Patterns of Successful Angel Investing by Simeon Simeonov

Data-Driven Patterns forSuccessful Angel InvestingSim Simeonovsim@fastignite.com@simeons

Founding. Funding.Growing. Startups.

Have fun & make $$$

58 % IRR

Cash-on-Cash 3.2x

66% lose money

45% total loss

What determines investment success?

quality deal flow picking winners winning the dealmarket environment

Can you pick winners?

If you can have asymmetric information most of the time, ignore the advice here

quality deal flow picking winners winning the dealmarket environment

investment optionalitydollar cost averaging

be a player investment optionality dollar cost averagingplay a lot

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

Two things you don’twant to see made:sausage & econometrics

The end result, however…

100%80% >10x60% 5-10x 3-5x40% 2-3x 1-2x20% <1x 0% % of % of % of % of Angels deals $inv $return

Monte Carlo results

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

Why do a few angels get the lion’s share of returns?

Lucky? Smart?

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

Answer: most likely luck

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

Does the lean startup movement benefit angel investors?

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)

Answer: yes but very active angels get disproportionate benefits

What’s the effect of big bets?

50x vs. 1000x returns cap80%60%40%20% 0% 5 10 20 25 50 100 DiffP(x > 1) DiffP(x > 2) DiffP(x > 3)

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)

Answer: big bets make the most sense for very active angels

Be an active angel.Benefit from: - portfolio effects - lean startup ecosystem - making big bets

Be a selective angel.Focus on: - information asymmetry - low-failure opportunities - price

Econometrician seeksangel investor data for discrete long-term relationship and intense anything-goes analysis.Must be clean and BS-free. http://sim.vc/angels

http://protoinvest.tumblr.com	12
http://www.linkedin.com	9
https://si0.twimg.com	4
http://blog.ourcrowd.com	3
http://misato2.wikispaces.com	2
http://olindainformatica4esoc.blogspot.com	2
http://www.freddylinares.com	1
http://94.126.241.26	1
http://fisicodearturito.blogspot.com	1
http://drizzlin.com	1
http://us-w1.rockmelt.com	1
http://www.onlydoo.com	1
http://www.madietiens.co.cc	1
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Patterns of Successful Angel Investing by Simeon Simeonov

by Simeon Simeonov on Jun 14, 2011

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