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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