Angel investors are nervous.

Can you blame them? The past five years have been brutal. Many investments have not worked out very well. Others have flat out crashed and burned - and a lot of that burning has been the angels' money.

While angel investing is on the rise in Utah again, more due diligence is being done before they put up their money. Here are a few things you should know before applying to the Utah Angels or other angel groups.

. Most investments now are done with some sort of a convertible security, such as a convertible note. An example would be a three-year note, with interest at 8 percent, a good conversion ratio and warrants during that time to increase the stake in the company if it is successful. Rarely will angels make a simple equity investment (usually common stock) in a company. The angels may also want a guarantee of a certain return - say, two-to-five times their money out before any founders are allowed to sell or participate in a harvest.

. Personal guarantees on the money raised are a common requirement for both husband and wife, if married, and the personal guarantee of cosigners if the entrepreneur doesn't have substantial assets. Many times the angel hears that the borrower doesn't want his wife, parents or co-signers to have to personally guarantee the loan. The angels' response? "Why should we bet on you if the people who know you best won't?" Angels may require personal guarantees of all the management team that owns more than 10 percent of the company.

. No matter how promising the forecasts or how high the optimism, the angel wants to see that someone values the product or service enough to actually buy it - and in quantities sufficient to suggest that it is not just a fad or fluke. Trying to find seed funding for a startup with no revenues is virtually impossible without some sales that have come from bootstrapping or some other means.

. The management team has to have as its leader someone who has had a successful business experience, especially in managing a company and in assuring that financial reporting and accounting is being done correctly. Contemporary angels are putting more emphasis on the team before the idea, product or service. And they want a team that is committed with their own funds before any angel funding goes in. It would be naive to think that angels will put up investment money without the entrepreneur having committed his own resources to the fullest. And if anyone on the management team has experienced a bankruptcy, angels usually won't bite. Too many times the team leader and team members have lots of stories but no successful harvests of a company or major assets of their own.

. Have a financing plan to present what is being offered in return for the angels' money. Many entrepreneurs expect angels to tell them what financial terms they want once the valuation of the company has been completed. But that is not the case. If the company has a CFO or a financial adviser, then a determination of the kind of security (convertible bond, convertible preferred, warrants, etc.) and amounts need to be presented. Angels may want to change the terms, but they want to see that the company is sophisticated enough to at least come up with an initial proposal. Above all, remember that the guys with the gold make the rules, and in the end cash is king. It is better to get some funds to make the pie bigger for everyone rather than keeping a large piece of a very small pie.