Billions not a must-have for angel investors

JUST about every major tech success - from Facebook to LinkedIn to Instagram - started with angel investors taking a chance. These risk-takers ended up being richly rewarded for their early investments, and no doubt they have inspired would-be angels to search for the next big thing. Such success, though, is highly unlikely in the dicey business of angel investing. Many investments go to zero, or they languish in a startup that never really takes off or attracts buyers. It's no wonder people brag so fulsomely about the winners.

David S Rose, a prominent angel investor in New York and a member of one of the city's wealthiest real estate families, argues in his new book, Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups (Wiley, 2014), that more people can and should become angel investors, and that a few big wins make up for all the losses.

"Angel investing is a legitimate part of an alternative asset class investment portfolio," Mr Rose said. "A rational person can be an investor and not a gambler." Not every adviser agrees. "There is a lotto ticket element to angel investing," said Michael Tiedemann, chief investment officer at Tiedemann Wealth Management. "The risk is such that most people are not going to see the best deals unless they are really well connected within the industry." I decided to look more closely at the assertions in Rose's book and ask some experienced angel investors for their insights.