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Angel Investing Return Expectations

Given that angel investing is VERY risky, what are chances for a return and what are angels looking for in terms of returns. Here is where returns for angel investors stand:

  • 1 or 2 of every 10 investments brings most of return. For angel investors, this means they generally need to do several investments. Ideally, there should be diversification within their angel investments.
  • It is hard to tell which companies will return, and this is why diversification is key. Angels want to go into an investment believing it may be the one that makes the return but if they knew which ones will make the return, there wouldn’t be risk, right?

The current return estimates and goals for angel investor portfolios are::

  • Annual IRR of 27% – 2.6X in 3.5 years
  • If business gets VC funding later, angel investment is often diluted
  • Some angels therefore looking for 10 to 30x return potential

There are of course a wide variety of expectations, depending on mix of motivations to be an angel.