Cheryl and Maxine
Okay, three, two, one. Hey, I'm Cheryl.
I'm Maxine.
This is First Cheque, part of Day One, the network dedicated to founders, operators, and investors. If you want to be a better early-stage investor, this is the show for you. So TL;DR, if you don’t want to suck at investing, listen up.

Maxine
Oof, I am so excited for this one. This is a topic that comes up all the time. I am constantly talking to people who are surprised at how easy it is to get started with angel investing—like how little you need to start as deployable capital. And so this one, I think, is a really exciting one just to go deep, deep, deep on the financial side of angel investing.

For all of you folks that are thinking about starting angel investing this year, or who have been an angel investor for a while but want to up your finance and budgeting game when it comes to it—think about the meat of the financial side of angel investing—we are going to go deep into it in this episode.

Maxine
I can’t wait to dive in.

Cheryl
Yeah. Without fail, every time I speak about angel investing, I get somebody asking the question—usually not in the audience, not like publicly. They’ll usually find me after and be like, “Hey, so, like, you're kind of young... how do you actually, like, have the money to invest? Are you using your employment income?”

And they’re always asking it kind of furtively, like it’s some kind of taboo that they’re not sure about. And I’m like, “Yeah, no, like, this is how I deploy the money.”

Maxine
Oh, really? Wow, crazy. It comes up a lot, right? Like, behind closed doors. But hold on a second. The question I really want to ask you is, like, how, how, how can you afford this? How do you do this?

So we’re going to answer that question—essentially, how not to run out of money when you’re angel investing.

Maxine
Essentially how not to run out of money when you're angel investing.

Cheryl
Yes. Don't run out of money. I get told this all the time. I repeat it all the—

Maxine
Time. Essentially do not run out of money. Rule number one, stay liquid. Do not run out of money. Don't exit the field.

Cheryl
Maybe it might be helpful to quickly touch again on why you're not supposed to run out of money as an angel.

Maxine
Yes, I think that would be really helpful. So why not run out of money? Why is it important that you always have cash?

Cheryl
I think there's a lot of reasons. My main ones are that if you are trying to take advantage of the power law and have enough runs on the board to potentially hit that big winner, then you need to make sure that you have deployable cash at all times in order to find that one and take advantage of it when it comes across your desk.

Cheryl
And then also mitigate risk across cycles and economic cycles. So the example that I like to give whenever I, you know, shout this role from the rooftops is a lot of people got into angel investing in early 2020 and ran out of money in late 2022, right? So they deployed over two-year period. But you look at what valuations and exits did in that time, pretty unlikely that those people are going to get an exit on their vintage in any reasonable time frame and potentially run the risk of actually losing all of that money.

Cheryl
So I'd love to use that example of like, what if you started here and ran out of money here? And like on the graph, you can kind of see. So that for me, I think those are the two big reasons. What about you?

Maxine
I mean, you've hit the main ones, right? You have to be on the field at all times, especially at early stage, a big part of performance is participating in the right vintages.

Maxine
And so you want to make sure that you are not, you know, illiquid in a period of time when it's really important to be liquid. Also as an angel investor, you know, there's a nuance here, right? As a fund manager, we have to be liquid because it's our job. And so cash planning and making sure that we don't run out of money is really important, but as an angel investor, you know, depending on why you're doing it, that can change for some people they're deploying for kind of impact reasons or they're deploying for learning reasons.

Maxine
And so for those folks, like, you run out of money, no biggie. That was not the goal, right? But from an investment performance perspective, it's really important that you're consistently investing across vintages and have a kind of consistent cadence at which you are deploying. So I think really important.

Maxine
The other thing, as you said, is, you know, if you miss the outliers because you are illiquid in that period and or you're only investing in the top of the cycle, you can imagine that that doesn't drive to pretty solid long-term returns, and so you need to make sure that that's the case.

Cheryl
Yeah. There's also one other one is like backing your winners.

