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The difference between a well performing and poorly performing investment often comes down to three things, says Angelhub Ventures lead partner Brett Commaille.
For Commaille these are: the stage a product is in, the maturity of the business itself and the readiness of the market to adopt the product or service a startup is offering.
But he admits “sometimes a business just hits the right market and the right time and takes off”.
The difference between a well and a poor performing investment often comes down to three things, says Angelhub Ventures lead partner Brett Commaille
How then is his Angelhub Ventures portfolio doing?
Responding to a number of questions from Ventureburn, Commaille details the performance of his portfolio and what kind of growth his investors are looking for to achieve a 10X in five years return on their investment.
This Q&A is part of a series of interviews that the publication is conducting with venture capitalists and angel investors in the SA tech startup sector (see the footer of the story for links to other interviews)
Ventureburn: What kind of return on equity do you generally look at?
Brett Commaille: 10X in five years is our target, but a minimum of 25% return is offered in fundraising formal docs usually.
VB: How many of your investments have had exits, how many are growing well?
BC: All of them are making good growth. (How well they are doing) varies by industry. To achieve 10X in five years you need to be growing at over 50% year on year.
We had two early stage small investments that were not working and closed. The others are all on track and growing well.
“Losing money” is not an indication (of whether an investment is doing well or not). Many companies are running at a loss as they put all their funds into growth. But, they may still be growing well and the growth is thus funded by investment.
We have six investments in our portfolio which are all growing at differing paces.
VB: Why would some investments be doing better than others? Are there say three or four important ingredients to making an investment return good value for investors?
BC: The differences are due to a multitude of factors. Stage of product, business and stage of market are three of the biggest factors.
- Product: New products take time for the market to figure out what it is and how to use it.
- Market: The product may have been ready but the market wasn’t and one or two key factors or events can dictate when a market starts adopting a product, or is open to being told about it.
- Business: A new business versus a mature business can be at very different stages as one is building a new team versus growing an existing one, or possibly focused on raising.
Sometimes a business just hits the right market and the right time and takes off.
VB: Of those investments you have exited, what made them successful?
BC: Most of our portfolio has not yet exited. But big exits come from timing (the right business at a time when it’s a hot sector) and a great team.
VB: How many of your current investments have had second or third-round investments?
BC: About 50% have had second or third follow-on rounds. It depends entirely on circumstances at the time — sometimes we follow-on.
We’ve been the lead investor and let others invest if it was best for the company. And we’ve invested with others and alone — both local and foreign investors.
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