Managing a Portfolio of Angel Investments

Managing a Portfolio of Angel Investments

Most investors are aware of the benefit of diversification. Investing in the venture asset class is no exception, and perhaps is most beneficial due to the amount of risk that can be diversified away. Therein leads to the importance of understanding best practices for managing a portfolio of startup investments.

Important Considerations for Managing a Portfolio

  • Return on Investment (ROI) — understanding the typical timing of return and potential outcomes
  • Dilution — the potential for future dilution, anti-dilution protections, and net-positive dilution
  • Follow-on Rounds — multiple follow-on rounds and follow-on investment strategy
  • Monitoring
  • Losses — loss of capital and taxation
  • Exits — liquidity events, acquisitions, IPOs, secondary sales, and recapitalization

The Evolution of Angel Investing

Traditionally, the angel investor community has been comprised of a small set of well-connected individuals located in a few hub cities across the country. With the advent of online equity crowd funding, this limited group is expanding and a new type of angel is emerging.

Is angel investment regulated?

For angel investment, there is a complete regulatory framework working to protect both the investors and the businessmen availing finance from those investors.

Before a business is thinking about getting finance from the angel investors, they should make sure that the investors are certified by the Financial services and market act of 2000 so that there are minimal chances of uncertainty.

The Importance of an angel investor

The importance of an angel investor cannot be overestimated. They play a very crucial role in the way the economy turns out. They are also considered to be the group that produces arguably the largest source of funding for most startup companies. They provide the capital needed for risky ventures that have a high rate of success. They are also important as they advance technology in an area through their consistent funding program.

The truth is that most banks would find it hard to lend the needed capital to new startups as the issues of risks and costs would be too much for them to handle. However, the angel investors would not only provide the needed investment, but they would also give managerial training and mentoring to the startups – something the startups would require.