Angel Investment Return Calculator

On the defaults, 50,000 buys 4% of a company, dilution across later rounds halves that to 2%, and a 200,000,000 exit pays 4,000,000. That is 80.00x the money, and spread across seven years it annualises to 87.01%.

One exit is not a return

The important thing about that figure is that it describes a single investment that worked. A portfolio's return is the average across every cheque written, and most angel investments return nothing at all. One 80x among ten investments of the same size is a portfolio multiple of 8.0x, not 80x, and 34.59% a year rather than 87.01%. What this page produces is the numerator of a fraction whose denominator is every other deal.

Dilution is one number here and a sequence in life

The field takes total dilution to exit as one number. At 50% a 4% stake becomes 2%. Ten points more, at 60%, leaves 1.6%, takes proceeds to 3,200,000 and the annualised figure to 81.14%. In practice dilution arrives round by round and multiplies rather than adds, so four rounds at 20% each leave 0.8 to the fourth power, or 40.96% of the original stake. That is a total dilution of 59.04%, not the 80% that adding the rounds together would suggest, and the startup equity calculator works through the sequence version.

Proceeds assume every share is paid the same price

Preferred shares issued in later rounds usually carry a liquidation preference paid before the common. On a 200,000,000 exit with 50,000,000 of preference ahead of it, the residual is 150,000,000 and a 2% stake takes 3,000,000 rather than 4,000,000, turning 80x into 60x. Nothing in the calculation can see that.

The cheque size sets the multiple, not the proceeds

Proceeds are ownership multiplied by exit value, so the amount invested never touches them. It only moves the multiple, which is what makes the pair of entry figures worth checking against each other: 50,000 for 4% implies a post-money valuation of 1,250,000 going in. The company then grows from 1,250,000 to 200,000,000, a factor of 160, and the investor keeps half of that after 50% dilution, which is the 80x. The whole calculation reduces to valuation growth multiplied by the share of ownership that survives.

Time moves the annual figure more than the deal does

The multiple is fixed by ownership, dilution and exit value. The annualised figure is that multiple spread across the years entered, and it moves enormously: the same 80x is 140.22% over five years, 87.01% over seven and 54.99% over ten. Nothing about the deal changed in any of those.

What the research says about angels

Studying 13 angel groups across 21 countries, Lerner, Schoar, Sokolinski and Wilson found angel funding associated with better growth, performance, survival and follow-on fundraising, and found that effect independent of how developed venture activity was in the country. Separately, work on how angel returns vary between individual investors finds the distribution heavily right-skewed, with the better performers reaching their returns through access to the extreme outcomes rather than by avoiding the losses.

What sits outside

Follow-on investment and any pro-rata rights exercised along the way, liquidation preferences, tax in either direction, secondary sales before an exit, the possibility of no exit at all, and the portfolio around this one deal.