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Episode 37: "Winners Emerge After the Five-Year Mark" | TCA Venture Group Chairman Emeritus John Harbison on Exit Timeline Expectations, Portfolio Diversification Strategies, and The Unexpected U-Curve of Returns
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Insights from a 20-year angel investing veteran who created data-driven tools used by hundreds of angel groups
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. With over 20 years of angel investing experience, John has led the ACA's data initiatives and helped develop the Angel Funders Report. His blend of management consulting and hands-on investing makes him a highly insightful, data-driven leader in the industry.
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.
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All opinions are personal and may not reflect the views of The Diligent Observer. Not investment advice.
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