The 20 Rules of Angel Investing is an educational presentation by Rikvin designed to demystify the fundraising process for startup founders. The deck covers critical logistical details, such as typical investment amounts ranging from $25,000 to $100,000, and standard convertible note terms including a 20 percent discount rate. It emphasizes the high-risk nature of the asset class, noting that only one in ten startups are successful. Beyond financial metrics, the slides provide a roadmap for founder conduct, advising on the necessity of warm introductions, the refusal of NDAs by investors, and…
Key takeaways
- Angel investors typically invest between $25,000 and $100,000 per company (Slide 1).
- A standard discount rate for convertible note seed financing is 20 percent (Slide 12).
- Only one in ten startups are considered successful in the angel investing context (Slide 8).
- Investors generally refuse to sign Non-Disclosure Agreements (NDAs) due to the volume of deals they review (Slide 10).
- Monthly updates are recommended for founders to maintain investor engagement and secure future rounds (Slide 15).
- A pitch deck should ideally be kept under 20 slides to remain precise and effective (Slide 20).
- Warm referrals are cited as the most effective way to secure an angel investor's attention (Slide 9).
- Valuation caps for seed rounds are frequently set around $15 million in the examples provided (Slide 12).
Introduction to Angel Investing Dynamics
The 20 Rules of Angel Investing deck is an educational resource published by Rikvin, a Singapore-based corporate services firm. Unlike a traditional startup pitch deck designed to raise capital for a specific product, this deck functions as a primer for entrepreneurs to understand the mechanics of the early-stage investment landscape. It covers everything from check sizes and legal documentation to the psychological expectations of the investors themselves.
Slides 1-3: The Basics of Investment and Criteria
Slide 1 establishes the financial baseline, stating that angel investors typically invest between $25,000 and $100,000. It notes that while these are standard amounts, investors may increase their commitment to secure a larger equity stake if the opportunity is sufficiently compelling. This slide sets the stage for the scale of capital a founder can expect at the earliest stages.
Slide 2 outlines six critical criteria for investors: founder integrity/passion, a well-researched market opportunity, a business plan with market traction, disruptive technology or intellectual property, a realistic valuation, and the ability to raise follow-on funding. This is a standard checklist that emphasizes that technology alone is insufficient without a clear path to scale.
Slide 3 focuses on the entrepreneur's presentation materials. It lists four essentials: an articulate elevator pitch, a comprehensive executive summary or pitch deck, a working prototype, and evidence of early adopters. The inclusion of 'early adopters' highlights that angels are increasingly looking for de-risked opportunities rather than just ideas on paper.
Slides 4-7: The Process and Questioning
Slide 4 provides a reality check on timing. It warns that raising angel financing is a 'time-consuming and frustrating process' that involves numerous meetings, due diligence, and term negotiations. It explicitly states that the process will always take longer than the founder expects.
Slide 5 lists standard financial questions. Founders are expected to know their burn rate, how long the current round will last, two-year financial projections, and unit economics. The mention of 'likely gross margins' suggests that investors are looking for business models that can eventually achieve profitability.
Slide 6 pivots to marketing and customer acquisition. Investors want to know the Cost of Acquiring a Customer (CAC) and the Long-Term Value (LTV) of that customer. The slide emphasizes that a strategic outline for social media and brand development is now a requirement, not an elective.
Slide 7 addresses the management team. Key questions include the team's relevant experience, immediate hiring needs, and the motivating factors driving the founders. This slide reinforces the venture capital adage that investors 'bet on the jockey, not the horse.'
Slides 8-11: Risk, Sourcing, and Professionalism
Slide 8 quantifies the risk, stating that angel investing is a 'huge gamble' where only one in ten startups succeed. This serves as a reminder to founders that investors are looking for 'outlier' returns to compensate for the 90% failure rate of the rest of their portfolio.
Slide 9 discusses sourcing. While it mentions AngelList and crowdfunding sites like 'Kicks-tarter' (sic) and Indiegogo, it identifies a 'warm introduction from a colleague or friend of an angel' as the most effective method. This highlights the network-driven nature of the industry.
Slide 10 tackles the common founder mistake of asking for an NDA. The deck is blunt: 'Yes, angel investors are opposed to signing nondisclosure agreements.' It advises founders to simply avoid sharing 'highly confidential information' in the early stages rather than trying to force a legal barrier.
Slide 11 encourages CEOs to perform their own due diligence on investors. It suggests asking about the investor's relationships with VCs for follow-on rounds and their level of involvement with portfolio companies. This frames the relationship as a two-way partnership.
Slides 12-14: Terms, Valuation, and Outreach
Slide 12 provides a detailed breakdown of convertible notes. It defines the standard discount rate as 20 percent and explains the valuation cap using a $15 million cap versus a $20 million valuation example. It also notes that most early-stage investors are 'strongly against' uncapped notes.