Cheryl
If you run out of money, then it's hard to double down on your winners. So if that's part of your strategy is like small check first, double down on winners, but you run out of money, then that strategy falls apart and makes it tough for you to maintain your position.

Maxine
Absolutely. So I think an obvious thing to say, but I think something that's worthwhile saying at the outset, right, angel investing, you are investing into a highly illiquid asset class.

Maxine
And so you can't simply sell down a position in order to invest in the next one, right? You were locked in for anywhere between 10 to 12 years at a time with no liquidity option. It can happen for folks that they get too excited that they deploy too fast or they invest too fast. And then they're not able to access that pooled capital.

Maxine
Ideally, that capital base that is growing over time, but they can't then take some out off the top and reinvest it. Sorry. Of all of your investments, it's actually really important in angel investing in particular, or investing in VC, that you cash plan appropriately so that you can be deploying as you go.

Maxine
It is really important that when things go well or things go badly, you are not able to take that money off the table. And so again, really important that your cash planning to make sure that you are continually activating. So as a resident angel, how do you think about making sure you don't run out of money?

Cheryl
Yeah. Uh, on that first point, I cannot tell you the number of angels and I. Like, I wish I could only count them on one hand, but I, I can't. The number of angels that have told me things like, "Oh yeah, like, I've invested in five or six companies, and now I'm waiting for the returns on those ones to make new investments."

Cheryl
Oh, that one breaks my heart. Why?

Cheryl
I, I'm like, it doesn't work like that. Like, you're gonna be waiting 10 years and the likelihood of any of them actually having returns to allow you to reinvest. Like, unless you are investing more PE style in more slow growth, brick and mortar, like, those types of businesses that are going to start to generate dividends and then use those returns, then maybe, but I can't tell you that that's...

Cheryl
What I'm seeing generally, it's like, yeah, yeah, I invested in this, like, you know, MedTech company or something high risk.

Maxine
Right, MedTech in particular, that's a long time period. I think that's actually an important thing to name here because it might not be obvious as we're talking about this. When you're investing through the stock exchange, you're generally investing for either capital growth or yield, i.e., the company is delivering dividends and it's coming back to you via distributed dividends or a franked dividend. That is not the case in startups. Almost universally, they do not distribute dividends because they are reinvesting those profits back into the companies for them to grow over time. And so, as you are thinking about angel investing or you are planning your angel investment portfolio, you should not bank on the fact that there will be money coming back to you by yield.

Maxine
The only way money is coming back to you is by sale of those assets. So either sale of that company to another, or listing of that company, or another investor buying your position over time. And so, you can imagine that takes longer, right, than just simply making profit. So a company might actually start to make profit and you'll start to see it talking about being cashflow positive and all those things.

Maxine
It's very, very, very, very, very, very unlikely that they will be distributing those profits back to you as the investor, as opposed to reinvesting it back into growth. Because ultimately from a portfolio construction, what you want is those outliers. And to get to those outliers, they can't start distributing cash back off.

Maxine
They need to be reinvesting it to get back to growth.

Cheryl
Yes, exactly. So that was the first point to make. But you asked how I fund this. So as an angel, I use a number of avenues, but what's kind of funny, I think, is when I first thought about the concept of angel investing, my like intuition on it was like, oh, you need to have like hundreds of thousands of dollars of free cash, just like sitting in a bank account.

Cheryl
Such a classic one. Yeah, right? To just like deploy. That's actually not the case. I think that first piece of like realizing that actually this is a cash flow budgeting exercise, not a have a lot of money exercise. Sometimes it is just have a lot of money. Great. If you tick that box, fantastic. But even if you do have a lot of money, it's still a cash flow budgeting exercise.

Cheryl
So for me, uh, the avenues that I typically leverage are things like employment income. So I pull a certain percentage of my employment income out of that bucket. And you know, instead of putting it towards bills and more suitable things, I put it towards high risk early stage investments. Other avenues are I typically will pull money out of places like put things in term deposits, or if we put things into ETFs, also have money in the offset account.

