After ten years of research into
Angel Investing, Robert Wiltbank presents us with the following conclusions.
- In any ONE investment, an angel investor is more likely than not to lose his or her money (i.e., earn less than a 1X return). However, once an investor has a portfolio of six or more angel investments, his median return exceeds 1X.
- Production of cash is highly concentrated in winners; 90 percent of all cash returns are produced by 10 percent of the exits. This is essentially the same concentration as in venture capital.
- When you aggregate all of the data, angel investors (across the U.S. and UK) produced a gross multiple of 2.5X their investment, in a mean time of about four years. This return is absolutely competitive with formal venture capital returns.
For more details, I urge you to CLICK HERE to check
out Wiltbank's recent post in Tech Crunch and, if sufficiently motivated, his Kauffman Foundation Angel Returns Study and NESTA Angel Investing Study.
You can also read a more formal academic paper on
how entrepreneurial expertise influences returns for angel investors.
Robert Wiltbank, PhD, is a professor at
Willamette University who I first met in the early days of the Angel Capital
Assn. He has co-authored two books and many academic
articles.
And many
thanks to Hambleton Lord of Launchpad, who posted a link to this study on
Twitter this morning, @hamlord.
2 comments:
I recently came across your blog and have been reading along. I thought I would leave my first comment.
it is a mix of hitting a few good ones and some bad ones. Angel investing takes a lot of due diligence and trusting your gut feel on the companies you are looking at. It's a lot riskier than stocks or investing at the venture tier.
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