Port Wren Capital, LLC
Finding Value InvestmentsSM
Angel Investing is Not for Everyone
During a recent conversion, someone asked me about ďAngle Investing.Ē And naturally, the general rule is. If one person asks that means there are others with the same question on their mind. Well first off, angle investors are typically affluent individuals who are willing to provide their own capital to startup or early stage companies in return for equity positions or convertible debt. The average angle investor is seeking high returns on their investments. Sometimes angle investing is referred to as informal investors, angel funders, private investors, seed investors, angle partners, or business angels. When we talk about early stage or startups, we are talking about companies that have not advanced to the development stages where they can seek capital from venture capitalist (which is still private capital, nor are we talking about companies that are listed on any of the stock exchanges (seeking public capital). For various reasons they do not meet the requirements to ask venture capitalist for funding or to be listed on an exchange.
Angle investing groups are typically set up as US Partnerships that are required to file both Federal and State Tax Returns in say South Carolina and each member must in turn file K-1 to report their share. Additionally, to be eligible to get involved in an angle investment group, you must meet the United States requirements of an Accredited Investor or a Qualified Investor. In general you must have income of $200K in each of the last 2 years or a net worth of $1M excluding the value of your primary residence. So if you do meet those requirements, then you must pay an annual fee to become a member that may run you $1,500 or so. Plus there is usually a minimum amount you must invest, which may run you about $5,000 for each startup company.
You typically donít have to invest into each startup company that presents. But, some angle investors do just that to play the odds in hopes they will hit a winner. The reasoning here is that most startups fail and as an angle investor you will most likely get zero back on your investment with each failure. Yes that is right, a total 100% loss. This is a high reward, high risk game. With not much room in the middle. So please be aware of what angle investing is all about prior to investing in one.
In fact, a 2016 study on angle investing tell us that the failure rate has climbed to 70%. Also understand if you do see a return it may take the business five to seven years to turn a profile before you receive your capital. Recent studies (2016) tell us the average hold time is 4.5 years. That is a 25% increase from 2007. Most of the failures with angle groups is due to not conducting good due diligence or research. This is a very important aspect in screening the investments. Not every pitch you listen to will you want to invest in for various reasons. You must have a yard stick to measure what is an acceptable investment. This is a highly specialized skill and not found on your local street corner. You need to have the skill, time, knowledge and successful track record to research them properly. Often an angle group my stray from its core knowledge and invest in an industry it knows little about which can create problems for both the investors. Typically this happens when the angle investors are trying to diversify their portfolio and protect their interests. Another concern is that some angles want to control some aspect of the businesses. This can spell bad news for all concerned. Most often angle investors have the capital but not the expertise to manage a business concern. Typically two or three key individuals doing the majority of the research become over worked and my end up leaving, or they develop an controlling attitude and try to rule the roast which creates even more issues. For the reasons stated above we would not recommend investing in an angle investment oriented group. We feel you have much better odds with returns investing in individual publicly traded stocks, provided you use well prepared investment research.
In contrast to angel investments, with Port Wren Capital, LLC, we provide an investing alternative. With publicly traded stocks you have more of an opportunity to find that "middle room" that is just not found with your typical Angle Investments. And you can still make an above average return without betting the entire farm on each idea, if you well. Plus, there is no minimum investment amount, we never handle your funds, and you donít have to invest in each and every idea. All for one flat affordable annual fee.
One of the many benefits of our investing service is we seek higher returns using individual stocks to invest our on capital. Plus we can help you with the research. Our research is designed to give you the information on which stock to buy and at what price and when to sell it and at what price to obtain higher returns. We find specific investment opportunities using security analysis research to find undervalued opportunities for our subscribers in our PWC STOCK REPORTSSM membership service. And you too can reap the rewards.
At Port Wren Capital, LLC, we specialize in picking specific undervalued U.S. stocks using fundamental analysis developed by Benjamin Graham using a five step process. We have beaten the S&P500, DJIA and NASDAQ benchmarks since we started 5 years ago on our own investments. Discover the difference for yourself. To learn more contact us today.
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