Why your 'angel' investor may not be on your shoulder

This sober article on very early-stage or ‘angel’ investing may have been written by Andy Rachleff to disabuse novice investors from ever venturing into this type of financing, but it is also a cautionary note to any start-up looking for OPM (other people’s money). The caution is laid out like a losing hand in poker: “The premier venture capital firms know the best investments have high technical risk and low market risk. Market risk causes companies to fail.” Apps and most devices are exactly the opposite–low technical risk, high market risk. But you still are an idealist and want to invest in your next door neighbor’s killer app. The author offers four tips on what to expect when you do, with the first “Assume you are going to lose all your money”. Why Angel Investors Don’t Make Money … And Advice For People Who Are Going To Become Angels Anyway (TechCrunch)

1 thought on “Why your 'angel' investor may not be on your shoulder

  1. In the comments “Brandon Smietana” points out that the basic mistake being made by the author (Andy Rachleff) is that he’s being selective in presenting research findings so that they agree with his assumptions of the market:

    “the Kauffman Foundation research…overall return for the venture capital industry has been quite poor (the average VC fund barely returned investor capital after fees)”

    Kauffman have published research on the Angel market showing it to be favorable to this ROI:

    “The largest study on the financial returns of angel investors in North America, released in a new report today by the Ewing Marion Kauffman Foundation and the Angel Capital Education Foundation, shows that angel investors participating in organized angel groups achieved an average 27 percent internal rate of return on their investments”


    I personally think the telecare and mHealth markets have a great fit for Angel investors who have made their capital in the Healthcare industry.

    As we move from the legacy procedural/treatment based healthcare systems to a market that features more personalised, connected and preventative services these professionals are very aware of the challenges and they of course have a very good idea of where the treasure (AKA commercially successful wasteful processes) is hidden.

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