Depending on the study, roughly 90% of early-stage startup investments fail to produce meaningful returns, with only a small minority generating the gains that drive overall portfolio performance. If that statistic makes you wonder why anyone does it, you are asking exactly the right question.
Angel investing is when you give money to a startup in exchange for an ownership stake in the company. You will not receive interest payments or dividends, and there is no repayment schedule. You are not lending money. You are buying a piece of a company that does not yet have a proven track record, and in most cases has not yet made a single dollar.
If the company fails your money is gone. If it gets acquired or goes public, you get a return based on your ownership percentage. That exit, something called a liquidity event, is the only way to get your money out. And it can take many years before that happens, if it happens at all.
This is different from what a venture capitalist does. VCs pool money from many investors and write large checks into companies that have typically progressed beyond the earliest idea stage. Angels use their own money and write much smaller checks into ideas that are barely off the ground. You are earlier and more exposed than a VC, and you are writing a personal check rather than investing through a fund.
Comments
Nothing yet. Say the first thing.
Sign in to join the conversation.