Today's episode explores three ideas that caught my attention:
The zombie portfolio problem - John created a simple "Lost Cause Fund" solution that lets angels harvest tax losses from walking dead companies. Genius. How many other innovations remain undershared across angel networks?
Expertise >> crowds - John's analysis revealed a U-shaped return curve where heavily-invested deals performed well, but surprisingly, some smaller deals with just a few deep-industry experts also outperformed. Fresh perspective on the “wisdom of the crowds.”
The first five years deceive us - Learning that early outcomes skew negative while big returns happen 5-15 years later explains why many angels quit too soon. Vital for inclusion in any angel education.
I explore these ideas and more with John Harbison, Chairman Emeritus of TCA Venture Group
John Harbison brings over two decades of angel investing experience as the analytical force behind the Angel Capital Association's data initiatives. As Chairman Emeritus of TCA Venture Group and a key architect of the Angel Funders Report, he has meticulously tracked outcomes across hundreds of investments to identify patterns of success and failure. His unique background combining management consulting methodology with hands-on investing has made him one of the industry's most insightful data-driven decision makers.
During our conversation, John shares:
A practical approach to data collection that simplifies complex cap table analysis by focusing on the key ratio between investment amount and return amount, making portfolio tracking manageable for groups of any size.
Detailed data analysis showing that early investment outcomes are misleading – the first five years are dominated by shutdowns while significant exits typically happen between years 5-15, fundamentally reshaping how angels should set expectations.
A forward-looking vision for how AI can transform angel investing, from automating member expertise matching to guiding diligence questions, potentially improving both efficiency and decision quality.
What We Cover:
00:00 Introduction
04:07 Angel Funder Report and Data Insights Monthly
07:41 Analyzing Investment Outcomes
09:07 Understanding Investment Returns
10:26 Insights on Exits and Shutdowns
15:07 Learning from Data and Experience
25:56 Tools for Data Management
Listen now on Spotify, Apple Podcasts, and YouTube.
Connect with John
LinkedIn: https://www.linkedin.com/in/harbison/
Connect with Andrew
Newsletter: https://thediligentobserver.substack.com
Website: https://pitchfact.com/
Stuff We Reference
Seraf: https://seraf-investor.com/
Alicia Doxon: https://www.linkedin.com/in/alyciadoxon/
Ron Weissman: https://www.buzzsprout.com/2459970/episodes/17152952
Tech Coast Angels (TCA): https://tcaventuregroup.com/
Central Texas Angel Network (CTAN): https://www.ctan.com/
Launchpad Ventures: https://www.launchpadventuregroup.com/
Google Notebook LM: https://notebooklm.google/
ChatGPT: https://chatgpt.com/
Gemini: https://gemini.google.com/app
SurveyMonkey: https://www.surveymonkey.com/
Slack: https://slack.com/
Angel Funders Report: https://angelcapitalassociation.org/angel-funders-report/
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All opinions expressed are personal and may not reflect the views of the individual’s organization or of The Diligent Observer. Not investment advice.
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