What is the average return on angel investing?
While it varies depending on the individual investor, the average return for an angel investor is thought to be around 20%. Of course, there are always exceptions to this rule and some angel investors have made a lot more (or a lot less) money from their investments.
For example, an angel investor might expect to see a return of 10 to 15 times their investment within 5 years, while a venture capitalist might be happy with a return of 3 to 4 times their investment over a longer period of time. Of course, there are always exceptions to the rule.
Angel Investors: Estimated average ROI: Around 20-30%, with some sources suggesting up to 35%. Range: This can vary widely depending on factors like individual investment strategies, industry focus, and exit scenarios.
| Job Title | Salary |
|---|---|
| Launchpad Ventures Angel Investor salaries - 1 salaries reported | $251,942/yr |
| G.G.Tronics Angel Investor salaries - 1 salaries reported | $281,625/yr |
| Stealth Startup Angel Investor salaries - 1 salaries reported | $312,318/yr |
The AngelList platform has generated returns, net of fees, of 26.5% per year for investors (LPs) dating back to 2013*. One might presume, then, that the typical AngelList startup investment returns 26.5% per year, with some variance.
50%-70% of individual angel investments result in a loss of some capital, according to the most authoritative academic data; the same is true for VC deals.
A typical investment is between $15,000 and $250,000, although it can vary significantly. Usually angel investors contribute a relatively small amount of capital into a startup company. Angel investors are often friends or family members. They might also be experienced venture capitalists or entrepreneurs.
Many angel investors are accredited investors, which is a designation that requires a minimum net worth of $1 million, at least $200,000 in annual individual income or at least $300,000 in annual joint income (see the Securities and Exchange Commission website for details).
If your valuation is around $1M, you can validly ask for $200K–$300K, and offer 20–30% of your company in exchange. Type of investor. Angel investment groups usually won't consider a request over $1M, while venture capitalists won't look at anything under $2M.
In most cases, it is advisable to have at least $25,000 available for investing purposes. However, if a startup is seeking a large amount of funding (say $1 million or more), then angels may need upwards of $100,000 to make a meaningful contribution and secure a spot in the syndicate.
Is an angel investor a wealthy individual?
An angel investor is a wealthy person who invests his or her own money in a company—usually a start-up—that is in the early stages of development.
Is 30% Good ROI? An ROI of 30% can be good, but it can depend on how long your ROI has been at 30% in previous years. A 1-year ROI of 20% compared to 3-years of a 30% ROI can be considered a better investment.
What Is a Good Return On Investment? In the current environment, a return of between 8% and 10% year-on-year is positive. If you take on more risk, the returns could be higher—but so too could the losses.
The average stock market return isn't always average
While 10% might be the average, the returns in any given year are far from average. In fact, between 1926 and 2022, returns were in that “average” band of 8% to 12% only seven times. The rest of the time they were much lower or, usually, much higher.
Angel investors who seed startups that fail during their early stages lose their entire investments. This is why professional angel investors look for opportunities that have a defined exit strategy, an acquisition opportunity, or participation in an initial public offering (IPO).
One of the biggest risks of raising money from angel investors is that you could end up giving up too much equity in your company. Remember, angels are investing their own money, so they're going to want a significant ownership stake in your business.
Making money as an angel investor is possible, but it's also risky and you could lose all of your money. Anywhere from 75% to 90% of startups fail. Most angel investors allocate a subset of their overall investment portfolio to angel investments.
A lot of advisors would argue that for those starting out, the general guiding principle is that you should think about giving away somewhere between 10-20% of equity.
Certainly, the investors of Shark Tank are not your typical angel investors. But they do some of the things most angel investors do. They evaluate new ventures, estimate the value of new ventures, and commit their own capital to some of the ventures they view.
- Have you ever founded your own startup or run your own company? ...
- What are your areas of expertise? ...
- Do you know other investors who might be interested in participating as angel investors? ...
- Are you interested in helping with other operations besides funding?
How long do angel investors generally hold shares?
It's not a question of “holding out”, because it's not volitional. Once angels have invested in a startup, they have no ability to get out…all they can do is wait. And in the US, the average holding time for an angel between initial investment and profitable exit is… nine to ten years!
The disadvantage of the angel investor's higher tolerance for risk is that also they usually have higher expectations. They are in business to earn money, and as there is a significant quantity of funds on the line, they are going to want to witness a payoff, just like anyone else is.
Angels get their payback through an exit that lets them liquidate their stake and potentially make a profit that's based on the percentage of the business they own. Generally, investors will pre-plan the details of the exit when negotiating the term sheet before they invest in the startup.
Angel investors are generally high-net-worth individuals who invest their own money directly in emerging businesses. Most angel investors are accredited investors, and many are current or former entrepreneurs themselves.
According to conventional wisdom, an annual ROI of approximately 7% or greater is considered a good ROI for an investment in stocks. This is also about the average annual return of the S&P 500, accounting for inflation. Because this is an average, some years your return may be higher; some years they may be lower.
