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Venture Giant

Venture Giant is a leading angel investment and business networking organisation based in London, UK. It connects entrepreneurs looking for investment with angel investors looking for opportunities to invest.

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Return on Investments for Angels

Angel investing is nothing new in the world of investment. Angels have been investing in Broadway shows and theatrical productions, since the 1950s. While at that time, they were not as popular or networked, in the modern times they are both well networked and much sought after.

Angel investors themselves have been rather keen on finding good investment opportunity in the form of business ventures which have the potential for profit. Though angel investors themselves are wealthy, they are always looking for opportunities which will give them good investment returns. Most angels try to invest only in ventures where they can get about 10 times their money in about 5-7 years. This is a long and tedious wait, but if the venture becomes successful, the wait is worth it.

Angel investors often also look for positions of profit in the business that they are financing. They may be interested in partaking in the profits of the business too. However, such details are decided at the time of finalizing of the terms. Since all angels are different from each other, there are huge chances that some of the angels may have very modest expectations of returns. However, this is not very likely since most angels invest in many businesses and the success rate is very low. If a small business that an investor has been backing financially folds, the investors money is never seen again. Therefore, most investors look for high investment return on the project that does become successful.

A recent survey of angels and the companies that they have invested in shows that most investors seek an average return of at least seven times their initial investment, over a period of seven years. This makes the average return somewhere around 32%.

The angels are unusually patient about their investment returns. They can wait for large periods of time to realize the potential of their investments. They are usually willing to remain in a deal for about 5-7 years and sometimes, even for longer periods of time. Over this period, their expectations of the investment returns are also rather modest. In many cases, it has been seen that the investors earned a compound return on investment of about 65.5% over five years. This is a mean value and actuals can vary slightly.

If the company is able to realize its projected value, the amount of equity received by the angel investors and the investment return can be around 30-40%. No angel would take the risk of financing a company which does not have the potential to make a profit. Many a times, angels may take days before they actually accept a proposal. During this period, they discuss the potential of the business amongst other knowledgeable friends and partners. Angel investing groups may take longer periods of time to consider proposals.

Angels also get a lot of proposals for consideration and therefore, it may take some time before they can actually reach a decision and be able to divide their funds along different investment opportunities.

Even though most angels tend to choose their business ventures after lot of consideration, it has been seen that only 3 out of 10 ventures will ever be successful. The expectations do vary for each angel, but the risks remain the same for everyone.

The overall returns of the angel investors are not very different from those of the broader market of private equity. The investment return of an angel is stated in terms of the return or exit. Statistically, it is known that about 39% of angels lose their money and gain not investment return on their portfolio. As compared to this, when the individuals go into business directly, only on 48% of the angels ever get profit on their investments. The expected investment return of 10% is received only by 7% of the total investors, even though the average term of investment is 3.5 years.

Even though there are several risk factors that can cause the investors to lose money, angels can increase the odds of converting their investments into profits by due diligence. The odds of increasing the investment returns can be increased by retaining close ties with the company even after the initial investment. When the angel continues to be attached with the business, their experience can help flourish the business.

The process of investing in private equity is such that one successful deal can reimburse 75% of the lost money of the investor. So if an investor has made 10 deals, the first deal that becomes successful, returns all the investor's money back. In the same breath, the next deals to turn successful, can only be profit. Since the investment return is high on each deal, it is best to allocated funds in a manner that they are as diversified as possible.

At any given time, investing in 6-10 companies can help the investor make sure that there is some profit to be made. These companies should be considered carefully and money should only be lent to those who have any realistic chances of making money. Potential investments should always be screened carefully, preferably, by weighing on the criteria of whether the company has enough potential to be in the top 10% of investments.

From the point of view of the entrepreneur seeking funding, it can get very difficult to convince the investors that their business has the potential to yield high investment returns and be in the top 10% investments. Fortunately, all angels do not consider the profit margin and the investment return while considering the project. There are numerous other factors that can influence their decisions. A personal interest in the business and past experience of it, are some of the criterion, based on which an angel can take decisions.

On an average, the angel investments can bring in more revenues than those brought in by high tech industries like e-commerce. The internal rates of return or the IRR are higher for angel investors, even though their expectations are rather moderate. So if you want to explore this highly attractive world of angel investing, check out the huge database of attractive business proposals on Venture Giant. It is a leading Angel Investment and networking portal and connects active angel investors with entrepreneurs who seek investment capital and business funding to start up new ventures or expand existing businesses.
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