Finance

Angel Investing – Fees, Returns and the Power Law

The power law dictates that a lion's share of VC returns comes from a small number of deals while most investments fail to return capital.

What is a liquidity event in angel investing?

When a startup becomes big, its early investors sell their shares to bigger VCs at a profit. This is called a liquidity event.

The math behind Carry in Angel Syndicates

Carry, short for Carried Interest, is the share in profit that a fund manager (GP) gets when they investment does well.

How have the richest countries fared in the last 40 years?

The inability of oil-rich states to diversify their economy has hurt them. They are as dependent on oil in 2021 as they were in 1978.

How have Indian VC funds performed?

VC investments are illiquid with 5 to 8 years lock-in depending upon the fund. Thus, it requires a higher return than most investments.

How hedge funds are disrupting venture capital?

Out of the 10 biggest startup investors in H1 2021, 9 were traditional PE/Growth funds.

Are we in midst of a startup bubble?

In the first 4 months of 2021, more Indian companies became unicorns (startups with at least $1 Bn valuations) than in the entire of 2020.

How much money do you need to be rich in India?

You need $60,000 in net wealth (Assets – Liabilities) to be in the top 1 % of India which is 32 times the GDP/Capita in India.

30-year economic boom for big economies

Between 1991 and 2019, the GDP per Capita in India grew by 7x.

Do startups and investors need Intermediaries?

The best bankers collaborate with founders to achieve their goals. Their incentives are tied to those of the firms they are advising.

Is the Indian economy overleveraged?

Despite fears of high debt, India's external debt to GDP ratio is the lowest amongst emerging markets after China.