Cheryl
And if it makes sense to pull money out of that, then we might do that. So there are a number of ways that I look at Essentially, like, how do I manage the cash that's coming in and the cash that I want to deploy into this asset class as an investment and budgeting that appropriately? So, while, yes, I've deployed, you know, at this point, hundreds of thousands of dollars into this asset class, it's been over the last five years and It didn't have that amount sitting in there to begin with.

Cheryl
It came out slowly from various channels. Some of it could come from savings. The other big one that I hear a lot of angels do, I don't do this at this stage, is the self-managed super fund. You can essentially take your money and put it into a self-managed super fund and then make investments of your choosing out of that.

Cheryl
There are other avenues, like if you are invested in the stock market that does pay dividends, that yield you're talking about, many angels will use that money to put towards this asset. I know other angels who invested in crypto and any gains that they make in the month or whatever metric they have, then they'll pull a certain amount of that out.

Cheryl
There are other like inheritance, if you have received an inheritance and have put that money away somewhere, and interest that you've earned on that, whether it's a You know, a term deposit or something else, or even if you've invested in the stock market into only dividend receiving shares and then using that money.

Cheryl
So I think the key thing to point out here is that there are lots of sources of money, as we know, and thinking about. How you intend to pull money from those sources, and in what quantities, and in what time frames, and deploy it into this asset class. So, at the beginning of the year, I will typically sit down with my partner and think about, okay, well, how many investments do I want to make this year?

Cheryl
What size check do I want to make them in? And then think about, okay, well, where is that money going to come from? And, and how are we going to meet that? And if it's unreasonable, then we rebudget. And if it's

Cheryl and Maxine
Not risky enough, then we rebudget. Right. Totally pays to have a CFO

Maxine
As a life partner. It also does pay.

Maxine
I can only imagine what those conversations are going to be like. Extremely sophisticated, but it's probably a good point, right? We're talking here about some fairly sophisticated financial principles. You're referencing this idea of rebalancing, right? The idea that there are certain assets that are growing at certain rates.

Maxine
Let's say, you know, the average stock market return is between eight and 15 percent cash rates at the moment. Uh, anywhere between kind of three and 5%, and then, you know, startups, if on average as an asset class, they're generally growing at around 30%. And so we're kind of moving cash from one section to the other, to rebalance our portfolio, to maintain the percentage that we want, but they're fairly sophisticated financial concepts.

Maxine
So if you are thinking about. Uh, angel investing and planning to be an angel investor or to start angel investing this year, or you've kind of been doing it on an ad hoc basis, you want to kind of mature it, it's definitely worthwhile talking to your financial advisors, uh, to make sure that, you know, you've got the right stuff in place.

Maxine
Not all of us are married to a CFO.

Cheryl
Yes, I do have that benefit, but also it's important to name that, like, the things that I talk about are personal for my financial situation. And it's. your financial situation may be different. So it is important to, uh, to get that context for yourself. Um, do your own research, talk to your own financial person, uh, expert.

Maxine
Yeah. Financial experts. I mean, the thing is, is especially for angel investors, as you're starting off, you want to make sure that you start off with capital that you. You might never see again, right? It's a highly risky asset class that you want to make sure that you start from that perspective. After you've matured and you've kind of done it for a while, you can start to get a sense of how you build that over time, which is maybe a helpful thing to kind of jump off and do as you're thinking about for those folks that have been doing it for a little while, and they're wanting to kind of up level their investments, how do you advise them to think about, you know, check sizing, check consistency, check pacing, and things like putting reserves to the side for doubling down on your winners.

Cheryl
First of all, I don't advise anything. Fair. There is no advice being given here. Not financial advice. Um, but yes, I do always say, uh, if I turn out to be the worst angel investor in the world and lose 100 percent of the money that I have invested in this asset class, my quality of life will not be worse.

