|
11/13/07: Study Reports on Angel Investment Returns |
|
|
|
Study Reports on Angel Investment Returns
Largest study on angel exits is released
The Kauffman Foundation and the Angel Capital Education Foundation released a report, “Returns of Angel Investors in Groups,” this week that shows angel investors participating in organized angel groups achieved an average 27 percent internal rate of return on their investments. The study, conducted by Robert Wiltbank of Willamette University and Warren Boeker of the University of Washington, was the largest on the financial returns of angel investors in North America.
Overall, this set of angel investors affiliated with angel 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. Seven percent of exits generated returns above 10 times their initial investment.
The study, conducted over the past year, analyzed results from 86 organized angel investor groups throughout the United States, involving 539 individual angel group investors who have experienced more than 1,130 exits in which companies that had received the investments were acquired, went public, or were closed. It comprises the largest data set of angel investor exits ever collected.
The study also assessed how several strategic factors impact the angel investors’ outcomes, including due diligence time, industry experience, participation with the company after the investment is made, and follow-on investing. The study also provides key demographic information about angel group investors.
The results demonstrate the risk inherent in angel investing. In slightly more than half the venture investments, some or all of the study respondents’ investment capital was lost.
Angel investors are high net worth individuals who make equity investments directly into growing companies, usually as the ventures are starting up. The study’s respondents had made investments in mostly early-stage firms, with nearly 45 percent of the investments in companies that had no revenues at the time of the first investment.
In recent years, individual angels began forming angel group organizations with other individual angels to share in due diligence, to make larger investments, and to make more sophisticated investments.
|
