Angel Investment Risks and Returns
Experts from the Center for Venture Research at University of New Hampshire estimate that, on a cumulative basis, the level of investments made by angels over the last 30 years has been double that of investments made by venture capitalists. In another study, Returns to Angel Investors in Groups by Professors Robert Wiltbank and Warren Boeker published in November 2007, the average reported return from angel group investments is 2.6 times the investment in 3.5 years, or approximately a 27 percent Internal Rate of Return (IRR). This average return compares favorably with the IRRs of other types of private equity investment. The distribution of returns for this type of investment is, however, quite varied. As is the case with venture capital, “average return” may not describe the performance of most angel investments. Fifty-two percent of all of the exits returned less than the capital the angel had invested in the venture. Seven percent of the exits achieved returns of more than ten times the money invested, accounting for 75 percent of the total investment dollar returns.
Since angel capital is invested at an early stage in a business venture, these investments tend to be high risk. The angel must be capable of taking a loss of the entire investment, thus most angel investors are high-net-worth individuals. Even when the company is successful, the return on investment can often take several years. Angel group members make independent investment decisions and therefore assume full responsibility for their investments.
For more information on angel investing and becoming a member of the San Joaquin Angels click on the For Angels button above.
Experts from the Center for Venture Research at University of New Hampshire estimate that, on a cumulative basis, the level of investments made by angels over the last 30 years has been double that of investments made by venture capitalists. In another study, Returns to Angel Investors in Groups by Professors Robert Wiltbank and Warren Boeker published in November 2007, the average reported return from angel group investments is 2.6 times the investment in 3.5 years, or approximately a 27 percent Internal Rate of Return (IRR). This average return compares favorably with the IRRs of other types of private equity investment. The distribution of returns for this type of investment is, however, quite varied. As is the case with venture capital, “average return” may not describe the performance of most angel investments. Fifty-two percent of all of the exits returned less than the capital the angel had invested in the venture. Seven percent of the exits achieved returns of more than ten times the money invested, accounting for 75 percent of the total investment dollar returns.
Since angel capital is invested at an early stage in a business venture, these investments tend to be high risk. The angel must be capable of taking a loss of the entire investment, thus most angel investors are high-net-worth individuals. Even when the company is successful, the return on investment can often take several years. Angel group members make independent investment decisions and therefore assume full responsibility for their investments.
For more information on angel investing and becoming a member of the San Joaquin Angels click on the For Angels button above.