Cheryl
It won't be better, and I won't be able to buy that boat, or the island, or the 4. 5 million house in Sydney that I'd like, love to own. My quality of life will not be worse than it is. And I think that's an important one to call out, that, that was my risk level, of like, okay, I'm, I'm not willing to risk the level of, Like, the level of my life that I have at the moment.

Cheryl
Um, so as long as that isn't being risked, then I'm okay with that. You may find that you have a different level of risk. You may find that, actually, I'm not happy with the quality of life that I have at the moment, and I do really want that 4. 5 million. So that's the level that I'm not willing to risk. So I need to put this amount that will eventually grow into 4.

Cheryl
5 million over the next three years over here and not touch that. So I think that's just another important one to call out. However, you were asking about consistency of check size. I think what's interesting is that this is another like not one size fits all type scenario. Uh, one of the first advice or pieces of guidance, we'll call it guidance, that I was given was, when you first start out, try to keep your check size consistent.

Cheryl
And so I was told, pick an amount you are willing to lose over a period of time, divide that by 10, and that's your check size, and then go write 10 checks of that size. So I had written to 20k checks before I'd gotten, I had gotten that, uh, guidance. And so then I was like, oh, well, if I have to write 10 of these.

Cheryl
Hmm. Hmm. Maybe I should reduce. So my partner and I picked 100k over 18 months divided by 10 is 10 10k checks. Now, once we had gotten those under our belt, it felt easier to make deviations from that. That being said, I know angels who split the difference and go, okay, well, I'm going to write 5k checks into really early stage stuff and 5, 10k checks into later stage, less risky stuff, again, risky relative to the SaaS class, you know, everything in the SaaS class is risky, but relatively, you can still keep things consistent while playing around a little bit with like how risky or like which stage you want to drive towards.

Maxine
Yeah, that's it. I mean, I think we've done a whole episode on doubling down. So if you're interested in the kind of nuanced decision about deploying all of your deployable capital in that first check versus reserving some to the side and doubling down, there's definitely arguments for and against both sides of that.

Maxine
Um, the kind of cliff notes are. If you invest all of your deployable capital in that first investment, you might be maximizing for IRR. So like overall percentage return, but you are also exposing yourself to the most risk. In theory, you get to learn more about the company and learn more about the founding team and the overall team.

Maxine
If you watch for a period of time, get to see how they execute and then double down on your winners, you probably phrased before. And so if you're doing that, then you need to appropriately. Right? On average, companies are raising once every 12 to 24 months, closer to the 18 to 24 time period at the moment.

Maxine
But, you know, be ready to go at 12. You definitely don't want to be in a situation where you don't have deployable capital at the point that, uh, your winners, inverted commas, are starting to raise again. My most painful anti portfolio was a company I passed on because I didn't have capital. Yeah, very sad for me.

Maxine
Alloy, they were incredible. They are incredible. And, uh, A16, uh, invested, I think, after, like, the round after I passed on, which was absolutely heartbreaking to watch. Anyway, RIP. They're crushing it.

Cheryl
And we have a whole episode on like whether to follow or not to follow, but I was actually describing like I chose an amount to invest into 10 very similar companies, like I wanted to invest 10 10k checks into 10 pre seed or seed stage companies.

Cheryl
What I'm also saying is you can choose to vary it across different types of companies. You could say, and I see this a lot, it's like, okay, well, I'm going to invest. So I'm five 5k checks into five pre seed companies, but then I'm also going to invest five 10k checks into series A companies. And so you can vary your check size by type of company or stage.

Maxine
Ooh, I love that.

Cheryl
If you want to be more exposed, you could also do it by like type sector, right? So you could say, well, I'm, I'm really bullish on FinTech. So I'm going to invest five 10k checks into FinTech companies, but I'm only slightly bullish on edtech. But Like, still bullish, but not as bullish, so I'm going to invest 5, 5k checks into edtech.

Cheryl
So you can vary it by type of company if you want to switch up your kind of risk profile in that way as well.

