In 2007, Professor Rob Wiltbank reported in Returns to Angel Investors in Groups that angel investors made follow-on investment in about 30% of their invested companies. It was surprising for me to learn that follow-on investments correlated with lower returns, that is, angels that made follow-on angel investments saw returns of 1.4X their investment, while those that did not make follow-on investments enjoyed 3.6X returns. The time to exit for both groups was similar. Frankly, the conclusion that angels who make follow-on investments can expect lower returns is distressing to me. At a time when venture capital, on average, has moved to later stage investing, angels need to plan on making multiple investments to help startups survive to positive cash flow and eventually to exit….
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The Center for Venture Research at the University of New Hampshire has been publishing statistics on angel investing for decades. Over the past several years, the numbers of US companies funded by angel investors has increased from about 50,000 per year to over 60,000 annually. Mark Boslet of senior editor with Venture Capital Journal posted the following chart on peHUB, based on CVR reports. As you can see, in the past eight years, the average angel round has decreased from nearly $500,000 to under $350,000. Why have we seen a drop in the size of angel rounds of investment? Several possibilities come to mind: • The softness of financial markets has had a negative impact on the willingness of angels to fund larger rounds. Shallow…