Here's a great comment from Ryan that I just posted:
"My fellow angel network managers say that they usually won't talk to inventors because the company anticipated is usually not ready for angel investment." I'm sure that most inventors pitch their idea with a powerpoint presentation and/or prototype, but at what point does an innovative idea or product become worthy of an investment?
Well, for an entrepreneurial company to be ready for investment - that is, to wisely use money to grow and increase the value of the Enterprise beyond the value of the money invested - it seems to me that there are four basic requirements.
1. The idea must be focused on the market. That is, the entrepreneur must be able to articulate what problem the company and its product is solving, why that solution is of value to the marketplace, and how the market will value it (and pay for it.)
2. The entrepreneur must have financial foresight, either themselves or in some way that brings the foresight to the company in a daily basis. That means, to me, understanding cash flow, minimizing expenses appropriately, investing in projects, processes and people well, and planning for cash flow and capital needs.
3. The company must have a plan for a great team that fills all of the gaps required for success. (I talked to someone today who clearly needs a particular kind of expert, but, as "CEO" is fearful of hiring someone in an area in which he is not an expert. His company is going to struggle because of it.)
4. The founding entrepreneur must be clear about their capabilities and their desired future role in the company. He or she must articulate this upfront.