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<h1 class="title">Risks and Rewards</h1>
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<div><div class="collapse-text-text collapsed-text"><p>Investment in early stage businesses carries high risks, as well as the possibility of high rewards.</p>
<p>It is highly speculative and before investing you are strongly advised to take advice from an accountant or Corporate Finance expert who is authorised by the Financial Service and Markets Act 2000 (FSMA) who specialises in advising on investments of this kind.</p>
<p>Recent research carried out by NESTA and BBAA, called "Siding with the Angels" showed that up to 50% of investments made by angel investors are likely to fail i.e. not return the original stake investment.</p>
<p>BUT this research has also shown that where investment has been made in a number of companies across a mixed portfolio, the returns can be very encouraging, ranging from two times the original investment up to 40 times, with an overall return of 22% IRR. This compared well with an identical survey of American angel investors in the US who gained a 27% IRR overall. <a href="../sites/default/files/media/files/bbaa_nesta_siding_with_the_angels.pdf">CLICK HERE</a> to access “Siding with the Angels” NESTA-BBAA 2009.</p>
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<p><span style="color:rgb(55, 0, 52)"><strong>Key factors which have been shown to influence positive returns are:</strong></span></p>
<p><span style="color:rgb(55, 0, 52)"><strong>Take a portfolio approach: </strong></span>Spread your investments across a number of small businesses, in more than one sector, rather than putting all your investment into one business. This will enable you to diversify your risks and increase your opportunities for achieving better returns<strong>. </strong></p>
<p><span style="color:rgb(55, 0, 52)"><strong>Invest in what you know: </strong></span>Invest in sectors or areas of business where you have experience or prior knowledge. Or invest alongside another angel or group of angels who are experienced in investing in this sector and who will also offer ongoing expertise and experience to the business. </p>
<p><span style="color:rgb(55, 0, 52)"><strong>Do due diligence</strong>:</span> Carry out at least 20 hours of due diligence and you are likely to make more informed investments, resulting in more successful outcomes and returns. Due diligence should be done to satisfy yourself about investing in the business on all the main aspects of the business including the team, the market and product; legal and financial aspects before making the investment. For more information on due diligence <a href="../be-an-angel/fact-sheets" rel="nofollow">CLICK HERE</a>.</p>
<p><span style="color:rgb(55, 0, 52)"><strong>Follow your investment</strong>:</span> Keep in touch with the business, providing relevant advice and support, or for example sitting on the Board, or providing business or marketing contacts. This could be done by yourself if you have time and the relevant skills and knowledge, or by an appointed experienced lead angel if you are part of a syndicate.</p>
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