In the world of startups and entrepreneurship, the first investor plays a crucial role. An early investor often takes a huge risk in betting on a team that has yet to show signs of success — often, they don’t even have a functioning business. Perhaps that’s why these investors are called angels.

In emerging startup ecosystems across the world, angel investors play a vital role in ensuring that innovative young teams can survive in their early days until they become large enough for a venture capital firm to back them.

“Angel investors are critical in early ecosystems,” Kalsoom Lakhani, co-founder of i2i Ventures, a Pakistan-focused, $15-million venture capital (VC) fund, told Rest of World. “Beyond just capital, angel investors can help with technical support and networking — basically getting the company to a place where it can raise funding from institutional investors and venture funds.”

Finding the right angel can be critical to a startup’s success. But what do they look for in a new company? Rest of World reached out to prominent angel investors who’ve backed teams in countries like India, Argentina, and Nigeria to understand how they select the right startup to invest in. Take a look at our cheat sheet to see their criteria for investment.

It’s all about the entrepreneur

Padmaja Ruparel has been a prominent angel investor in India for nearly two decades. In 2006, she co-founded the Indian Angel Network, which now has a portfolio of nearly 200 entrepreneurs, including two unicorns.

For Ruparel, the most important factor to keep in mind while making an investment decision is the entrepreneur. “My top investment criteria is the entrepreneur himself/herself  —  the entrepreneur’s understanding of the domain, leadership quality, and passion and grit,” she told Rest of World in an email.

The right founder is more important to her than the startup idea itself, she said. “For me, a Class A Founder with a Class B idea is far better than a Class B Founder with a Class A idea,” she said.

A focus on emerging markets

Claire Díaz-Ortiz is an early-stage investor primarily focused on Latin America. She has invested in more than 60 companies.

She believes that due to globalization, the best innovations of the future are statistically more likely to be things that serve emerging markets, not Silicon Valley. “And what founder is most likely to build and scale those innovations? Emerging market founders,” she told Rest of World in an email.

The fatal flaw of venture capital at the earliest stages is the sociological concept of homophily — like attracts like, she added. “Early stage investing is not a meritocracy, and it is critical that we have investors who have diverse deal flow and regularly invest in founders who look different than the founders of the past,” Díaz-Ortiz said.  

The founding team matters

Steve Ciesinski has been the managing director of the Silicon Valley-based VC and private equity firm Kalele Partners for nearly 15 years. He also invests in tech startups ranging from seed to later-stage.

In his checklist of what to look for before making an angel investment, the founding team is the most important. Ciesinski expects the founding team to be “intelligent, driven, creative, agile, [and] clever,” he told Rest of World over email. He said that ideally, the core founding team should include a business person and a technical person.

Other qualities in the founding team that Ciesinski likes are: the ability to adapt to the market, the ability to set up a scalable tech architecture, the clarity of not confusing minimum viable product with “vision,” a sense of urgency, and the aptness to react to customer feedback.

Are they solving a hard problem?

Iyinoluwa Aboyeji — who featured in Rest of World’s list of global tech’s changemakers earlier this year — is a Nigerian entrepreneur, and among the most active and influential early-stage investors in Africa. His venture capital fund, Future Africa, “provides capital, coaching, and community to bold and visionary leaders turning Africa’s biggest challenges into business opportunities,” according to Aboyeji’s LinkedIn

His criteria for investing include the problem that the startup is solving, and the market size.

“My top criterion for investing in startups is that they are a team solving a hard problem for a large market preferably on the continent,” he said in an email response.

The market opportunity is important

The former CEO of Groupon India, Ankur Warikoo, has been an angel investor since 2015. So far, he has backed at least 30 companies. He also mentors and coaches entrepreneurs on finding product-market fit, attracting and retaining talent, and managing their emotions as a founder.

For him, the most important criterion for making an investment is the market opportunity, he said in an email.

“Investing, by definition, is the act of entering and exiting a business,” Warikoo said. “Unless there is a huge market opportunity, the possibility of an exit remains unlikely or difficult, which I have come to realize is one of the strongest proxies for a successful investment.”

Demonstrating a deep understanding

Yasser Bashir is the co-founder and CEO of Arbisoft, a Pakistani software development company. His top criterion for investing in a startup is a capable team with a deep understanding of the problem they are trying to solve.

“Both the operative words here — capability and deep understanding — are important,” Bashir told Rest of World. “Unique capability is a powerful competitive advantage in the early stages of a new business. A deep understanding of a problem is developed when the team applies its capability to understand something about the product or market that is not immediately obvious to everyone else.”

The combination of these two criteria, Bashir believes, is “powerful” and often produces winners.