In a perfect world for investors, the startup’s management personnel are the alchemists who turn their entrepreneurial idea into gold. In reality, management teams are often unable to unlock the full potential of their creation. You must assess what core skills the startup needs to succeed – and test whether it has them, or will have them, on board. A tech firm with leading-edge software expertise, but no commercial experience, is unlikely to fly, for example. Similarly, a retailer with brilliantly marketed products, but no-one with the acumen for numbers to look after the bottom-line may also struggle.

Management teams may be a work in progress. At such an early stage, gaps will be apparent - and that's completely normal. But how confident can you be that the necessary gaps will be filled as and when needed? What's more, the founders must show a willingness to welcome new members to the management team and to pass some of their duties onto others.

Healthy debate between founders ensures decisions made about the business are carefully considered. Continual arguments, or a sense that they are pulling in opposite directions, however, suggest a ship heading for choppy waters. Given that most startups will be trying to show their best side to you as the investor, look for subtle hints of disharmony behind closed doors.

Misreading the market could be disastrous for the business - and your investment. Some entrepreneurs will be looking to do something innovative in a market they have already been entrenched in during their careers. Others may have little experience in the target market but have devised a way of disrupting it. Either way, there must be a thorough understanding of the challenges ahead in gaining a foothold.

The entrepreneurial path rarely follows the initial business plan exactly. Unforeseen challenges and unexpected breakthroughs can lead it in different directions. Should this be the case, will the management team be able to respond accordingly and, as they say in Silicon Valley, ‘pivot’ towards success?

Do you detect goals being passionately pursued that aren’t simply money orientated? Entrepreneurs chasing profits alone could suffer burnout before the exit plan plays out. Those determined to innovate, improve and disrupt markets – and have a positive impact - will be more likely to power through the tougher times. Other misplaced reasons for launching a startup include greater freedom and work/life balance. These are the trappings of a lifestyle business rather than a scalable investment opportunity. Startup success brings more responsibility and demand on time than most nine-to-five jobs.

Failure to retain talent in the business is a red flag to investors. Small businesses in particular need everyone pitching in together, enthused by collective goals and a distinct company ethos. Low morale and poor retention point to problems ahead, and although not entirely uncommon, it needs to be clear that they're being rectified.

Particularly if you're looking to take an active role - as an angel investor, for instance - can you really see yourself liaising with them for the five-plus years it may take before an exit? You don't need to have a truly groundbreaking relationship, but there does need to be mutual respect and understanding of each other's skills and views.

Some of the most alluring opportunities for investors include those involving businesses that are: Entering a market in the throes of rapid, across-the-board growth Targeting a market that is absolutely ripe for disruption, in dire need of a new approach Creating an entirely new market, backed by customer demand for something different An opportunity that doesn't fall into one of the above areas doesn't necessarily make it unappealing, but it can be a big tick in the box if it does.

Simply put, if the lifetime value of customers - however long it may be - is not truly profitable (or will not be), the prospect of healthy returns is seriously under question.

Simply put, if the lifetime value of customers - however long it may be - is not truly profitable (or will not be), the prospect of healthy returns is seriously under question.

Has the startup thoroughly investigated every aspect of its prospective market? Some considerations include how sustainable its marketing approach is and any potential changes in the market in future.

Investors often look for a five-year picture, showing the conservative, expected and aggressive outlook of the business.

Established businesses will be able to provide trading history and other evidence to back up their projections for your investment. However, a pre-start firm’s growth forecast is based on theoretical figures, which you must question in detail, drawing on your own experiences to assess how realistic they are.

There are many systems for calculating valuations, including the Venture Capital Method and the First Chicago Method. Whichever has been used, you should also run its figures through your own go-to method. Overpaying for an investment will have major ramifications down the line, so you must be absolutely confident that a fair valuation has been reached before you invest.

If not, the company’s ability to gain its desired market share is under question. Ideally, small to medium enterprises (SMEs) should be able to demonstrate a strong track record in getting other products to market, and a startup must have robustly analysed the market opportunity and customer dynamics to build up a compelling case for the new offering.

Scalability separates investable startup opportunities from lifestyle businesses which are unlikely to deliver the level of returns many investors expect. Ask yourself: does the business model enable the company to multiply revenues without significantly increasing costs?

To be investment-worthy, the business should have clear plans for your capital that will ensure it delivers maximum impact on the organisation’s development. It might be marketing, HR or anything in between, but the company should know exactly where each pound raised in investment will be allocated.

Taking on further capital could dilute your share and influence on the business. Will government grants or business loans be sought to speed up progress? The company should have a clear vision of the capital it needs to fund its journey beyond every key milestone on the route to scaling up, with room for manoeuvre should unexpected problems - or opportunities - emerge.

The business may provide you with a summary of the model and plan in the form of a tool such as the popular Business Model Canvas. This offers a one-page view of the company’s strategy and is a useful reference point for your analysis of the investment opportunity.