What Returns Can i Expect For My Money ?

Business Angel investments are generally high risk so the returns can be very good. On the other hand you should not make such investments unless you can afford to lose the whole amount. Recent research among existing business angels has shown that one in five investments provided a cumulative return of 50% or more per annum, but in one in three cases the total amount invested was lost.

The 2-6-2 Rule

This rule states that in a large universe, 20% of investments will be winners, 60% will be 'Living Dead' (that is, continue to operate but will not generate a sufficient return to justify on-going monitoring costs), and 20% will cease to exist. Many investors operate on the basis that the 20% successful investments will pay for the remaining 80%, AND still show a return on the total investment that justifies the higher risks.

The typical expectation of Angels regarding returns on their investments is as under

• Startup Companies -10 X s the investment  within five years
• Companies less than one year in - 6 X s the investment within five years
• Companies one to five years in age - 5 X s the investment within five years
• Companies more than five years old - 3 X s the investment within five years