What Happens After you Click 'Invest'?
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How is my investment performing?
Have I been diluted?
How much is it worth now?
Every new angel asks these questions. The short answer is, you really can’t. Sorry. 😞 But it’s worth reading to understand why. We’ll reward you at the end with our favorite investment cash-out calculator.
An example
Not to state the obvious, but when you write an angel check, you are investing in a very early private company. Private companies share very little detailed financial information with anyone but their biggest investors, who have “information rights.”
Let’s say a company does a Series A investment round, and you see the valuation published in TechCrunch or announced by the founder in their monthly updates. You can maybe get a “rough” view of your markup. But you can’t really calculate your ownership or the actual markup on your investment because valuation is just the tip of the iceberg.
Some of the most critical information is only shared with lead investors and board members. Angels (and even early-stage funds, as time goes on) won’t usually know:
What other SAFE notes were signed after you invested, and at what valuation cap?
How big is the option pool, or was founder equity trued up?
Were any warrants issued? Did the company take on any secured debt?
What type of liquidation preference did later-stage investors get?
You might not even know what all of these things mean. Most founders don’t until they encounter tham. But all of this can affect your returns as an early investor and affect how the proceeds from a liquidity event will “waterfall” to everyone on the cap table.
It’s frustrating but…
It’s frustrating not to know all these details. But even if you knew them, what would you do? You can’t act on them. And while markups can be exciting, they are not exits. Only the final returns matter.
That’s why we suggest building a diverse portfolio each year. The non-financial ROI of angel investing delivers dividends every day. The long-term financial results from a diverse portfolio have historically been very attractive.
One more thing…
By the time you make even a handful of angel investments, you will thirst for a dashboard to manage them all. We have personal investments spread across every platform imaginable, and it's the number one request we’ve heard from every angel we’ve talked to—so we get it. Unfortunately, there is no universal API for angel investing. So, it’s Notion templates and Google Sheets as state-of-the-art.
Our favorite investment calculator!
We are just like you. We like to dream. Here is our favorite online calculator. You can use it to model different scenarios on individual investments—pure joy. 💎