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Patterns of Successful Angel Investing by Simeon Simeonov
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Patterns of Successful Angel Investing by Simeon Simeonov

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Sim Simeonov's presentation from Angel Bootcamp 2011 teaches lessons for successful angel investing based on statistical analysis of thousands of angel investments over a twenty year period. For more ...

Sim Simeonov's presentation from Angel Bootcamp 2011 teaches lessons for successful angel investing based on statistical analysis of thousands of angel investments over a twenty year period. For more info, see http://sim.vc/angels

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Patterns of Successful Angel Investing by Simeon Simeonov Presentation Transcript

  • 1. Data-Driven Patterns forSuccessful Angel InvestingSim Simeonovsim@fastignite.com@simeons
  • 2. Founding. Funding.Growing. Startups.
  • 3. Have fun & make $$$
  • 4. 58 % IRR
  • 5. Cash-on-Cash 3.2x
  • 6. 66% lose money
  • 7. 45% total loss
  • 8. What determines investment success?
  • 9. quality deal flow picking winners winning the dealmarket environment
  • 10. Can you pick winners?
  • 11. If you can have asymmetric information most of the time, ignore the advice here
  • 12. quality deal flow picking winners winning the dealmarket environment
  • 13. investment optionalitydollar cost averaging
  • 14. be a player investment optionality dollar cost averagingplay a lot
  • 15. Angel Investment Returns AnalysisIngredients Instructions• Kaufmann angel 1. Clean data return data set 2. Analyze data set• Additional data 3. Reverse-engineer from angels returns probabilityTools distribution• Big data kitchen 4. Do Monte Carlo 5. Adjust & repeat #4 for all interesting questions
  • 16. Two things you don’twant to see made:sausage & econometrics
  • 17. The end result, however…
  • 18. 100%80% >10x60% 5-10x 3-5x40% 2-3x 1-2x20% <1x 0% % of % of % of % of Angels deals $inv $return
  • 19. Monte Carlo results
  • 20. 100% Portfolio 75% Size Size PortfolioP(return > X), % 5 10 25 50% 50 100 25% 0% 0x 2x 4x 6x 8x 10x Cash-on-Cash Return
  • 21. Why do a few angels get the lion’s share of returns?
  • 22. Lucky? Smart?
  • 23. Portfolio SizeP(return > X), % 15% 200% 5 10 25 50 100 Portfolio Size 10% 5% 0% 5x 6x 7x 8x 9x 10x Cash-on-Cash Return
  • 24. Answer: most likely luck
  • 25. 100% Portfolio 200% Size Size PortfolioP(return>X), % 75% 5 10 25 50 50% 100 25% 0x 1x 2x 3x 4x Cash-on-Cash Return
  • 26. Does the lean startup movement benefit angel investors?
  • 27. P(failure) reduced from 60% to 50%125%100% 75% 50% 25% 0% 5 10 20 25 50 100 DiffP(x > 1) DiffP(x > 2) DiffP(x > 3)
  • 28. Answer: yes but very active angels get disproportionate benefits
  • 29. What’s the effect of big bets?
  • 30. 50x vs. 1000x returns cap80%60%40%20% 0% 5 10 20 25 50 100 DiffP(x > 1) DiffP(x > 2) DiffP(x > 3)
  • 31. 20% 50x cap, 55% fail vs.10% 1000x cap, 60% fail 0% 5 10 20 25 50 100-10%-20% DiffP(x > 1) DiffP(x > 2) DiffP(x > 3)
  • 32. Answer: big bets make the most sense for very active angels
  • 33. Be an active angel.Benefit from: - portfolio effects - lean startup ecosystem - making big bets
  • 34. Be a selective angel.Focus on: - information asymmetry - low-failure opportunities - price
  • 35. Econometrician seeksangel investor data for discrete long-term relationship and intense anything-goes analysis.Must be clean and BS-free. http://sim.vc/angels