- http://gust.com/angel-investing/startup-blogs/2012/03/27/the-reality-of-returns-on-angel-investment/
A majority of all new, angel-backed companies fail completely, so if you invest in only one company, the odds are that you will LOSE ALL YOUR MONEY, not just “not make a profit”.
Several studies and mathematical simulations have shown that it takes investing the same amount of money consistently into at least 20-25 companies before your returns begin to approach the typical return of over 20% for professional, active angel investing. This means the greater the number of companies into which the angel syndicate invests, the greater the likelihood of an overall positive return. [1]
Angel investing (like venture capital) follows the classic J-curve. Because unsuccessful companies tend to fail early, and big exits from the successful ones tend to take a long time to develop, when you graph it on a timeline, the overall value of an angel portfolio makes a shape like the letter “J”. The value immediately begins dropping for several years as soon as you start investing, and only after a fair amount of time does it change direction and begin to be worth more than the original investment.
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