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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 info, see http://sim.vc/angels

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

  1. Data-Driven Patterns for Successful Angel Investing Sim Simeonov sim@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 deal market 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 deal market environment
  13. investment optionality dollar cost averaging
  14. be a player investment optionality dollar cost averaging play a lot
  15. Angel Investment Returns Analysis Ingredients Instructions • Kaufmann angel 1. Clean data return data set 2. Analyze data set • Additional data 3. Reverse-engineer from angels returns probability Tools distribution • Big data kitchen 4. Do Monte Carlo 5. Adjust & repeat #4 for all interesting questions
  16. Two things you don’t want to see made: sausage & econometrics
  17. The end result, however…
  18. 100% 80% >10x 60% 5-10x 3-5x 40% 2-3x 1-2x 20% <1x 0% % of % of % of % of Angels deals $inv $return
  19. Monte Carlo results
  20. 100% Portfolio 75% Size Size Portfolio P(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 Size P(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 Portfolio P(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 cap 80% 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 seeks angel investor data for discrete long-term relationship and intense anything-goes analysis. Must be clean and BS-free. http://sim.vc/angels

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