Slide 13 lists factors determining valuation, including team accomplishments, market comparables, and the 'potential for a big exit.' It acknowledges that valuation is ultimately a negotiation rather than a pure mathematical formula.
Slide 14 gives tactical advice for email introductions. It recommends short bullet points on the problem and traction, and specifically suggests attaching a '2- to 3-page executive summary or 15-page PowerPoint deck.' This provides a clear constraint for founders who tend to over-share in initial emails.
Slides 15-17: Post-Investment and Legal Requirements
Slide 15 emphasizes the importance of monthly updates. It quotes Jason Calacanis, noting that updates are vital because investors 'didn't give you all their money — they have more!!!' This highlights the role of communication in securing internal follow-on capital.
Slide 16 lists reasons for rejection. Notable entries include the startup being 'based too far away' (citing a preference for tech hubs like San Francisco or New York) and the use of cold emails. This slide serves as a summary of the 'don'ts' for founders.
Slide 17 lists the exhaustive legal documentation required, from Articles of Incorporation and Bylaws to Stock Vesting Agreements and Cap Tables. This is a useful checklist for founders to ensure their 'data room' is ready before they start pitching.
Slides 18-21: Meeting Conduct and Conclusion
Slide 18 covers common pitch meeting mistakes. It warns against the CEO doing all the talking if the whole team is present, as it 'shows a weak team dependent on one person.' It also cautions against claiming there is no competition.
Slide 19 lists the non-monetary benefits of angels, such as access to their network of VCs, strategic partners, and lawyers. This reinforces the idea that an angel's 'smart money' is more valuable than just the cash.
Slide 20 provides final preparation tips, including reviewing the investor's LinkedIn and keeping the deck under 20 slides. It also lists specific Singaporean resources like 'Spring Singapore' and the 'Singapore Angel Network,' grounding the deck in its local context.
Slide 21 is a closing slide with the Rikvin logo and contact information, serving as a call to action for their corporate services.
What Works in This Deck
Clarity of Expectations: The deck does not sugarcoat the difficulty of fundraising, explicitly mentioning the high failure rate (Slide 8) and the time-consuming nature of the process (Slide 4). · Specific Benchmarks: Providing a 20 percent discount rate (Slide 12) and a $25k-$100k check range (Slide 1) gives founders concrete numbers to work with. · Tactical Advice: The advice on NDAs (Slide 10) and the structure of an intro email (Slide 14) is highly actionable and addresses common points of friction in the founder-investor relationship.
What is Missing
Modern Funding Instruments: The deck focuses heavily on convertible notes (Slide 12) but does not mention SAFEs (Simple Agreement for Future Equity), which have become a standard in many tech ecosystems since this deck was likely produced. · Diversity of Investor Types: The deck treats 'Angel Investors' as a monolith. It does not distinguish between individual angels, angel groups, or micro-VCs, which often have different processes and check sizes. · Sector-Specific Nuance: The advice is very general. The requirements for a biotech startup (heavy IP, long timelines) are vastly different from a SaaS startup (traction-focused, lower capital intensity), but the deck treats them the same.
Founder Takeaways
Keep it Lean: Follow the advice on Slide 20 and keep your deck under 20 slides. Precision is valued over volume. · Focus on Traction: As Slide 3 and 16 suggest, investors are rarely convinced by ideas alone. Evidence of demand and early adopters is the strongest signal you can provide. · Build the Network: Since warm referrals are the gold standard (Slide 9), founders should spend more time networking with other entrepreneurs than cold-emailing investors. · Prepare for the 'No': With a 90% failure rate mentioned in the deck, founders should expect rejection as the default outcome and build a large enough pipeline of potential investors to survive the process.
Frequently asked questions
- What is the typical check size for an angel investor according to this deck?
- According to Slide 1, angel investors typically invest between $25,000 and $100,000 into a company. However, they may be willing to invest more depending on the specific opportunity and their desire to retain a larger equity percentage.
- Why do angel investors usually refuse to sign NDAs?
- Slide 10 explains that angel investors are presented with many deal options daily. Imposing an NDA is viewed as a roadblock that makes a challenging process more difficult. Founders are advised to be careful but not disclose highly confidential information during initial stages.
- What are the standard terms for a convertible note in a seed round?
- Slide 12 outlines that notes are almost always unsecured. They typically feature a 20 percent discount rate and a valuation cap. The slide uses a $15 million cap as an example to reward early investors for taking higher risks.
- How often should a founder update their angel investors?
- Slide 15 advises giving monthly updates regardless of whether the news is good or bad. Regular communication prevents investors from being blindsided and keeps them engaged for potential participation in future funding rounds.
- What are the most common reasons for an angel investor to reject a pitch?
- Slide 16 lists several reasons, including a market opportunity that is too small, a cold email instead of a warm referral, exaggerated financial projections, and the startup being located too far away from the investor's preferred tech hubs like New York or San Francisco.
