Today’s Pick: Angel investor group returns and best practices
The results of the largest study on the financial returns of angel investors in North America were released earlier this week by the Ewing Marion Kauffman Foundation and the Angel Capital Foundation.
The study showed that angels affiliated with organized angel groups achieved an average of 27% internal rate of return on their investments. Overall, “…. [these] groups experienced exits that generated 2.6 times their invested capital in 3.5 years from investment to exit. This return compares favorably to that of other private equity investments, including those of early-stage venture capital.â€?
In addition to the study’s findings on angel investment outcomes, best practices in angel investing were also identified. Areas linked to investment performance were:
- due diligence time
- industry expertise among investors
- active participation by angels in the funded venture
- follow-on investing (interestingly, the study found that “ … [i]n ventures where follow-on investments were made, nearly 70 per cent of the exits occurred at a loss.â€?)
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Helen Kula sources and delivers market data and intelligence to entrepreneurs, high-growth companies and MaRS staff and advisors. She is an active member of Toronto’s information professional and librarian communities.