Indeed, earning money as an angel investor is not as easy as it may look. Some individuals think angel investing is a casuistic game, the lottery of spray and pray, taking out the responsibility of searching and doing informed and intelligent selection and adding value processes. Some angels succeed economically, and there are angels with total economic failures. Some angels tell only the excellent investment stories, and there are discrete ones that don't share them. Naturally, angel financial failure leads to disappointment, in some cases to the abandonment of the angel activity, which is a significant concern for all the players in the ecosystem.
There is also the unicorn myth. 85% of the unicorns have angel investors behind them; that is the truth. Without angels investing in the unbelievable before it is proven, the large majority of those great companies that changed our world and our lives would not exist.Our world would be very different without Airbnb, Google, Spotify, Facebook, Uber or Whatsapp, to give a few examples.
Some of the great success stories of angels investing in unicorns serve the primary purpose to sustain the angel hero. However, the opportunity to invest in unicorns is unclear, and the ticket to enter the train that produces them is not accessible for everyone. There are less than 1000 unicorns globally, so the probability that some angel takes part in a unicorn is less than 0.1%. That's why angels must find other sources of satisfaction than investing in unicorns; otherwise, they will always be frustrated. The good news is that startups deliver excellent economic outcomes that are not necessarily unicorns and are great sources of monetary satisfaction.
There is an apparent correlation between angel success and entrepreneurial success. It's factual. Angels succeed economically only if some of their invested companies succeed too. Hardly we have the success of the angel at the cost of an entrepreneurial failure. Some theories and statistics show that 9 in 10 startups fail in the first five years of existence, and the common angel voice believes the one or two startups in the portfolio that run very well compensate for all the investment. Of course, if one invests in a minimal number of startups, the possibilities of success are less than those that invest in a large number of startups (portfolio theory). That's why investing in a group can be an excellent opportunity to be part of a portfolio, even without a vast amount of money.
On the other side, studies show the expected IRR of professional angels (full-time dedicated) is on average 25%. Evidence shows the performance of professionals (around 10% of the angel population) do not correspond to the majority of the angels. Sounds like magic? No. Professional angels obtain those results because they base their investment practice on knowledge, method, processes and techniques that help them to avoid significant failures. Professional angels invest regularly and continuously in promising startups because they have good processes and a long term commitment to this activity. It's the right moment to say luck in angel investing needs a lot of time and gives a lot of work. If you invest like an amateur, don't expect professional results.