How to Assess Early-Stage Startups

Investing in early-stage startups can generate exceptional returns — but only when supported by the right knowledge, tools, and frameworks.

TheAngel’s tokenised structure enhances liquidity and transparency, but investors should still evaluate deals with discipline and clarity.

This section provides the investment education, frameworks, and tools needed to build and manage a high-performance early-stage portfolio through TheAngel.

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7.1 Overview

These resources will help you:

• Understand tokenised equity and how it differs from traditional angel investing

• Assess startups with a proven framework

• Build a diversified investment portfolio

• Manage risk effectively

• Use liquidity windows strategically

• Optimise long-term returns

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7.2 Understanding Tokenised Startup Equity

Tokenised equity is a modern upgrade to traditional angel investing.

Key Investor Benefits

• Liquidity: Quarterly windows allow you to buy/sell tokens

• Fractional Access: Invest smaller amounts in more deals

• Transparency: Quarterly founder updates and clear financial structures

• Security: Bankruptcy-remote compartments and institutional infrastructure

• Standardisation: Identifiable via ISIN — recognised globally

What Tokenised Equity Represents

Tokens represent a beneficial economic interest in the equity held by the SPV or securitisation compartment.

This gives you rights to:

• Value growth

• Exit proceeds

• Liquidity events

And avoids the administrative burden of entering each startup’s cap table.

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7.3 How to Assess a Startup (Investor Framework)

Below is a structured system used by professional angel investors and early-stage funds.

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TheAngel 6-P Evaluation Framework

1. Problem

• Is the problem real and painful?

• How often does it occur?

• Who experiences the pain most intensely?

2. Product

• Is the solution unique?

• Is there early validation (users/revenue)?

• Does the product demonstrate clear utility?

3. People

This is the most important factor at pre-seed.

Evaluate:

• Founder grit

• Industry knowledge

• Track record

• Coachability

• Ability to attract talent

4. Progress

Even small signals matter:

• MVP launched

• Early customers

• LOIs

• Partnerships

• Revenue traction

5. Pricing / Business Model

• How does the startup make money?

• Are margins attractive?

• Is the pricing reasonable and scalable?

6. Potential

• TAM (Total Addressable Market)

• Timing (Why now?)

• Competitive advantage

• Long-term scalability

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Scoring Method

Assign each P a score from 1–5.

Total score out of 30.

Example:

• 24–30 → Strong investment

• 19–23 → Good but needs validation

• 14–18 → High risk

• <14 → Avoid

This creates consistency in your decision-making.

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7.4 Red Flags to Watch For

Founder Red Flags

• Blaming others for previous failures

• Unrealistic projections

• Poor communication

• Lack of domain knowledge

• High founder churn

Business Red Flags

• Weak understanding of customers

• No clear go-to-market plan

• Overly complex technology

• Legal/regulatory uncertainty

• High burn with little traction

Tokenisation Red Flags

(Not on TheAngel, but in general markets)

• No clarity on rights

• Non-segmented assets

• No valuation framework

• Lack of regulatory alignment

TheAngel structure mitigates most of these risks by design.