Two years ago, I started funneling money into the riskiest asset class on the planet: startups. This morning, I sat down to take a hard look at my performance.

Miraculously, I’ve actually made money!

25 months angel investing…
– 20 companies
– 3% total return thus far.
Waiting for the J curve to make me steeply negative in the next few yrs before ultimate success (?).

— Francis Santora 🐷 (@FrancisPSantora) May 31, 2023

Total Performance

My portfolio is up 3.4% since April 2021. The NASDAQ is down about 7% over that period.

What surprises me most is of the 20 investments I’ve made so far, not a single one has gone out of business!

Performance Breakdown

Let’s break down the outcomes so far:

Acquired: 2

Sold shares via secondary: 1

Markups: 2

Markdowns: 0

Fatalities: 0

Company By Company:

Growing revenue 3x YoY or more (crushing it): 5 – I’ve reinvested in 2 of these so far, and plan to reinvest in all of them

Modest growth: 6

Going sideways: 4

Revenue down: 2

Conclusions

The companies that are killing it are mostly investments made in 2021, not 2022. They’ve had more time to mature.

All but one of the companies going sideways are investments made in the last year. These startups may not have had time to hit their stride yet.

In time, I think some will.

Many of the “modest growth” and “going sideways” companies were very early stage when I invested. Most had revenues of just a few thousand per month.

Meanwhile, the elite group had more revenue to begin with. They were usually in the $250,000 to $1 million ARR range.

You pay a little more to get into those startups, but thus far it’s been well worth it. I’ll be doing a lot more investments like that in the future.

Caveats

This “return” isn’t that meaningful. I can’t actually get the money out for another decade or so.

Angel investing is a long road.

But we have to take our pleasures where we can. And seeing this portfolio perform well so far puts a smile on my face!

I expect my returns to fall precipitously in the next few years.

Years 2-5 as an angel investor are known as the “J-curve” or the “trough of despair.” Companies you love fall apart, while the winners haven’t won yet.

Even the best portfolios tend to get crushed in that period. I’m ready for it.

Outlook

Of my top 5 companies, all seem likely to continue their growth. Of the rest, I can think of at least 4 that could go out of business soon.

For the sake of the founders, the teams, and of course myself, I hope they don’t. But like it or not, failure is an integral part of startupland.

Wrap-Up

I make about 10-12 investments per year. I plan to continue at this pace for another 8 years, bringing me to 100 companies over a decade.

If I can 3x my cash, I’ll be very happy with this experiment. That would put my tiny “fund” firmly in the top quartile of VC funds.

But I’m stubborn. I’d really like to see 4-10x.

Any advice for the future? Leave a comment and let me know!

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