Research: Do early-stage investors really enjoy rates of return three times better than public markets?
Do early-stage investors really enjoy rates of return three times better than public markets?
How much money do angel investors make investing in early-stage companies? Is it a genuine “asset class” with generally predictable returns, or just a potentially expensive hobby?
When Upstate Carolina Angel Network (UCAN) investors in Greenville and South Carolina Angel Network (SCAN) investors across South Carolina invest in a startup company, we have a specific return goal: to make a 50 percent or better annualized internal rate of return (IRR), which translates to 10 times our investment in five years (or four times in three years, etc.). We know that early-stage investing is highly risky: Startups often fail and take their investors’ capital with them. Factoring in the inevitable losses, we target a “portfolio return” of 20 percent IRR.
This compares to the annualized return (including dividends) of the S&P 500 over the last 15 years of around 7 percent. Do angels really enjoy rates of return three times better than public markets?
When you read about the fortunes of early private investors in Twitter or Uber, or founders like Mark Zuckerberg and Elon Musk, you see that sometimes they do. But those cases are news precisely because they are atypical. So what returns do “regular” angel investors expect, and what do they actually achieve?
Matthew Le Merle’s study, “Capturing the Expected Returns of Angel Investors in Groups,” released last December, answers the first question. From surveys of angel groups, Le Merle found that 55 percent of investors expect returns above 20 percent IRR, and the rest expect 10 to 20 percent IRR – better than public markets on average. This resonates with surveys of our members that show they are targeting returns of 20 percent or more IRR.
Press: Best Practices for India's Angels
There are best practices that differentiate between the most and the least successful investors: Matthew Le Merle of Keiretsu Capital
Keiretsu Capital is an affiliate of Keiretsu Forum, a leading global angel network headquartered in the US. The Keiretsu Forum has three chapters in India – Chennai, Bengaluru and Mumbai – helping Indian angel investors invest in start-ups in the US and in India. Keiretsu Capital has about $10 million under management, which it hopes to go up to $20 million by the year-end. In this recent interview, Matthew Le Merle, Managing Partner, Keiretsu Capital, talks of angel investing and the opportunities for India.
Press: VCCircle Interviews Matthew Le Merle on Angel Investing in India
Best time for angel investors in India, says Keiretsu Cap's Matthew Le Merle
Keiretsu Capital, the co-investment fund of global angel network Keiretsu Forum, raised around $6.5 million for its first angel investor fund in 2015. It is now planning to start a seed fund in India. During his recent visit to India, Matthew Le Merle, a managing partner at the fund, said it was contemplating an India focussed fund in 2017.
The US based cross border network's Chennai chapter, its first in India, has invested a little over $1 million in early stage startups, finishing its first year with around a dozen deals.
In this interview with VCCircle, Le Merle, whose firm, Fifth Era, advises countries and companies on growing the digital economy, outlines the investment goals for Keiretsu Capital's funds and the opportunities for angel investors in India.
Press: VCCircle Announces Keiretsu Capital to Launch India Fund in 2017
Keiretsu Forum, one of the world’s leading angel networks with 46 chapters across three continents, is planning to start a venture fund in India.
Press: Keiretsu Forum Angels Come to India
The Hindu BusinessLine
Angel investors – wealthy individuals who invest in and mentor start-ups – will be better off writing small cheques for a number of ventures rather than restricting their investment to just a few companies, according to Matthew Le Merle, Managing Partner, Keiretsu Capital.
He told The Hindu BusinessLine here that angel investing is a hit-driven business and the more diversified portfolio that an angel investor holds, the better are his or her chances of making a decent return.
Keiretsu Capital is a co-investment fund that has been started by Keiretsu Forum, the US-headquartered global angel network. Members of Keiretsu Forum can invest in these funds. Keiretsu Forum has 46 chapters across the world, including two in India – in Chennai and Bengaluru.
Press: Expanding Israel's Digital Economy
Brief video taken during the presentation of Fifth Era's 2016 report on the impact of internet regulation on investment given to members of the Government of Israel in Jerusalem.
This Fifth Era white paper can be downloaded by clicking this link.
For further perspective on this issue, contact Fifth Era through the contact section of this website.
Report: Do VC's back start-ups? Ensuring start-ups are backed in an innovation cluster
Press: Born Free: Will Regulation Ruin the Internet?
The Wall Street Journal and AT Kearney the global management consulting firm are exploring the future of America as it approaches it's 250th anniversary. Fifth Era has contributed to the dialog.
The Internet has so profoundly changed the world, few of us could imagine living without it. Fewer still would want to. Clearly, the Internet’s myriad benefits dwarf its inevitable drawbacks. Will the Internet continue to be an engine of global progress? Or will burdensome new regulations dampen its future? As we choose our path toward America@250, leaders in the U.S. and abroad would be wise to draw some key lessons from the Internet’s remarkable rise.
