Business angels realise bumper return on investment in start-ups

The first quarter of 2014 has seen an “unprecedented return-on-investment” for the business angel community in Ireland, according to the Halo Business Angel Partnership (HBAP), with some angels receiving as much as a

700 per cent return following the sale of companies in which they invested.

HBAP, Ireland’s largest and most active angel network, has also reported a 12 per cent increase in the number of investors registering with it.

"We see from our portfolio of companies that, on average, revenues have increased 5.6 times since investment and this bodes very well for future performance of angel investments and the returns to investors," said HBAP manager John Phelan.

Healthy returns
He said exits were giving evidence to the potential that early-stage start-ups were an asset class worth investing in due to the healthy returns.

“Valuations within the portfolio of companies invested in are increasing with some strong companies coming through (not that they are exiting) and this will increase the investors’ returns and perception of value investing at an early stage.”

HBAP said there have been four company sales from within its portfolio of investments in the past six months with a fifth exit currently in the legal process.

These include Activation Energy, Storyful and 20 20 Insights.

The HBAP business angel who invested in Storyful made a return of seven times his investment when the company was sold to Rupert Murdoch's News Corp for €18 million in January.

Developer of innovative loyalty programmes and business intelligence 20 20 Insights was sold to Swiss Post, also providing a return on investment of seven times to the original angel investor.

Angel investor Aidan McDonnell, one of the investors in Activation Energy which was acquired by Nasdaq-listed EnerNOC in February, said he would expect to see more exits over the next few years.

HBAP business angels have invested in 139 deals since 2007, with the total angel amount invested over €25 million.