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Real-Life Angel Investing Returns 2012–2016

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Re: Real-Life Angel Investing Returns 2012–2016

#31

Post by nl »

lxe wrote: post #16

"Clever googling" the revenue numbers and "probably reaching X" don't count as real numbers. This writeup is up-in-the-clouds optimistic. The 409a or any other speculative valuation also doesn't mean much. I'm behind the first part -- It's worth investing in real business and job growth, but I'd like to see more grounded and practical ROI calculations.

It's true these are estimates. But they don't seem unrealistic to me.

Take KiwiCo - I'd never heard of it. They raised $11.5M, and 2018 were profitable, debt free and making over $100M/year revenue[1]. That's high growth and profits (a great mix), so assuming she got in during that early round, a 30x return seems very achievable.

[1] https://www.inc.com/christine-lagorio-chafkin/kiwico-is-the-...

Re: Real-Life Angel Investing Returns 2012–2016

#34

Post by ponker »

chii wrote: post #24
nl wrote: post #21

Earlier quoted context omitted.

> But in fact that author is going about this all wrong. It doesn't really matter if VC outperforms. The point of VC or hedge funds or any other alternative investments isn't too outperform the market on a risk adjusted basis (though that would be nice), but to provide a uncorrelated return stream. This is correct, but it's pretty clear the the author isn't viewing angle investment in mere economic terms (which is an…

> From the post: "When you invest in a startup, the money directly goes to the economy to build up a business, to create jobs and to actually contribute to the trickle down economy." and this is completely wrong. The money public investors pay to exiting shareholders do play a major role in the economy - it enables the early, IPO/angel investors to exit, and allows them to convert capital locked in the established st…

In the aggregate this may be true but the public markets don’t need any given investors. There are hundreds of thriving startups that simply would not exist today if ten people who did invest had chosen not to invest. No public company is that dependent on investors especially if they don’t need to make another offering.

Re: Real-Life Angel Investing Returns 2012–2016

#35

Post by nl »

chii wrote: post #24
nl wrote: post #21

Earlier quoted context omitted.

> But in fact that author is going about this all wrong. It doesn't really matter if VC outperforms. The point of VC or hedge funds or any other alternative investments isn't too outperform the market on a risk adjusted basis (though that would be nice), but to provide a uncorrelated return stream. This is correct, but it's pretty clear the the author isn't viewing angle investment in mere economic terms (which is an…

> From the post: "When you invest in a startup, the money directly goes to the economy to build up a business, to create jobs and to actually contribute to the trickle down economy." and this is completely wrong. The money public investors pay to exiting shareholders do play a major role in the economy - it enables the early, IPO/angel investors to exit, and allows them to convert capital locked in the established st…

> The money public investors pay to exiting shareholders do play a major role in the economy - it enables the early, IPO/angel investors to exit, and allows them to convert capital locked in the established startups to new startups, without waiting to "cash-out" using the company's profits (which may be years away).

Sure, this is true. But there aren't any early investors in Exxon (for example) cashing out this way.

Re: Real-Life Angel Investing Returns 2012–2016

#36

Post by elliottback »

manyhats wrote: post #23

I disagree on the choice of benchmarks as they're not really comparable. A more comparable benchmark for angel investments in Internet / SW startups would be a broad-based ETF that covers those. Picking a couple of the larger ones, I looked at the same periods (2012-2019 and 2016-2019) for each of them: FDN: 4.31x / 1.86x IGV: 4.41x / 2.27x overall mean: 3.2x Not much different than QQQ's 3.04x, but SPY is not a good…

Also the article doesn't calculate SPY total return.

Dividends-reinvested SPY is very different over long periods of time, I get ~3.46 (versus their 3.01) for the from-2012 calculation, which is a substantial improvement (and over only 8 years!).

Re: Real-Life Angel Investing Returns 2012–2016

#37

Post by einarvollset »

Seeing how there’s a lot of investment/maths inclined nerds on this thread I will (selfishly..) point out the one key point nobody seems to have picked up on yet: she talks about the importance of diversification.

Imho that it is the key differentiator between a well performing and atrocious angel portfolio.

The math is pretty well explained in this piece by Abe Othman of AngelList here: https://angel.co/blog/venture-returns - but the TLDR is: at earliest stage of venture your mean is infinite so making more bets (aka diversifying your portfolio) actually increases the average return. That’s probably why most angel investors do poorly - not enough cash/time/interest (or been told to “focus your portfolio”)

We (here comes the selfish part) apply this to B2B SaaS here: TinySeed.com/thesis

Fundamentally - the problem with replicating the angel investment success that the author has is - not many individual investors were early enough in Facebook to have funds to deploy at a scale where the math starts to work in your favor.

Re: Real-Life Angel Investing Returns 2012–2016

#38

Post by einarvollset »

pavlov wrote: post #5
cellis wrote: post #3

Earlier quoted context omitted.

You have to be an accredited investor, most even non-faang-but-sv-sfbay senior swes can demonstrate this after 3 years.

Isn’t the requirement $2M net worth? Or did that change?

Accredited Investor: Basically $200k annual income or $1m net worth

Qualified Client: $2m net worth

Qualified Purchaser: $5m in “investments” not including the fund invested into

Re: Real-Life Angel Investing Returns 2012–2016

#40

Post by bemmu »

Slightly off-topic, but which trade platforms are trustworthy for buying stocks in pre-IPO companies? I see in this post that SharesPost appears to be legit. Any others?

Also curious to hear if anyone managed to make such a purchase in a US pre-IPO company without being US-based.

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