The purpose of this Data Insight is to explain to angel groups the importance of collecting the key data elements of their group associated with their investments and outcomes. In next month’s Data Insight, we will provide angel groups with several ways or tools that can be utilized for this work. We will also define the key elements to track.
We need to think of start-up or angel investing as an asset class. Other asset classes we all know and are familiar with include public equity markets (stocks), bonds, private equity, alternative assets such as real estate, crypto, and many others. Many such assets, especially the public ones, come with an array of tools and reporting that allow you to track their progress and your returns. Similarly, start-up/angel investing is an asset class that also requires a plan to track investments and returns. As you track these other asset classes, your goal is obviously to be not only successful but also to improve your returns over time. You improve over time because you study what you have done and develop an ability to modify your investment approach as you learn. This learning can only take place if you have the data necessary to understand your performance or results. This same comment applies to angel investing. As you review the start-up investment data being tracked by your angel group, you begin to better understand what is working or creating success and likely what is not working. This allows you to create ‘lessons learned’ to help you modify or alter your start-up investment approach, just like other investment classes mentioned above. An approach with data collected and analyzed regarding investments and outcomes accelerates learning, hence improving results and returns.
The good news is that many established angel groups now track their investments based on preliminary results of a current survey by ACA. Among the first 17 groups responding to that survey, 16 stated that they track portfolio performance in aggregate (multiples and IRR realized on exits and shutdowns). However, only a minority of these groups collect enough data to derive insights that help enable their members to be more successful investors.
When an individual is studying their equity public market performance one learns which companies are doing well and which are not, timeframes to produce results and many other key metrics. Just like public markets, when tracking start-up/angel key investment metrics, one can learn from studying this data and learn the answers to these questions (and many others):
- How long should I expect it to take to start seeing exits?
- How many companies do I need to invest in to achieve some sort of reasonable return?
- Which industries are most likely to yield the best exits?
- How do local outcomes compare to other geographies?
- What is the appropriate pre-money valuation for certain vertical industries?
- Is there wisdom in “following the crowd” of my fellow investors?
- Are patterns emerging that point to more successful investments compared to others?
- What are the expected returns of successful angel investing over time?
- Am I better off investing in Convertible Notes or Preferred Equity?
- How do returns differ for new rounds vs follow-ons?
- What sorts of experience or background in the CEO is more likely to lead to successful outcomes?
The answer to our first question can be seen with the two charts noted below by two very data-centric angel groups: TCA Venture Group and the Central Texas Angel Network (CTAN).
FIGURE 1 – EXIT DISTRIBUTION BY YEAR & MOIC*
*Note: MOIC is “Multiple on Invested Capital” and reflects the ratio of cash received to cash invested
Source: Analysis of 124 TCA Venture Group Exits that Realized Cash (1997-2025)
FIGURE 2 – NEED TO SET REALISTIC TIMING EXPECTATIONS
Source: Analysis of 143 Central Texas Angel Network Outcomes including Exits and Shutdowns 2006 – 2024
The TCA Venture Group chart correlates exits with length of time held, showing that the largest exits taking more time. The CTAN chart plots the timing for out of business and exits of their 143 companies, noting that 3-5 years is the “sweet spot” for out of business companies and 5-8 years is the “sweet spot” for exits.
Figure 3, below, helps answer question #3 with regards to the industries most likely to yield the best exits.
FIGURE 3 –OUTCOMES BY VERTICAL
Source: Analysis of all 320 TCA Venture Group portfolio companies with Outcomes (Exits or Shutdowns) 1997-2025
FIGURE 4 – CTAN IRR’S BY VERTICAL
Source: Analysis of 142 Central Texas Angel Network Outcomes including Exits and Shutdowns 2006 – 2024
Figure 4 provides additional information on the correlation of industries and exits, using the Internal Rate of Return (IRR) for the five Special Interest Groups that CTAN tracks .
Another key value to collecting your angel group’s data is that it demonstrates to members of the angel group how much you value performance and transparency. We believe the appropriate tracking of investment data elements and outcomes will increase angel group membership and improve the retention of current members.
We hope that we have made a compelling case for the importance of the collection of investment and outcome data by angel investment groups and for utilizing these results in order to improve member retention, investment performance and returns.
Key Takeaways
- It is important to think of angel investing as an asset class like equities, bonds, alternative assets, and others, and to track their performance and returns like these asset classes.
- Angel groups that track investment returns and other metrics allows members of the angel group to understand key metrics and improve performance over time.
- Tracking angel group returns, and other key metrics, demonstrates to current and future angel group members the value of returns. It often results in higher retention of members and increased individual membership.
In next month’s ACA Data Insight, we will explore some of the processes and best practices that various leading angel groups follow to gather the data needed to track and analyze their portfolios.
AUTHOR: Rick Timmins, Central Texas Angel Network and ACA Data Analytics Committee Member
