Entrepreneurship Ecosystem Insights
  • Home
  • Content
    • Perspectives
    • Innovative Programs & Policies
    • Research You Should Know
    • In Case You Missed It
  • About Endeavor
    • Our Mission
    • Our Model
    • Our Entrepreneurs
    • Insight & Research
    • Investor Network
    • Programs
    • Our Background
    • FAQS
  • About EEI
Research You Should Know 0

AngelList: Early-Stage and Late-Stage Investments Should Be Different Asset Classes

By Endeavor Insight · On December 22, 2019

Venture Capital is a young industry, and until recently, it has been difficult to find adequate data to mathematically model VC strategies and draw conclusions about which strategies pay off the most. Frustrated by the lack of quantitative evidence to inform decision making at VC funds, AngelList Head of Data Science Abraham Othman used AngelList data on more than three thousand investments including valuations and price-per-share figures to understand how each successive year of a startup’s existence affects investment returns.

In a paper published earlier this month, Othman shared a number of conclusions to inform decision making for venture investors and policymakers.

  1. Early-stage investments and late-stage investments are so different in their expected returns that they should be treated as entirely different asset classes. Investors in different rounds of fundraising at the same startup experience fundamentally different expected returns for their winning investments, and these expected winnings change very significantly over the company’s lifetime. This explains why many venture capital firms are organized by company stage, as opposed to by industry vertical.
  2. Early stage investors should be allowed to cash out from winning investments, because in the later stages of company growth, early investors find themselves owning an entirely different type of asset class from what they signed on to. These investors may prefer cashing out and reinvesting their money in other early stage companies.
  3. Policymakers should open up the opportunity to make retail investments to accredited retail investors.  Companies are staying private longer, and these high growth private companies are powerful tools of wealth creation. At the same time, policymakers should not open up the opportunity to make early-stage retail investments to non-accredited retail investors. Early-stage investments remain incredibly risky, especially for investors who do not have the means to diversify their investments.

Contributed by Lili Torok.

To access the original article by Abraham Othman titled Startup Growth and Venture Returns, please visit this link.

Print Friendly
Share Tweet

You Might Also Like

  • Research You Should Know

    Place-Based Innovation Policies are Important for Building Entrepreneurial Ecosystems

  • Research You Should Know

    Middle American Cities Are Some of the Nation’s Largest Talent Generators

  • Research You Should Know

    National Governments Want More Companies to Scale

No Comments

Leave a reply Cancel reply

Subscribe to our monthly update

  • Popular
  • Comments
  • Tags
  • How Can Decision Makers Foster Productive Entrepreneurship Communities?

    October 29, 2018
  • Three Tips for Entrepreneurship Policy-Makers from Philip Auerswald

    October 14, 2015
  • The Three Most Important Resources Companies Need to Succeed

    March 10, 2014
  • Start-Up Chile: Heading toward Failure or Success?

    September 9, 2014
  • How Five Percent of Kenyan Companies Can Help Create 3.9 Million Jobs

    May 11, 2015
  • How Local and State Governments Can Best Support Entrepreneurship

    April 15, 2015
  • ride says: Тhanks for finally writing about >The Three Most Important Resourϲes Compan...
  • American Dreamers says: Very insightful article. This can help out all aspiring ...
  • Steven Koltai says: In my work in 36 countries over the past 8 years beginning as the first Senior...
  • Mark Neild says: Of course it may be that just providing entrepreneurs in developing countries ...
  • Endeavor Insight says: Thank you, Julia! Big hugs from Team Insight....
entrepreneurial ecosystem entrepreneurship ecosystems access to finance entrepreneurship startups access to capital jobs scaleups entrepreneurship policy research success high-growth firms economic growth smes public policy economic development europe high-growth

Perspectives

  • Network Building Sets Women Entrepreneurs Up for Success

    February 12, 2020
  • Emerging Fintech Entrepreneurship in the African Remittance Market

    June 29, 2017
  • Xavier Niel is Building the World’s Largest Startup Incubator in Paris

    May 26, 2016

Innovative Programs & Policies

  • How Social Entrepreneurs ‘Zig-Zag’ Their Way to Scale

    December 5, 2019
  • Five Ways for Entrepreneurship Support Programs to Become More Effective

    November 22, 2019
  • What Types of Companies Have the Strongest Impact on Economic Growth?

    June 7, 2019

Research You Should Know

  • Place-Based Innovation Policies are Important for Building Entrepreneurial Ecosystems

    March 30, 2020
  • Middle American Cities Are Some of the Nation’s Largest Talent Generators

    March 23, 2020
  • National Governments Want More Companies to Scale

    March 12, 2020

In Case You Missed It

  • What Is the Typical Career Path of CEOs at Large Firms?

    July 24, 2019
  • The Fintech Sector is Rapidly Expanding in Latin America

    June 25, 2018
  • Scaling Entrepreneurs Drive Innovation in Emerging Markets

    June 7, 2018

Endeavor

To learn more about Endeavor and our worldwide network of high-growth companies please visit our website.

© Endeavor 2019. All rights reserved.