Maxine
It sounds to me, when you were talking about this, that there's a lot of kind of pre planning before you start. Investing. You would think. Right? Planning your budget, planning the check size, planning, etc.

Maxine
To what extent do you see angels actually do that, or do you see them just kind of like run onto the field and start deploying? And can that ever work?

Cheryl
Most angels run onto the field and start deploying. I think we're seeing more of a trend now where angels are getting educated first, but that first check, I think, like, It's impossible to know everything.

Cheryl
You can do a bit of planning, absolutely, but it's really hard to plan what you want to do when you have no experience of what it looks like. Like if I had tried to do the level of planning that I do now, five years ago when I first started, I simply would not have had Either the knowledge, and I think you can acquire the knowledge, but the experience to know actually this is what I want.

Cheryl
So it would really just be like a finger in the air being like, Hey, I think I want to invest in five ed tech companies, and five FinTech companies, and maybe slightly more into the FinTech companies, and maybe slightly more into Pre seed companies, but until you actually do it and get a sense of the market, you probably get to the end of that and be like, actually, that's not what I wanted.

Maxine
I think this is like such a big point, right? I hear from a lot of angels, especially folks that are just starting out. So probably in their first year, every everywhere from kind of like angel curious through their first year is this idea that they want to get like the right formula. To do this well. And the reality is, is you have to be comfortable with the fact that you will be making mistakes and learning from those mistakes.

Maxine
for the beginning part of this. Right. And so the goal is learn as fast as possible, not make no mistakes. Yeah. You know, if I think about the thesis, I started investing behind when I first started angel investing, it definitely evolved. I was like, Ooh, I'm just going to invest in like pure play automation of services.

Maxine
And then I stepped into market as a baby angel investor. And I was like, Hmm. I've got no deal flow. It's really hard to invest in just automation of services companies when you don't meet any automated services companies. And so, you know, evolving my thesis over time was really important to actually like have companies to invest in that would accept my check.

Maxine
Yeah. It's great to make a plan. Yeah. But if it doesn't materialize, it's worthless. So I think it's really helpful for angel investors to. internalize the reality that you have to be comfortable that you're going to make risks. And so you're going to make mistakes. And the purpose of this period is to learn from those mistakes as fast as possible and like iterate your process, your check size, your budgeting, and then be able to build from there, which the necessary corollary to that is you need to build a budget such that you have that room to breathe.

Maxine
You know, make sure you've got that space to be thinking about. on either side.

Cheryl  Yeah, I do think the planning of deployment is possible without any experience of market, right? Like sitting down and thinking about, okay, well, how many companies do I want to invest in over what period of time? What check size can I feasibly write into each of those companies?

Cheryl  And where can I get that money from in order to meet that demand? And if it's smaller than, you know, the 25K most startups want to go direct, then okay, maybe you need to look at syndicates. And so that piece I think is plannable because you know where your money comes from, theoretically, you know, you've been earning money for a period of time and are able to determine where some of your income comes from and if you have some of that disposable income and pull some maybe from your savings and pull some from somewhere else and and pull together.

Cheryl  Okay. Well, this is the amount that I will deploy this year let's say it's 50k and as I need that money, maybe, you know, the first 10k will come from my savings maybe the next 10k will come from my offset account and then by then my ideal term deposit will have matured and I'll be able to get that money. So like you, you can plan that way.

Cheryl  Um, but in terms of planning the stage or the thesis, like, you, you could make a plan and then go into market. You'll figure out whether that plan works or not.

Maxine  Absolutely, especially as you're starting out. I have heard that advice as well, and I strongly encourage people to think about consistency of investment size.

Maxine  And the reason for that is as an angel is to control for the number of temptations that you experience to go all in on things that feel like a winner at the beginning, and then overweight your portfolio to something that doesn't materialize. We see this a lot, as you said, people that are investing for the first time.

