Abstract

This paper explores the tremendous variation in investment performance of angel investors. The returns are highly skewed: Despite the massive losses incurred in most investments, the mean return is twice the invested capital. Investor fixed effects explain far more of the total variation in angel performance than any collection of observable factors. “Better angels” do not earn higher returns by avoiding left-tail realizations as much as they do by achieving extreme right-tail outcomes. As explanations for the performance differences, we contrast better access to deal flow with better deal selection and find that industry-specific knowledge along with deal-selection skill is important.

Authors

Johan Karlsen, Norwegian School of Economics
Katja Kisseleva, Frankfurt School of Finance & Management
Aksel Mjøs, Norwegian School of Economics
David Robinson, Duke and NBER