Valuable Advice for Investors

An article we liked from Thought Leader John Harbison, TCA Chairman Emeritus :

Angel Returns Beat All Asset Classes But Pose Greater Risk

We all know that investing in startup companies is inherently risky.

Over half of early-stage investments typically fail to return any capital, with the top 10% usually returning 85-90% of all the cash proceeds. The game is won on “grand slam home runs”, not “singles”.

In order to justify investing in an asset class with this high amount of failure risk we would need to see much higher returns. With an adequately diversified portfolio of early-stage companies, there is compelling evidence that the return on early-stage investment can indeed be compelling. This data insight article explores the comparison with other asset classes.

Two of ACA’s largest angel groups have kept track of IRR (internal rate of return) for all outcomes. The IRR for Central Texas Angels Network’s 115 outcomes between 2006-2022 is 31% and the IRR for Tech Coast Angels’ 247 outcomes between 1997-2022 is 25% (assuming one invested equal amounts in all companies)

Both angel group portfolios offer statistically significant sample sizes, and three previous large studies by Professor Rob Wiltbank also showed IRR’s in a similar range: 27% (2007 study), 22% (2009 Study) and 22% (2016 Study).

But how does this compare to other asset classes for...

Read the rest of this article at techcoastangels.com...

Thanks for this article excerpt and its graphics to John Harbison, TCA Chairman Emeritus.

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