The Evaluating section of early-stage investing seems to have many complexities and covers a lot of ground. For me, The Harvard Framework is the most intriguing and offers the best practical use for a new angel.
I like how the framework begins with four basic components, and then breaks down the details of each;
People, the entrepreneur, the management team, and the stakeholders
Business Opportunity, the model, the customer, the size, and timing
Context, the economy, technology, regulation, and competition
The Deal, price, and structure
When I play any game, I want to win. I want to understand the rules and the best strategies to succeed. Investing can be very similar to a game with significant risk and reward, and one should do everything possible to prepare for how the game is best played.
William Sahlman provides a well thought out adaptation from Howard’s original framework for real estate, which if applied correctly, can significantly reduce the risk for the investor. I feel like this model dissects potential business opportunities in a way that new investors can manage the information and come to logical conclusions based on the evaluation of these components.
David Amis and Howard H. Stevenson. Winning Angels: The Seven Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001.
William Sahlman. Thoughts on Business Plans. HBS Publishing, 1996.