Angel Investment Return Pattern

Shaan Puri and Sam Parr discuss their experiences with angel investing, highlighting the long-term nature of returns and the importance of patience in early-stage investing.

Key Points:

• Investment Returns Pattern:

  • Initial period feels like "money's gone" with no feedback
  • Takes 2-3 years before seeing meaningful returns
  • Can turn small investments ($20K) into significant returns ($300-500K)

• Long-term Orientation Benefits:

  • Being long-term oriented is a major competitive advantage
  • Ability to make bets others can't due to longer time horizon
  • 10-year view allows for better opportunities than quarterly focus

• Investment Strategy:

  • Currently investing ~$2M per quarter
  • Focus on quality deals over quantity
  • Looking for companies at lower valuations ($10M vs $50M)

• Compounding Advantages:

  • Reputation compounds over time
  • Network effects increase deal flow
  • Previous successful investments attract better opportunities
  • More valuable than pure intelligence advantage

• Return Expectations:

  • Base case: 3.5x fund return is "solid but nothing special"
  • Upside potential: 15-20x possible
  • Some crypto funds have achieved 100x returns
  • Small fund size allows for better percentage returns

• Ownership Structure Impact:

  • Angel investing provides smaller ownership (0.8% typical)
  • Carried interest further reduces personal returns
  • Direct business ownership often more lucrative than angel investing