Business Angels: Can you beat 210 companies and 35 fold increase in 5 years?

We’ve written before about the growth of business accelerators (see our business accelerator list here), however, until the recent NESTA report – Startup Factories – there was little independent evidence of the effect of these accelerators.

Well, now we have it – the first and most effective business accelerator – Y Combinators – which began in 2005, recently valued the businesses that passed through its programme in the following 5 years at US$4.7 billion.

Clearly, that is a massive success and one that would surely beat even the best traditional business angel model.

For instance, the volume of businesses passing through is 210 – that is an average of 42 for the first 5 years.

Do even the best business angels get anywhere near these numbers?

Clearly, no – neither in terms of volumes of investments nor

Now, Y Combinator invested around 20,000 US$ in each of its 210 startups – so that’s a total of around US$4m. Let’s just gestimate that the cost of running the programme was another US$4 for those 5 years. So, total costs US$8m.

Of course, the Y Combinator partners have also invested 5 years into helping these startups – but then active business angels would expect to do the same – so no real difference there.

Okay, so assuming an average 6% stake in each investment means that the value of Y Combinators share is US$282m.

That means US$8m has been turned into US$282 in 5 years and the partners have been paid an annual salary whilst building this cash pile. This equates to a 35 fold growth over the period.

So, let’s ask the question, how many business angels can beat this performance? Okay, a few venture capitalist who hit big home runs on Facebook etc might beat this – but, for business angels who have built up a portfolio of businesses, can you beat 210 companies and a 35 fold growth over a 5 year period?

Okay, business angels, time to join your local business accelerator?