What is angel investing REALLY like?

by | Sep 2023 | Early-Stage Capital

Being a founder is hard; but so is being an angel investor. I found out last week that one of the startups in my angel portfolio is selling. Hooray (kind of).

I invested in 2017 and 6 years later I’m getting my money back, with a chance of a 50% kicker, subject to the terms of the founders’ earn-out.

Hey, it’s not a loss!

This isn’t a moan, I promise. I’ve got some good ones too. But if you’re thinking about investing in angel deals, don’t assume every deal will be a winner. It won’t.

As well as this exit, I’ve had 6 portfolio companies close this year. That’s on top of 4 in 2022 and 2 before that in 2021 (including my first loss).

Of course I thought all of these companies would be winners, otherwise I’d never have invested my children’s inheritance in them…

So, that’s 12 closures in total, so far, with 4 exits (including this one), the best of which paid out ~3x.

As things stand I’m about $100,000 down in realised investments (i.e. those that already either paid out or shut down).


The lemons ripen before the plums

Although a $100K loss sounds bad, what I’ve learned from people who’ve been doing this longer than me is the following: the bad news typically comes before the good.

Have a look at the chart below and you’ll see what I mean.

The startup investor's timeline chart

You see, although I’m down in realised investments, I still have 47 portfolio companies that are still fighting the good fight. If you think about it, it makes sense. Companies that fail tend not to survive very long (sometimes, yes, but not usually). Those that succeed, on the other hand, can go on for decades.

“As an early-stage investor the losses will typically come early and the winners will materialise later (or the exits).”
Mikael Krogh, Investigate VC

This isn’t always true, of course. A friend of mine made a single $100K investment (ballsy!) and came away a few years later with >$1m. Legend. But from speaking with a lot of angel investors, it seems to be normal that things appear to start poorly.

In my portfolio, I see three more companies that look likely to fail. This isn’t a good thing, of course, but remember that you can only lose 1x your investment. At the other end of the scale, I have several standout performers, including two that look capable of delivering a return of 50x or better.

That sounds like asymmetry to me.

Of course, what happens next is anyone’s guess. Most of my portfolio companies have been running for at least 3 years and now turn over a decent amount of money …but I know from experience that revenue doesn’t mean much without profit.

My latest exit

In the just-announced deal, I invested in 2017 at ~10x revenue. The startup world was in a good place back then, and 10x seemed reasonable at the time. The company was early in its journey and growing quickly, with some great clients onboard. Meanwhile larger SaaS companies were selling and trading at 10-20x revenue, so this deal looked on the cheap side.

It didn’t last though. SaaS multiples got crushed and my portfolio company accepted an offer at ~4x revenue. It’s not a bad deal, as far as headline numbers go (it’s still high severn figures), but it’s far from where I pictured it ending up. What’s more, the company has grown by several hundred percent in the interim, so a 1.5x ROI feels low. In effect, the change in revenue multiple combined with the deal terms has pretty much cancelled out any profits I expected to make.


  1. First of all, if you’re thinking about angel investing, don’t underestimate how difficult it is to make money. Only invest what you can lose without losing too much sleep over.
  2. Secondly, don’t rule out parking money with an expert. I invested in a managed fund that, so far, has delivered a far greater return than my angel deals, at around 7% annually. (Mind you, it’s not hard to beat a $100K loss!).
  3. Thirdly, don’t assume you can pick deals better than a professional. My best startup investment, as it looks right now, is the money I invested into a Singapore-based early-stage VC. The managers there are much better at saying no than I am!

I’m not doing any more angel deals for now, so fingers crossed one of the remaining 47 companies knocks it out of the park. If that happens, I might go again.

If you want to dip your toe into angel investing yourself, find someone who knows what they’re doing and, before you invest too much, try to find out what they’ve learned.

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– Featured image: Midjourney

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