FDN: 4.31x / 1.86x IGV: 4.41x / 2.27x overall mean: 3.2x

Not much different than QQQ's 3.04x, but SPY is not a good benchmark due to big differences in underlying constituents.

I'd want to get a better handle on the timing of investments as well to make the benchmark more comparable - e.g., if 50% of the capital was deployed in 2012 (hypothetically) and 10% in each of the following 5 years then I'd weight my benchmark performance in the same fashion.

Finally, I would want to discount the angel investment portfolio for lack of control and liquidity. Much depends on the specifics of the recent fundraising - is the valuation using the pref figure or is it a reasonable approximation of the valuation of the seed paper (adjusting for structural differences)?

Personally, I'd rather have a well-diversified liquid ETF return of X than a portfolio of illiquid minority stakes that are marked to 1.2X. At 2X, I'd be happy with the restrictions.

Please don't misinterpret this as dumping on the result - IMO I believe this to be an above-average outcome and I congratulate the author on their success. Angel is harder than most if the top-few % of investments are not in a portfolio.

But in fact that author is going about this all wrong. It doesn't really matter if VC outperforms. The point of VC or hedge funds or any other alternative investments isn't to outperform the market on a risk adjusted basis (though that would be nice), but to provide a uncorrelated return stream.

When these uncorrelated or less correlated return streams is mixed into the standard market return stream, the risk adjusted return of the entire portfolio is enhanced. This is why you shouldn't focus on the individual risk/return profile of an asset or investment, but instead focus on the entire portfolio.

A great example of this somewhat counterintuitive statistical phenomenon is gold. Gold historically has had both high volatility and low returns. However, due to the low correlation to the market, mixing in gold to a SPY portfolio and performing a minimum variance optimization to determine the weights actually boosts the return/risk profile.

If anyone is interested, I have a blog post about it: https://cryptm.org/posts/2020/07/09/alt.html

This was a very informative and well-written article, but it pains me to see this misconception.

Buying investments in the secondary market does not in any way "keep money out of the economy". Aggregate savings equals aggregate investment. Period. It's one of the most fundamental tenets of macroeconomics.[1]

How do we square that with what we actually see? Certainly it's the case that if you go out and buy 100 shares of Apple, it's not like Apple receives a check. Yet for every buyer there has to be a seller. If you buy 100 shares, the seller now has $120,000 of liquid cash to reinvest somewhere else.

That seller may then originate a new primary investment himself. Or he may turn around and make a secondary investment, in which case the next seller faces the same choice. He may even just park the cash in a bank, who will then use his reserves to make loans (primary investments) or buy securities (secondary investments).

But either way every secondary investment results in a net cash balance, that then has to be reinvested by the next party in the chain. No matter how long the chain is, the supply of secondary investments is fixed. Any new capital invested in the secondary market must result in new economic investment in some way or another.

[1] https://en.wikipedia.org/wiki/Saving_identity

She should be using the standard way funds (and angels) observe non-liquid valuations on a quarterly basis [1]

Briefly speaking, if the company hasn't raised any new funds in the last 12 months from 'sophisticated investors' (in which case the valuation is given), she must have used a proxy valuation, like enterprise/sales comparable.

Anyways, interesting that over half of her portfolio is still active, but in line with the overall market [2]

[1] https://carta.com/blog/what-is-asc-820/

[2] https://www.sethlevine.com/archives/2014/08/venture-outcomes...

Also curious to hear if anyone managed to make such a purchase in a US pre-IPO company without being US-based.

Just like with hedge funds you tend to hear about the ones that did well, and not so much about the ones that lost their shirt. Also like hedge funds while there are a few recognized skilled investors for many others there’s not a whole lot of solid evidence that the “winner” investors were really smarter than the rest, just probably luckier. (Just under 50% of people betting black in roulette will double their money... that doesn’t make them good investors). Like hedge funds there are lots of, often untold, stories of people getting super lucky with returns, thinking they are “skilled” and then going out and losing a ton the next few times around.

Imho that it is the key differentiator between a well performing and atrocious angel portfolio.

The math is pretty well explained in this piece by Abe Othman of AngelList here: https://angel.co/blog/venture-returns - but the TLDR is: at earliest stage of venture your mean is infinite so making more bets (aka diversifying your portfolio) actually increases the average return. That’s probably why most angel investors do poorly - not enough cash/time/interest (or been told to “focus your portfolio”)

We (here comes the selfish part) apply this to B2B SaaS here: TinySeed.com/thesis

Fundamentally - the problem with replicating the angel investment success that the author has is - not many individual investors were early enough in Facebook to have funds to deploy at a scale where the math starts to work in your favor.

If "loss is part of the game" then why not list the companies they've invested in and lost? Especially if this is for "for transparency and accountability"...

Bits like this read like an advertisement to me, especially since my child has tried Kiwi crates and we found them to be pretty awful value. Maybe they're fun if you're an investor and you get a whole bunch of them at no cost, but for 20 bucks each we'd rather buy Legos.

The figures assumed to be right, this demonstrates that with knowledge and skill you can drive to a very satisfactory outcome. 2013 to present is a 7 year investment timeline, and on a sustained normal investment return scale you'd expect it to be double-and-a-bit, he went to arguing 6x so he's ahead of the market.

But, thats also arguably a non-sustainable ROI longterm. Not that it doesn't happen, but that the luxury of being able to retain the risk side, for the large multiplier, is confined to a lucky few.

This is about the latent value of early-stage ideas, as opposed to the sustained value of enterprise which continues in role and is not game-changer forever (what is?) but becomes an industry: the Angel is not talking about industrial continued value, but about that initial rise of the curve.

And, since the angel can swoop away, they can confirm their inner sense by denying capital injection at the point it might have rescued things, to focus on something else: So in effect there is no neutral arbiter "was it right" -It simply is what it is.

IME, private marks in aggregate are less volatile than equivalent public performance for a wide range of reasons, but that doesn't mean that a private manager can liquidate a portfolio company at an optimistic mark in a downcycle any more than the manager wouldn't be able to get a better price than the last mark in an upswing.

I think it's also worth clarifying for other readers that the risk you're talking about is volatility and has nothing to do with the actual fundamental risks of a given investment. Private equity (broadly defined) managers look to minimize risks in their investments, but they're talking about business and financing risks. I don't think I've ever heard a private equity manager ever talk about minimizing volatility and I'm ok with that.

This is correct, but it's pretty clear the the author isn't viewing angle investment in mere economic terms (which is an extremely sensible thing to do).

From the post: "When you invest in a startup, the money directly goes to the economy to build up a business, to create jobs and to actually contribute to the trickle down economy."

Looking at gold over the last say 2,000 years years shows a very bumpy ride with large long term negative returns. Stock data doesn’t have anything close to that kind of history, but looking at various historic stock markets again shows a lot more variety than simply reviewing a winner like the US stock market.

Essentially, with bad enough assumptions or data any calculation is meaningless.

> When you invest in a startup, the money directly goes to the economy to build up a business, to create jobs and to actually contribute to the trickle down economy. On the contrary, investing in the public market is simply buying stocks from other investors. The money doesn’t directly go into the economy.