1 min read The Ten Outcomes of an Angel Investment
A well-known podcast is the Frank Peters Show. In an interview with John Huston a former President of the Angel Capital Association, he outlines the ten possible outcomes of angel investment. They are listed below but recommend you listen to the podcast or read the full text here.
“Grand Slam Homerun”
Exceeds a 10X in five years (>58% IRR)
“A Lucrative Exit”
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The “Harry Houdini”
Escaped with a 1X return; No loss
“Lost a Little”
Didn’t lose it all (<1x 0x=”” a=”” br=”” but=”” not=””>
“My Grandkids’ Company”
The company is successful but there’s no exit in sight. Maybe it will occur after my grandchildren inherit the portfolio?
The “Zombie”
A walking dead venture which will never become a great company, nor will it die so I can declare the loss.
“Deductible Loss”
It died without a tail and I got to declare the loss (or sold my shares for $1.00 to record the loss)
“Funeral Expenses”
Not only did I lose all my original investment, but I had to also cover the costs of winding down the venture, plus pay accountants to provide the final accounting needed so I could take my tax deduction.
“The Worst Gets Worse”
“The loss that keeps on losing” due to ongoing litigation expenses even after the company has no value.
“Angel Hell”
In addition to losing all my investment plus a considerable amount of my time, media coverage tarnished my reputation, plus damaged my relationship with co-investors.
John mentioned that loss of investment dollars in a deal is the least worry. He cites the loss of a c0-investor relationship, tarnished reputation, and loss of time as even bigger concerns in a losing venture.
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Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group
