A review and simulation of business angel investment returns

G. Gregson, A.J. Bock, R.T. Harrison

Research output: Contribution to journalArticlepeer-review


Business angels are widely recognized as a significant source of entrepreneurial finance, particularly for early-stage businesses. However, rigorous investigation on angel investment performance has been limited. This paper examines investment returns of business angels in addressing the question of whether angel investing generates attractive returns. We review the few published studies which report on more than 100 investment exits to establish baseline returns expectations and clarify returns measurement limitations. We then use data from one of the largest studies of angel returns to populate a Monte Carlo simulation of returns profiles to explore the link between portfolio size and the probability of the desired level of returns. The study reveals that angel deal returns are highly skewed; smaller portfolios have higher average returns but dramatically lower median returns. In contrast with prior studies, our study shows that portfolios with more than 50 investments are required to significantly minimize risk of poor returns and that similar scale is required to maximize returns potential, as smaller portfolios have a lower average internal rate of return (IRR). We show that reinvestment rate is a critical element in measuring angel returns, and we demonstrate the limitations of IRR as a returns metric through the simulation. © 2017 Informa UK Limited, trading as Taylor & Francis Group
Original languageEnglish
Pages (from-to)1-27
Number of pages27
JournalVenture Capital
Early online date7 Jun 2017
Publication statusE-pub ahead of print - 7 Jun 2017


  • business angels
  • investment returns
  • policy implications
  • portfolio size


Dive into the research topics of 'A review and simulation of business angel investment returns'. Together they form a unique fingerprint.

Cite this