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How do angels verify traction?

As an angel, how can you verify customer traction with an app, especially if it's in beta mode? How can you verify user growth, payments collected, funds raised to date, etc.? I don't know how much angels can dig through specifics of a company without making the founder uncomfortable. At the same time, it seems pretty easy for founders to exaggerate their traction or just completely make up numbers.

15 Replies

Mike Langford
2
0
Mike Langford Entrepreneur
CEO - finservMarketing
Jason Calacanis mentioned that he uses a side letter contract in all his investments to ensure he can access details when needed.http://thisweekinstartups.com/news-roundtable-wood-bowles/

Personally, I don't feel uncomfortable at all with asking for details before writing a check. If an entrepreneur wants your money you, as an investor, are entitled to information to confirm the valuation of the investment.
Neil Gordon
1
0
Neil Gordon Advisor
Board Member, Corporate Finance Advisor and Strategy Consultant
Verification's not that hard. (i) Ask how many beta users they have. (ii) Ask if they collect demographic and other data on the users. (iii) Etc. (iv) Ask for some underlying analysis based on (i), (ii) and (iii). Made up numbers will be obvious in no time.
Joe Milam
5
0
Joe Milam Advisor
CEO AngelSpan, Inc.
I wouldn't invest in a startup that doesn't embrace transparency. There is a clear link between entrepreneurs that do and better performing startups.

The very premise of your question verifies why...if they don't offer it unsolicited (proper Investor Relations would take care of that), much less quickly respond to requests, then they don't deserve investors' dollars to begin with.
Chris Kitze
1
0
Chris Kitze Entrepreneur
CEO at Safe Cash Payment Technologies, Inc.
Greg, every entrepreneur should have the set of KPI's that guide their business available in a real time dashboard. There's no excuse not to have this at your fingertips. They can create an account for their investors to access to that info, to the extent it's not sharing private user information or presents a security problem. Investors like to know these metrics and can offer many suggestions that can benefit the company, a true win-win. Remember, if you can't hand your business plan to your biggest competitor and still do well, you don't have a real business.
Jim Newcomer, 4ma - preparing local entrepreneurs for funding via Community Public Offerings
3
0
4ma - Advisers for startup and business growth
You're going to be uncomfortable. Get used to it. An angel who hesitates to make an entrepreneur uncomfortable doesn't last into her/his second investment. Angels ask uncomfortable questions. That's what they do. Tigers eat meat. That's what they do. Surgeons cut your body open without embarrassment. That's what they do. The investor is betting his own money that you'll succeed. No investor is going to take your word for it that everything will be OK; we're playing for keeps with his money. What each of us start up entrepreneurs need to do - our jobs in the transaction - is to rehearse: imagine all the hard, embarrassing questions we can think of - as well as the answers - and go over them in advance. Then think of more, worse questions, and go over the answers to them. Then ask your coach or adviser to think of even more hard, embarrassing questions and go over those answers too. Anticipate who the angel will want to call up or email and ask about you - and what prying questions he will ask your references + your bank + the credit bureau + the police - and how fast he will Google you and check your Facebook and LinkedIn pages - and all the rest. That's why you want to have a coach or adviser, IMHO. Jim Newcomer, Ph.D. Principle Business Advisor */4/ma* //for'ma/ n. formula for success/ [removed to protect privacy] Cell Phone/Txt [removed to protect privacy] __
Martin Omansky
0
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Greg: we "angels" do not have perfect knowledge, but we usually have sufficient tools (and experience) to sort through blather to the truth. We did not gather substantial assets without a measure of cleverness and street smarts. Sent from my iPhone
Leo Lam, PhD
0
0
Leo Lam, PhD Advisor
Product development executive, serial entrepreneur and Angel Investor
We verify by looking at verifiable metrics. If the entrepreneurs are uncomfortable with showing us verifiable metrics, we are not comfortable to invest in them. Transparency is key.
Greg Lipinski
0
0
Greg Lipinski Entrepreneur
Patent Examiner at USPTO
Mr. Omanksy, I read a bunch of your comments on the thread from last month about securing seedfunds. Would you be willing to answer some questions of mine via email or phone? I can be reached at

greglip85
at
gmail
Martin Omansky
0
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Email me at crucibleadvisors sitcom Sent from my iPhone
Martin Omansky
0
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
Greg: are you related to Dr. Bogdan Lipinski? Sent from my iPhone
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