Startups such as Uber, Airbnb, Xiaomi and TransferWise are among over 150 privately held startups with over $1 Billion in valuation. These are the Fortune 1000 companies of the next decade. Unlike traditional companies however, these companies are going public later as the median time to IPO has increased from 4 years in 2000 to over 11 years in 2015. These startups are raising a lot more money privately and going public at much higher valuations, making it less likely for post IPO investors to get large returns in the public markets.
The top 20 most valued startups raised money in the public markets each year until 2011, but they have all raised private capital since then. This has resulted in less than 2% annual growth in the number of companies going public since 2001.
More investors seeking to fund startups earlier and participate in their growth since their inception. The rise in the number of accelerators such as YCombinator and online funding platforms such as AngelList has also contributed to support for startups at the earliest stages and made it easier for entrepreneurs to raise initial capital.
This has coincided with a rise in angel investing as well with over 200 (48% increase over the previous 12 years) new venture groups formed since 2012 and 100K (30% increase from 2008) new angel investors putting their money in startups.
Investing in public and private markets require diversity to manage risk, a strong deaflow and pipeline of available investments and securities to exchange capital for equity. There are many differences between private and public market investing including, lack of easy liquidity for investments, tools to manage portfolio and time horizon for investment return.
Of the 300K angel investors in the US, 24K were active (invested in at least 1 deal) in 2016. Angels invested a total of $21.1B in 71K companies in the US alone. While worldwide numbers are hard to come by, based on historical trends, the US represents between 45% to 50% of all angel deals. Business services (12.5%) and Internet (11.1%) made up the 2 most frequently invested companies by angels, followed by Retail (10.7%).
Women make up about 7% of angel investors and 12% of all founders who received angel investment. The average angel round was about $510K at a valuation of $2.2M. Individual angels reported investing $27K in median in 2016 in 2 (1.7 average) deals. Angels with over 10 invested companies and investing for the last 5 years had partial annualized cash-on-cash returns of 19% with some outliers at 40% annual returns, and fewer than 11% making less than 15% in annual returns.
There are roughly 700 angel groups in the US, with an average of 42 investors in each group. Over 60% of angel deals are equity and 24% are convertible debt with an average of 23% equity owned by angels after their investment round.
When it comes to returns, many angel investors have experienced 20%-25% pre-tax and 15%-18% net of fees and taxes annually with their startup portfolio. While these returns are not common for all investors, the top 10% certainly experience better returns. The most important differentiation noticed from the Angel investment Halo report is the number of startups an angel invests in.
As the number of investments increases so does the probability of better returns. It is typical for most prolific investors to have better and risk adjusted returns than those who only invest in 2-10 companies, as the graph above shows.
The key issue is to then have a large portfolio, keep investing steadily over time and be patient. To manage a large number of startups in your portfolio (Forbes suggests 30-50 startups), the best angel investors use Zuput to manage their startup portfolio. While many of them previously used Excel spreadsheets and email, the combination of portfolio tracking, automated analytics and compliance reporting are key features they chose Zuput.
According to the quarterly VC survey, over 60% of the 1500 US firms used Excel and email to manage their dealflow. Of the remainder, many have transitioned to newer CRM systems such as Pipedrive or Prosperworks, and few others have also considered old deal management systems such as Altvia or Venture 360 but these systems are generic CRM systems with no specialized reporting support for Venture requirements and require a lot of manual input.
Zuput addresses both these specific issues with our meta-heuristics application Zuput Invest. With over 1.5 Million startups in our research platform, we provide the best way to reduce data entry and make it easy to get portfolio reporting for your LP’s, collaboration with your partners and reduced data entry to save time and give you more accurate pipeline status.
If you are an early stage startup fund manager with under $50 Million under investments, you have a small team (most likely 1-2 people, including you) and little room for expenses. Most time is spent hustling to get into the top deals and helping entrepreneurs you have invested in.
Early stage startup fund managers and investors don’t have a simple, secure and inexpensive solution to research startups, analyze their pipeline, monitor their companies and track their startup investments. In the absence of such a system, they use multiple tools including email for monitoring and notifications, cloud drive for sharing and analyzing, spreadsheets for analyzing and free databases for research.
Zuput is an easy to use, reliable and automated solution to manage your investment pipeline, supervise your portfolio and review key data, It performs the role of a CRM system, a startup analysis platform and reporting solution, all in one for $100 per month.
With Zuput, you can
research a new market or track the startups in your region
collect all due diligence information for analysis
automate reporting of your pipeline
manage and track your portfolio and
monitor your investments
Zuput also integrates with key tools such as Dropbox, Gmail, Slack and Asana to help you be more productive.
So instead of relying on free crowdsourced databases or expensive deal analysis platforms, you can have the power of a curated system with the built-in integration of a CRM application and collaboration without having to pay for all of them separately.
Researching companies in a location or a category made easy.
Want to know more startup trends in a Chicago? Or understand more about growth and funding in Block Chain related companies?
This week, at Zuput, we launched an ability to Search for a Category/Location and understand market trends.
Wouldn’t you want to quickly understand who are the influencers in that market? Or detailed trends about the growth? Or to identify companies to sell? This makes it easy for anyone to do a market research.
Lets say you were given an overnight assignment from your boss. Or you wanted to prepare for a big meeting with the leadership team and were asked to “research a new market – say Robotics”.
What all would you do? You have very little time, (overnight) and lots of new stuff to learn.
The typical set of things I did as a product manager was:
Search on google for analyst reports on the market: (Pro tip: use filetype:pdf to get hard to find reports) – for example: Robotics market filetype:pdf on google.
Search for “landscape maps” – oh those wonderful landscape maps. Full of logos in neat boxes, that look like a mess.
Find a few key “influencers” – entrepreneurs, investors, reporters, journalists, consultants, analysts, etc. in the space to scan their twitter feed. Then go into a rabbit hole finding more stuff on twitter than I ever needed. Need. To. Focus.
Locate key events supporting that space – seminars, conferences, etc. so I can track what the key themes are
Research a few up and coming companies, to understand their offering, messaging, positioning, pricing, etc.
Get some metrics and stats on the space from as many sources as I can – how many companies, how much funding, etc.
Hunt a few customer use cases by reading key blogs, news sources and publications
I would then put all this together in a OneNote or Evernote and start to form a thesis of the story. These would typically go into a set of charts on a PowerPoint or a 1 page document for background on a Word document.
Done well, this entire exercise would take me days if not weeks, and it would be pretty superficial if I did it in one evening.
What if I told you, that all of these can be done on Zuput in less than 30 minutes. And you can create reports and charts from the system to fit your research need?