Maxine  Some of them get very excited for the first company that they get excited about, and then they just deploy 50% capital in the first year. Shut up and take my money. And so having that kind of constitutional moment prior to you starting to deploy, thinking about how much you're going to deploy and how it's structured over the course of the year can be a really valuable exercise to have that structure to recognize that their companies that you're investing, especially at the early stage, be a pre-seed, seed or series A, they're still very risky assets.

Maxine  There are so many ways that they could fail and so many ways that they could be successful. And so not over allocating into one particular direction can be a really valuable outcome on the fund size. It's different. There's different reasons that people have similar kind of check sizes or the same check size, but as an angel.

Maxine  It's super important to have that discipline then maybe as you get more mature and kind of further down the track, you can vary your check size based on, as you said, backstage or any of those kinds of things, but it can be a useful one to have that discipline to start off with from what I've seen.

Cheryl  I would say the vast majority, every angel I've talked to, who is further along, and has had exits, and you ask them like, Did you call that one?

Cheryl  Like, which ones did you think were going to be successful, and which ones were you kind of like, No idea! None of them can pick it. Like, you just can't. You have no idea. So, trying to vary your check size, based on whether you think something's a winner or not, can have disastrous consequences.

Maxine  Absolutely.

Maxine  Yeah, absolutely. And so one of the things to be thinking about when you're planning angel investing is payback periods, right? What kind of time period can you expect liquidity from these? And what kind of investment returns do you generally see? In the startup ecosystem.

Cheryl  Yeah, well I think as you called out that like payback is generally via acquisition or IPO or trade sale or secondaries as in, you know, someone, some bigger investor comes along and buys your shares from you.

Cheryl  It is generally not through cash being paid back. That one's to call out, right? So if you think about how long those things take, we're talking seven years at the earliest. I'd say if you're investing later stage, and again, if you're investing later stage, then your check size typically has to be bigger.

Cheryl  So let's say you're investing series A, 'cause you want an exit in three to five years instead. then you're looking at like investing 100k minimum. Whereas if you're investing in the early stages, which is where I play and you play, then you're looking at like seven years minimum. But most likely your winners are going to be, you know, that kind of 12 years.

Cheryl  Like Canva, they're going on 12 years now and still haven't IPO'd or gotten bought out, right? So they've, they have provided some liquidity to early investors, which is great. Um, but that was probably at that like 11 year mark.

Maxine  Right. Well, I think there was a lot of scuttlebutt that they were actually, there's a degree to which there was a lot of internal pressure for them to do that internal round.

Maxine  One of the pressures was it's rumored they're ramping for an IPO.

Cheryl  Yes.

Maxine  And so they're trying to clean up their cap table. Uh, cause you don't want a whole bunch of little scragglers on your cap table as you're going into an IPO process, very painful, but also that there was a lot of push from the investors to see that liquidity rightfully so right at that point, they'd been holding on for 12 years at the point at which they invested.

Maxine  The, it was very rare that funds would utilize their plus two, it was mainly the 10 year period. And so, you know, a lot has changed in that over a decade

Cheryl  at Canva, push the boundary on that one.

Maxine  Yeah, they sure did. And I'm so glad that they did, right. They are growing really well, but it's one of those ones where I think increasingly it seems to be the trend that companies are staying private for longer, you know, who knows what's going to happen, but if that were to continue, then being prepared for the fact that that's the case.

Cheryl  Yeah, I mean, I think the key thing to call out here is that there is a correlation between stage and payback period. So if you are investing later stage, then you are likely to get your money back earlier. And if you are investing earlier stage, then it's going to take a lot longer. So you can adjust your risk profile and time horizon expectations based on that kind of rule of thumb.

Cheryl  Like, the earliest I've heard of someone getting, like, you know, getting an exit from an investment they've made. I think it was a friend of mine invested in something, uh, on AngelList, the U. S. one, and they got acquired within two years and they doubled their money, which is like, okay, cool, two years, 2x return, like, that's great, but that's probably the exception, not the rule.

