Some problems are only obvious in retrospect, even when they are right under your nose. Several years ago, a member of my angel group (Launchpad Venture Group) sent an email with a cry for help. As an active angel investor, she had built a portfolio with more than 15 angel investments over 3 years. Initially, she was able to keep track of her portfolio with a simple spreadsheet. This worked out just fine for about a year or two, and then she ran into trouble. Between notes converting to equity, multiple follow-on rounds of financing, and the ever growing size of her portfolio, the task of staying on top of what she owned became overwhelming.
Upon receiving her email, I got in touch with my colleague at Launchpad, Christopher Mirabile. Being a former CFO and General Counsel at a publicly traded enterprise software company, I was confident that Christopher knew how to keep track of a large, early stage investment portfolio. And so the conversation went like this... Yes, he had a spreadsheet. And, he had most of his documents stored electronically or in hardcopy folders for each company. He seemed pretty confident that he was on top of things.
Confident until I asked if he knew if he had any warrants expiring in the next year. He said he didn’t THINK so, but that question would take some research. When I asked if he knew whether his spouse could figure out what he owned, he laughed and said almost certainly not. And, with each ensuing question, we went further downhill. When he turned the tables on me and started quizzing me on my system for tracking angel investments, I didn’t even pretend to be organized. I told him I gave up years ago as my spreadsheet became unwieldy and I stopped asking companies for a closing deal document binder.
Managing these investments is very hard to do manually. So hard that many prolific angels simply do not do it. But there are a number of ways in which failing to attend to and manage these details can negatively affect your investment returns. So we set out to see if there was a better way.
With three data points all indicating a need for better investment tracking, we spoke to seed investors and angel group leaders in the Boston investment community to understand if anyone had a working angel portfolio solution. Across the board, we heard pretty much the same answer. The most organized had a spreadsheet and file folders for each company. The least organized didn’t even know how many investments they had made over the previous years. Not a pretty sight! And not good for returns.
But before succumbing to disorganized defeat or trying to quickly hack our own solution to the problem of managing an angel portfolio, we figured that the Venture Capital industry must have solved the problem long ago. Nope… all of the VCs we spoke to were still using spreadsheets, or adapting some expensive portfolio management tool that was designed for public company investments.
We expect to manage and track our public company portfolios using sophisticated websites from companies like Fidelity, Merrill Lynch, eTrade or Schwab. And, we can track our personal finances with tools from Quicken, Mint.com and the like. Given the steady growth of active angel investors over the past couple of decades, we felt it was well past time for a professional solution to keep track of our angel investments.
So what do serious angels need in a solution for tracking investments in the Wild West of startup companies? At a minimum, we need a portfolio management application that allows us to do the following:
- Track: Keep a transactional record of each investment you make
- Analyze: Calculate your investment returns, portfolio diversification, etc.
- