Angel diligence is not institutional diligence in miniature. You are not going to audit anything, and the company does not have the artifacts a later stage process expects. What you can do is verify a short list of things that are cheap to check and expensive to be wrong about.
The company
- Talk to two customers, chosen by you rather than supplied by the founder where possible. This is the highest yield hour in the entire process.
- Ask for the last three monthly investor updates. If they exist, you learn how the founder handles bad news. If they do not, that is also information.
- Confirm the revenue definition. Signed, invoiced, collected and pipeline are four different numbers and they get used interchangeably.
- Ask for cash balance and monthly burn, and check the runway math yourself.
The team
- Verify the founding story and the equity split, including whether any founder has already left and what they kept.
- Check that IP created before incorporation was properly assigned to the company.
- Take one reference from someone who worked for the founder, not only with them.
- Understand who is full time and who is not.
The terms
- Read the actual instrument, not the summary in the email. Cap, discount, pre or post money, and whether it is a standard form or edited.
- Ask what has already been raised and on what terms. Stacked SAFEs at different caps change your outcome materially.
- Confirm the round size, the amount committed and whether anyone named as committed has actually signed.
- Check for pro rata rights, and whether you get them at your check size.
Ask one question that the founder has to think about. Their behavior when they do not have a prepared answer is more diagnostic than any document in the data room.
The cap table
Ask for it. A clean early cap table is one page and a founder who will not show it at the point of committing is telling you something. Look for dead equity in departed founders, oversized advisor grants, and an option pool that is either missing or already exhausted.
Deciding
Set a time budget before you start. Angel diligence that runs longer than two weeks usually means you already decided no and are looking for permission. The failure mode is not being too quick. It is being slow and imprecise, which costs you the deal and teaches you nothing.
Write down, before you wire, the one thing that would have to be true in twelve months for this to be working. Then read it in twelve months. That habit will improve your judgment faster than any checklist.
