The Top Angel Investors and Venture Capital Fund Managers by Brian Thopsey

TL;DR - Angel and VC use multiples to quantify return, while Private equity usually use the Internal Rate of Return. Private equity funds are also often leveraged, while the other two are not.

Helpfulness - 3

Tags - SPV, Co-investment, VC Funds

Questions addressed:

  • What are some factors considered when ranking investors?
  • What are the differences between private equity, angel investors, and VCs?

Summary:

  • Differences in performance metrics, timing of cash flows, and analysis window determine the analysis.
  • Angels and Venture Capital often use multiples like “a return of 2x capital invested,” and Private Equity often uses Internal Rate of Return (IRR)
  • highly leveraged nature of private equity funds, whereas angel and VCs are rarely leveraged
  • Angel investors primarily put money in startups at the stage entrepreneurs first look for outside (e.g. friends and family) capital. This is called seed funding.
  • Factors considered in angel rankings: network strength, rate of follow-up on investments, performance persistence, investment discipline, selection aptitude, illiquid performance, etc

Follow up links:

Definition of leveraged fund: