Angel investors have good reasons for passing on your startup company. But they should make more, not fewer investments over the long run, in order to maximize their returns. That’s what I took away from Sim Simeonov’s guest analysis in PE Hub last week. But it turns out there’s much more to the story.

Simeonov, a noted entrepreneur, angel, and former venture capitalist, cited a study of angel investing performance conducted by the Kauffman Foundation. Restricting the data set to first-round investments in early-stage tech companies—56 angels with exits from 112 companies—he concluded that two-thirds of the angels made less than what they invested; nearly half generated no return; and 6 percent of the angels accounted for 68 percent of the total returns. (Wade reported on some of this at the Angel Boot Camp last month.)

Intrigued by these results, Simeonov decided to push it further. Being a technical guy—computer scientist, Macromedia and Allaire veteran, former technology partner at Polaris Venture Partners, and founder of FastIgnite—he programmed a “Monte Carlo” computer simulation of angel investing, making some assumptions about the statistics of portfolio companies (based on the above 112 companies). Then he ran the simulation to calculate the hypothetical returns, varying things like the number of companies in an investor’s portfolio.

To read the full, original article click on this link: Super Angels and Seed Funds: Sim Simeonov’s Advice for Investors and Entrepreneurs | Xconomy

Author: Gregory T. Huang