As a fairly active angel investor, I get pitched by entrepreneurs eight to 10 times a month. The founders generally aren't looking to become the next Facebook or Zappos, but want to build a successful business that will allow them to achieve financial independence and make a mark in the world. Those happen to be the kind of startups I like. When I invest, I always insist on owning 51 percent of the stock until I've earned back my principal (whereupon I become a minority shareholder with a stake we negotiate up front). At that point, most people lose all interest in my investing, which is fine with me. If they don't have confidence that the business will be successful enough to pay me back and leave them in full control, why would I give them my money?
For those still interested, there are five factors I consider most important. I look for deep knowledge of the product or service based on extensive research; proof that the entrepreneur can sell it; experience in business, either as an owner or an employee, that demonstrates an ability to adapt to change; a willingness to make a full-time, 100 percent commitment to the venture; and an equity investment large enough to show they really believe in the concept.
After we've met a few times and they've done some homework that I've given them, I ask them to come up with projections of sales and expenses by month for the first year. The sales forecasts are almost always over-optimistic, and the expenses underestimated. That's OK. I want to see how they react when I challenge their projections. I'll go forward only if they can convince me there's a good chance of reaching viability. At the end of the day, the best pitches are the ones that convince me that I will get my money back.