What You Need to Consider as an Angel Investor

Singapore-based Morrison Foerster corporate partner Lip Kian Ang is quoted in a recent article, “What you need to consider as an angel investor,” published by The Straits Times.

The article explores what potential investors should consider before making the decision to invest in a start-up or early stage company.

Lip Kian comments, “the business plan will help prospective investors to get a decent understanding of the company, its core products or offerings, background on the market landscape and also financial matters.”

He adds, “It is important to remember that due to the early-stage nature of start-ups, these documents will be based on assumptions and forecasts that help tell a story of what a particular venture could be, so it is important to ask questions around such assumptions and forecasts and scrutinize the opportunity in question."

When it comes to deciding on how much to invest, Lip Kian says, “it depends on how much you can lock up in the project. To put your investment sum into perspective, consider the following: the total amount that a company is looking to raise, the size of the investment as a proportion of your total portfolio, the valuation of the company if the company is issuing shares, and your rights as a shareholder. Typically, larger shareholders have more say in the company.”

Standard investment agreements are available online, and Lip Kian explains that “the Venture Capital Investment Model Agreements can be used as a starting point. These model agreements were developed by the Singapore Academy of Law and the Singapore Venture and Private Capital Association.” He continues, “the level of participation depends on the investor, with venture capitalists usually playing a more active role.” He further states, “at a minimum, the investment terms should provide the investor with sufficient information to allow them to understand how the business is doing and monitor the performance of the investment."

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