Angel investors - wealthy people who toss money at fledgling companies - received about the average rate of return as other types of private equity investments, according to a survey of 539 U.S. angels.
The average rate of return of angel investments was 2.6 times the investment over a period of 3.5 years.
"This average return compares favorably with the internal rates of return of other types of private equity investments," said the study, Returns to Angel Investors in Groups.
Published by Robert Wiltbank of Willamette University and Warren Boeker of the University of Washington, the study was based on 1,137 investor "exits" over the past two decades, whether through an initial public offering or acquisition.
However, the researchers found a wide range of returns. Most significant: Fifty-two percent of exits returned less than the capital the angels invested in the venture.
But 7 percent of exits achieved returns 10 times the money invested, "accounting for 75 percent of the total investment dollar returns."
Of individual angels, the study said 61 percent "had portfolio returns that were greater than the capital they invested."
The best returns tended to occur when the angel spends more hours of due diligence, has expertise in the industry of the venture and when the angel interacts with portfolio companies at least a few times a month.
That contact consisted of coaching, mentoring, providing leads and monitoring performance.
Of all the companies receiving angel funding, 45 percent had no revenue when they received the investment.
The study focused on angel investors who are connected to angel organizations, rather than all angel investors.