Startup investing has traditionally been seen as a selective, judicious process. But a new report says that angel investors and venture capital firms will do better at the seed stage by investing broadly.
AngelList, the leading startup seed investing syndication platform, recently published "Startup Growth and Venture Returns".
The report is based on analysis of 3000 startups funded through their service led by Abraham Othman Ph.D., the Head of Data Science at AngelList.
It includes this provocative recommendation for seed stage venture investors:
"If you miss the best-performing seed investment, you will eventually be outperformed by someone who blindly invests in every credible deal."
There’s some limit on that strategy obviously as the article goes on to say:
"However, we do not feel that investing in everything is practical. We worry that an investor promising to blindly fund every whisper of a new company would fundamentally alter the investment universe they are exposed to by introducing a huge number of new money losing investments that otherwise would not have been created but for the investor’s universal funding policy."
Still, the overall conclusion of the study is this:
"Consequently, our results suggest that at the seed stage investors should put money into every investment that clears some minimum threshold."
Today any balanced portfolio likely includes venture investing because of the outsized returns potentially available.
Will this research encourage our local angel investors and VC firms to spread their money around more broadly to "index" with the most credible early stage venture investments they can find...?
Thanks to AngelList for sharing this valuable research with the startup investing community!
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