Angel investment activities are generally divided into screening startups and managing the portfolio. Portfolio Tracking and Management is taken seriously by dedicated investors. This is where they try to get the best they can out of their investments.
Some investors spend most of their time screening new deals, neglecting the importance of dedicating time to their portfolio. While looking for new startups is part of the job, tracking current portfolio startups can increase the odds of high returns, as we will see in this article.
Reasons Why Dedicated Angel Investors Track their Investments
Wealth Allocation Awareness
Investing in startups can get messy. Unlike the stock market, you can’t access your historical or current transactions on one screen on a simple app. Startup investors have to make the effort of recording these transactions. Not to mention, every startup investment has a different check size, valuation, and legal contract. For an investor who actively made 20+ investments, we can see how the numbers will be loose if not recorded.
Recording transactions is also needed to follow an investment strategy or thesis. How do you invest across industries and stages of development? Do you allocate a percentage to minorities or a cause?
Improving Learning Curve
When tracking portfolios, angel investors and VCs receive periodic updates from founders. This typically includes a written report accompanied by the latest KPIs. The updates allow the investors to follow the startups’ growth, see challenges, and stay informed on the market’s latest developments.
By tracking every startup, angel investors gain more expertise, whether consciously or not, on the characteristics of a good startup investment. Even tracking a losing investment teaches investors what to avoid.
In such an uncertain economy, staying fresh and continuously learning is a necessity to detect outstanding future deals.
Taking Strategic Actions
Depending on their rights in the term sheet, angel investors get certain actions they can trigger. Having a pro-rata right, for instance, gives the investor the right but not the obligation to participate in a future funding round to maintain their ownership. If the investor has the startup periodic updates and data, they can make a more informed decision as to whether the startup is worthy of investing more cash.
By maintaining good communication with your portfolio startups, you make sure you do not miss on triggering a critical action at the right time.
At VeFund, we built a tool for managing periodic written updates and KPIs. You can build your own templates and invite your portfolio startups to fill them out periodically. Join us now and put your portfolio communications on autopilot.