I began studying angel investing returns about 10 years ago as a result of a problem I couldn’t resolve: The investing world seemed certain that angel investors were rubes. Conventional wisdom dictated that they made reckless investments in very early-stage ventures mostly doomed to fail. And whenever they might come close to succeeding, savvy “professional” investors would just swoop in, cram them down, and win the real returns. In addition, angels were up against a selection problem: All the best entrepreneurs and opportunities would naturally gravitate to the best venture capital funds, leaving only the “scraps” for angel investors.

So which is it? Are angel investors just unwitting philanthropists or legitimate entrepreneurial investors? Read more