Founders, when raising an angel round, does it matter what the check sizes are? Does it matter how many checks you collect? And does it matter who writes these checks? The answer to all of these things is yes.
The Ideal Angel Investors (And Why They're Hard to Get)
First of all, the ideal investors are those who know what they're doing. They've invested before, they're entrepreneurs themselves, and they can add value to your company well beyond the check they're writing.
But this is very hard to pull off for first-time founders unless you already have a massive network of highly successful people. For most of us, that's not really the case. So you're pretty much left to figuring this out on your own.
When you're pitching to angel investors, the temptation is to take money from anyone who offers. But applying filters before accepting checks will save you from cap table problems later.
Why "All Money Is Green" Is a Trap
And in the early stages, it may very well feel like money is money, all money is green, and I'll just take it wherever I can get it. But hear me out. You want to apply a few rules and filters before you take money from somebody.
The difference between smart money and dumb money becomes painfully clear later when you need help navigating challenges or raising your next round. Smart angels open doors. Dumb money just clutters your cap table.
Three Reasons for Minimum Check Sizes
There are a few reasons why people will have minimum check sizes in angel rounds.
Number one, you don't want to be spending a lot of time pitching people who are going to write small checks because that's not good ROI.
Number two, there are legal costs associated with every investor you bring on board. So you want to keep that to a minimum.
And number three, you really want to keep your cap table clean. You want as short a list of investors as possible. And most of the investors you have on your cap table, especially early on, should be ones that are adding a lot of value.
The Problem with Overly Involved Angels
And then there are a few other things to consider. A lot of people will do angel investing because they love the process of getting involved in early-stage startups. They love getting to know the founders one-on-one. They love talking with you about the challenges you're facing. They almost feel like they are part of that journey.
The only problem with that is they also will be strongly opinionated sometimes. And this can lead to a lot of opinions coming from people who don't really know your area as well as you do, who are not living and breathing your area every day, and who haven't really earned the right to advise you on what to do. And yet they want to advise you.
And when they do this after they've given you money, it's a position of power that is hard to ignore. And you don't want too many of those on your side. Not at all.
Serial Angels vs. First-Time Angels
The best angel investors are around to get involved when you need them. Now, the more free time the angel investors have, the more they're around to possibly bug you.
If there's somebody who's involved in 20 different startups, they don't have the time to follow up with 20 startups. They are a serial angel investor. They may be around when you need them, but they're not going to bug you.
This brings me to the next point. How prolific of an angel investor are they? Now, if they haven't invested in too many other startups, and you're kind of their only focus, or one of like three startups or something like that, then there is a chance that they have more time to focus on you.
This becomes relevant when considering your equity structure and who's on your cap table, as early investors often influence major decisions about compensation and future rounds.
The Check Size Sweet Spot
And lastly, what is their tolerance of losing the money that they give you? Now, ideal check size for you from somebody is the amount of money that they would care enough about that they are willing to invest some time to help you out when you need it. But at the same time, it's not so large that losing that money would be a disaster for them.
This is one reason people have minimum check sizes. If someone wrote a 5k check, they may not remember it. They may not care about it. Somebody writes a 50k check, even if they're multimillionaires, they do care.
What This Means for Your Cap Table
Every angel investor you add to your cap table is a long-term relationship. They'll be on your cap table through your Series A, Series B, and potentially through exit or failure. Choose people who will support your journey, not people who will make it harder.
The angels who earn the right to advise you are those who've built companies themselves, who understand the challenges you're facing from experience, and who respect that you're the one living and breathing this business every day.
At FinalLayer, we built relationships with angels who understood our vision and gave us space to execute while being available when we genuinely needed their perspective. That selective approach to our cap table made all the difference.
Choose your angels as carefully as you'd choose a co-founder. They're in it with you for the long haul.