Cheryl  And, and so if you think about, Well, okay, what's my time horizon here? If you are in your 70s, and doing this to bolster your retirement, then it's probably not a good idea to be investing in really early stage risky stuff that's going to take another 12 years to potentially materialize. Right. Um, especially given that like, It's taken me five years to invest into 32 companies.

Cheryl  Like, the minimum, as they say, is 20, and ideally 40. So I'm not even at the ideal 40 portfolio companies, um, directly yet. I've kind of cheated by investing in a whole bunch of funds.

Maxine  Hacked your way to hundreds of investments. Yeah. My

Cheryl  indirect portfolio is like a couple hundred. Oh,

Maxine  maybe,

Cheryl  probably close to 200 if I add up all the funds.

Cheryl  But anyway, so I've hacked that. But if I was only angel investing, I'm five years in and 32 investments. Try to get to 40, like, it takes a long time to, to make investments, especially good investments. So yeah, I think you also, the key there is like calling out what your time horizon is and then thinking about the stage at which you want to invest based on what you are hoping to get paid back.

Cheryl  Right.

Maxine  Yeah. I mean, I think, uh, for the family offices that are LPs and that we work for on that side of our business, you know, a lot of them are investing for the next generation. Right. They're building that asset base for that next generation, recognizing that, you know, by the time these pay out, they might not care anymore.

Maxine  That's a good way of putting it. They might not care anymore. Right. Right. They're going to be, you know, on a beach somewhere, uh, living their best life. So, I mean, as you're thinking about a return profile, what have you seen so far in terms of angel investment returns?

Cheryl  Oh man, I've seen some great stories, honestly, you know, and I can, I can name a few.

Cheryl  So actually, you know what? Before I go into some anecdotal fun stories for the audience, um, I will call out that like Australian angel groups don't tend to publish their, uh, their returns, uh, and their data around returns. But I did, for this episode, do a little prep looking at a couple angel groups in the U. S. So one of them is the Central Texas Angel Network, the CTAM network that tracked 115 investment outcomes between 2006 and 2022. And they had a reported IRR of 31%, which pretty much tracks with, like, our general knowledge of this asset class generating around that 30 percent IRR. And then the other one that I looked at was the TechCoast Angels in California, which tracked 247 outcomes between 97 and 2022.

Cheryl  And that resulted in IRR of 25%, which I think tracks around kind of the minimum of what funds generally will hit in terms of IRR? Is that kind of minimum 25 percent and then we see go up from there all the way up to like what can Blackbird's first fund is like 53 percent IRR? It's wild.

Maxine  Yeah, I think the highest I've seen is Union Square Ventures fund one of 76.

Cheryl  Wild. That's, I mean, kind of wish I was on that fund.

Maxine  Right. Actually, that makes me think, I wonder what, uh, I think for non Kosler was a KKR when he went on his tear. I just, I haven't seen their IRR metrics for fund. I guess they would have been on like fund four or five by then, but yeah, kind of ballpark return profile for funds is anywhere.

Maxine  If you return less than 30%, you're out of a job, right? You shouldn't be deploying capital. So they're anywhere between kind of 30 percent IRR on the low end up. Uh, you know, as high as 76, it might be even higher.

Cheryl  We actually have a whole section on this in Angel Academy, which is the most comprehensive but easy to digest angel investing course, uh, out there for Australia and New Zealand.

Cheryl  And yeah, we, we have a whole section on this in, in terms of what returns look like and a lot of other amazing things. So if you are interested. To dive into some of that, uh, I would absolutely encourage you to jump on and, and get into the course. I will call out a few, uh, a few interesting ones from Australian companies.

Cheryl  So Clarity Pharmaceuticals, they raised their first round in 2012 and then listed in 21 and first round investors enjoyed a return of 50x, which is a 46 percent IRR on that one. Love to see it. Yep. Yeah. Uh, another one here is Autra. Agil's first invested in 2019 and they were acquired by Schneider Electric in 21.

