Angel investments are risky. Individual angels who invest in a limited number of startups without an investment strategy risk losing all their money. So how can individual angel investors gain exposure to a broad range of opportunities? How can angel groups improve their sustainability, attract new members and the best deals?
A sidecar fund is a fund that invests along side an existing angel group. Existing angel investors (looking for diversification) and passive investors (looking for exposure to an emerging asset class) can invest in the sidecar fund. They gain the broad resources of the angel group including deal flow, domain knowledge, deal screening and due diligence.
Studies show that 15+ investments are required to expect material investment returns on angel investments. Investors can still take high conviction exposure to early stage enterprises via direct investment while diversifying their exposure with a multitude of option positions via a sidecar fund.