50% of angels regret investments made this year | Hacker News Reader

50% of angels regret investments made this year

venturebeat.com

21 pointsblo15 comments

This almost makes it seem like angel investing has some risk associated with it.

But seriously, this is about as low content as a post as you could imagine:

- Angel investors regret bad decisions

- Angel investors want lower valuations

- Angel investors want less "hot air" (which is ironic because most media sources highly recommend you "hustle" when raising money)

All of this is obvious. And a company that is replacing the guesswork of valuing early-stage companies with their own arbitrary guesswork doesn't strike me as an upgrade, especially since I'm sure they take a cut somehow.

Yes, this is a very silly article.

In fact, since it's saying that "50% of angel investors regret at least one investment this year", that could be taken to mean that the other 50% of angel investors are being too conservative with their investments: http://www.avc.com/a_vc/2013/11/loss-ratios-in-early-stage-v...

This assumes that angel investors have the same incentives as institutional VC firms do, which is not always the case, but I'm just highlighting how silly it is to have a headline that "only" 50% of angel investors this year have no regrets.

The silliest part of the article is actually buried in the graph: the number-one reason people regret angel investments is that the company's "financial projections [were] overly optimistic."

All financial projections in an early startup's pitch deck are going to be overly optimistic. That's because it's a startup, not an established company with a proven business model. Angels shouldn't be filtering for degree of optimism in the projections, which are mostly meaningless at this stage. They should be filtering for the underlying assumptions in the projections. It's about the inputs in the model (strategic, human, and technological) -- not the exactitude of the projected outputs.

That's it huh? I'd assume ~100% would regret some investment they made.

Yeah, that was exactly my thought.

50% is not actually that bad - given that its really hard to say which investment will work or not.

Put another way, it means 50% weren't too unhappy with their investments! That's a lot!

If I'm not mistaken angels anticipate that 90% or more of their investments will fail. It's high risk so that's why they command high equity.

"Regret" (ie hindsight) is a useless metric.

But that's the not the point of the article anyway. Hello sales pitch for Worthworm!

All things considered I think a 50% regret rate is pretty damn good, considering the majority of those companies will probably not pan out.

Especially when it is that 50% regret 1 or more investments.

What percentage of stock market investors make at least one investment per year that goes down?

The last paragraph is self-contradictory. And the entire article, while telling entrepreneurs not to inflate their projections, implies that inflating your projections is exactly how to get funded.

As the article mentions, 1/2 of all investments lose money (source: http://sites.kauffman.org/pdf/angel_groups_111207.pdf). Given that, plus the fact that 6-12 months usually provides a lot of hints about whether an investment will be a good one, these findings don't seem very surprising.

Don't most angels regret investments every year? I was under the impression that you invested expecting to lost 90% but get a 10x return on 10% to pay off the fund and then everything else was gravy?

The more I think about it the more I think the real headline here is that 50% of angel investors don't regret a single investment they've made in the past year.

I bet half of them were below average...

It's 46%. And, there's no comparison to other years. Maybe "46% regret" is a record low for the industry.

Uhm. 50% actually seems quite conservative. If you have no data, the probability halves with each concurrent requirement. If Angels invested, on average, in two start ups a year, looking at the issue with no data, you'd expect 75% of them to regret at least one of their investments. If they invested in four you'd expect 93.75% of them to regret.

According to Almeida Capital Research, as cited by the DTI, the average number of annual investments by angel-backed funds in the UK is 6.5

http://www.bis.gov.uk/files/file38273.pdf (see page 47)

Granted the UK is not the US, granted that angel-backed funds isn't necessarily the same as saying that each Angel made 6.5 investments.

Still, if those numbers are even vaguely in the right ballpark, that's a lot of uncertainty being reduced to get down to 50% regret.

And then, is their regret rational, do they only regret things on which they've lost money, and how much? If you make 80% of your income from 20% of your projects (I don't know the actual numbers) and you regret on average > 15.38% of your investments you may well be able to take on a fair bit more risk.

> Investors would basically prefer if entrepreneurs didn’t blow a lot of hot air. Considering that angel-funded startups are significantly more likely to survive at least four years and raise additional financing, its in entrepreneurs’ best interest to be honest and back their claims up with real information.

If they gave an honest valuation maybe they wouldn't get funded at all. The motivation of an entrepreneur is not necessarily to reduce investor regret.

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