Cheryl  And get this, first round investors had an IRR of 91%. Wow. That's incredible. Yeah. And then last one, I think everyone's kind of heard this one because they're one of the more recent exits, uh, which is Instacluster. They raised their first round in 2014 and they were acquired by NetApp in 22 and first round investors enjoyed 63 percent IRR on that one.

Cheryl  So these are some incredible numbers. I think it's fun to point them out and show like, hey, look, this is amazing. Um, but it's also important to remember that, you know. Each investor that invested in those also invested in a whole bunch of others that went to zero. So, like, it balances out, and I think the, like, the, the deals across those angel groups sitting around that 30 percent mark is much more accurate in terms of, like, what can you expect from investing across this asset class if you do it right.

Cheryl  So, I know a couple people that just invested in Instacluster for, like, they were, that was one of, like, three they had done. And so, there's those outliers.

Maxine  Yeah, those are the group that, uh, you know, they're lucky straight out of the gates and then they just did up their laurels for the rest of ever. Lucky lucky cells.

Maxine  But for the rest of us, we need to make sure that we are properly structuring our portfolios and making sure that we are, you know, taking the benefit of diversification.

Cheryl  Most of those are generally like, Oh, it was a friend and I was just backing them because it was a friend. If that is your strategy, it has a hundred percent.

Cheryl  Likelihood of going only one of two ways, which is you make a lot of money or you lose it all. There's no middle ground if you employ the like, I just invested in my friend's strategy.

Maxine  Right, or just have brilliant friends. The other life advice I have for you is just have like incredibly entrepreneurial, sick friends and then invest in them.

Cheryl  But if you only, but then again, power law, like if you only have really high performing friends then you're still employing the power law.

Maxine  True, true. You got me. We all have to worship at the church of the power law. It is unavoidable.

Cheryl  Unavoidable. Just show up every day, bow down, yes, power law, yes, I believe in you, you are amazing.

Cheryl  Please grant me my returns.

Maxine  Exactly. Yeah. It's a form of religion. So interesting. I think that as folks are planning out this year, if you're thinking of angel investing, the Angel Academy program is awesome. I've had the benefit of, uh, being a video or two in there. You are in there quite a few times actually.

Maxine  And a few of these episodes

Cheryl  are linked in there.

Maxine  Right. So, um, but it's really, it is, it's super robust. So definitely, um, have a look at it if you are interested in leaning in on that education process of becoming an angel investor, or maybe you've been investing for a while and it's worthwhile kind of sharpening your tools.

Cheryl  Yeah, actually, we've had a number of investors who are later in their journey go through it now who have said that even as a seasoned investor, I learned some things. So I'm like, yeah, that's pretty cool. I was just hoping to get your feedback. But also, in case anyone's like, how do I find Bench, uh, Angel Academy, it is www.venture.academy.

Maxine  Awesome. Well, hopefully folks will go along and have a look. So is there anything else as folks are thinking about getting into angel investing this year, thinking about budgeting or planning for being an angel investor this year that they should be thinking about. Other than step one, don't run out of money.

Cheryl  Step two, uh, plan for long-term illiquidity. Step three, start with consistent check sizes. Step four, sit and wait. Step five,

Maxine  profit. Step five, profit. Sit and wait. Very important. Very, very important.

Cheryl  I would love to ask the audience to reach out to us, uh, or the show if there's a way to contact us through the show page.

Cheryl  If you do have any questions about this topic, uh, we would love to jump into them and answer them.

Maxine  If we left anything unanswered, any stone unturned, just hit us up either on social media or on the show page. We'd love to answer your questions. Best of luck, angel investing out there. So hopefully we'll see you out in the field.

Cheryl  Yeah. Thanks everyone. And, uh, as a

Cheryl and Maxine  reminder, I'm Cheryl. I'm the founder and CEO of Aussie Angels. And I'm Maxine. I am the GP at Coventures.

Maxine  Amazing. See you soon.