6 Must-Ask Questions Before You Make Your First Startup Investment

Your crash course in angel investing—questions to ask before diving into early-stage startups

We’ve all heard it before: "Did you do your homework?" Turns out, that childhood warning was just early training for life — especially when you're considering your first startup investment.

Angel investing is exciting, high-risk, and often misunderstood. At Favcy Venture Builders, we’ve seen the early-stage ecosystem evolve first-hand — and through 1stCheque by Favcy, we've helped hundreds of new investors make confident, informed first bets.

If you’re thinking of investing in startups, start with the right questions. Here are 6 essential ones to guide your decision:

1. Where do I fit in the startup funding lifecycle?

Angel investors typically come in at the Seed or Pre-Series A stage — a phase where there's an MVP, some early traction, but a long road ahead.

Unlike VCs who chase scale, angels invest in belief — in the founding team, the problem they're solving, and the signals of early product-market fit. Through 1stCheque, you’re not backing spreadsheets — you’re backing stories,

with structure.

2. What kind of returns can I expect?

Let’s be honest — angel investing is not your typical asset class. It’s illiquid, long-term, and unpredictable.

The industry IRR average ranges from 20% to 40%, but outliers exist — and so do wipeouts. Diversification is the closest thing to a safety net. At 1stCheque, we keep ticket sizes small, allowing investors to back multiple vetted startups each year — building a portfolio, not just a position.

3. What are the risks — and how can I mitigate them?

Risk is part of the game. But smart investing = risk awareness + mitigation strategy.

Startups can fail due to founder fallouts, missed PMF, regulatory changes, or sheer bad timing. You can’t predict everything, but you can invest in well-diligenced, venture-built startups with clear business models, structured governance, and traction-led growth.

At Favcy, every startup has passed through a venture-building layer — meaning you’re not investing in just ideas, but in validated execution.

4. How are early-stage deals typically structured?

You’ll hear terms like SAFEs, convertible notes, and priced equity — and they’re not just legal jargon.

• SAFEs (Simple Agreements for Future Equity) allow your investment to convert into equity at a future priced round.

• Convertible Notes are similar but have interest and maturity periods.

• Priced Equity Rounds lock in a valuation upfront.

  
  

Most early-stage startups now prefer SAFEs and notes for their speed, simplicity, and valuation flexibility — and 1stCheque ensures you understand how each deal is structured before you invest.

5. How involved should I be as an angel investor?

This depends on you.

Some angels offer mentorship, network access, or strategic advice. Others prefer a silent-partner approach. At 1stCheque, you get complete transparency into each portfolio company and optional engagement pathways — but the decision to dive deeper is always yours.

You're backing a startup, not joining a boardroom — unless you choose to.

6. What’s the expected timeframe — and is there a clear exit plan?

Angel investing is a long game. Think 5–7 years minimum for meaningful outcomes.

Some exits may come through acquisitions, secondary sales, or follow-on rounds. Others might pivot, pause, or perish.

That’s why it’s crucial to know:

• What's the exit strategy?

• Who’s interested in acquiring this company?

• Is the market timing right?

At Favcy, we build exit readiness into our venture architecture. And through regular portfolio updates, you’ll always know where your investments stand.

The Bottom Line

Angel investing isn’t just about money — it’s about mindset.

It takes curiosity, patience, and a willingness to learn by doing. But with the right partners, information, and risk-aware strategy, it can also be hugely rewarding — both financially and intellectually.

That’s why Favcy 1stCheque exists — to make startup investing more accessible, informed, and structured for new investors.

We do the heavy-lifting — from startup diligence to thesis-building — so that you can back the future with confidence.