Within the crowdfunding community has emerged a trend to set up “funds” that invest in several startups and sell percentage shares of interest in the overall combined “fund”. You get a few sucessful VC’s or Angels who are well known and have done well putting together these funds an doing well as by investing in multiple pre-vetted startups along with these known investors you’re diversifying your investment not risking your total investment on one early venture “seed stage” startups which are riskier and have a very high fail rate. Here’s an example of a current one that’s doing very well on Funder’s Club.
Here’s a screenshot showing the three things to note;
- Campaign is oversold 698% or $3,483,300 pledged so far based upon a $500,000 goal.
- It’s Listed as a multi-company “fund”
- It lists two successful VC’s as leading the “fund”
“Invest alongside angel investors Fabrice Grinda and Jose Marin. In past: $30.3M invested across 215 investments. 31 profitable exits; +5.82x multiple on realized investments (65), 5xcarrying value on unrealized investments (150)”
Here’s another excellent example on Angel List
“Instead of putting all your eggs in the same basket make multiple investments. This will increase your possibilities of success and will also help to reduce the risk involved. It will also increase your chances of getting your money back with some returns at a liquidity event such as a public offering or an acquisition by another company. In the end, these investments are for the long run so try to be patient.”
Adam Sharp wrote in his very detailed rundown on Angel List Funds:
“When it comes to early-stage investing, I’ve found there are generally two theories. They boil down to this:
- Spread out your bets across many promising startups to maximize the chance of hitting a grand slam. Help companies when you can.
- Focus your investments in a select few startups per year. Then help them succeed.
Billionaire Peter Thiel is a big proponent of the second option, a focused approach. And it’s worked well for the co-founder of Paypal. He sold his early $500,000 stake in Facebook for $1 billion in 2012. That one was good for 2,000 times his investment. He’s made many successful, highly focused investments since.