This was interesting. The speaker, Wade Brooks, is executive director of the Willamette University MBA Angel Investment fund. A couple of nights ago as he shared notes and research with members of the Willamette Angel Conference. These are the top four things Wade and his group looks for in the companies his organization is considering for investment:

1. Entrepreneurial expertise

They want people who have been there, team leaders who have been through the experience of a startup. Wade says there’s no getting the kind of experience they need without going through it.

2. Affordable loss

Affordable loss is about planning, expense control and careful management.  “A little bit of money goes a long way,” he says, when a company is careful with it. If there were no loss, they wouldn’t need angel investment at all; but a big loss means trouble.

3. Early “yes” answers

Ideally, that means people are saying “yes” to sales, and signing contracts. That doesn’t always happen, but there can be yes answers to major allies, distribution channels, beta users, and so on. The best validator is early sales.

4. Milestones met

Wade talked about “a history of performance.” That’s a matter of setting goals and meeting them. He said the company that consistently exceeds its milestones is very rare, but very good to have. Sometimes his group will redo the projections on their own, come up with substitute numbers, and then, even if the substitute numbers are smaller, they still credit the company for making those lesser numbers, if they do.

Wade and his group work with Dr. Rob Wiltbank, who has one of if not the largest database in the world on return on angel investment. The program at Willamette University is impressive — MBA students, with the help of a lot of advice, guidance, and mentoring, are actively involved in making angel investment decisions. The group participates in several of the angel investment groups operating in Oregon, and makes multiple investments every year.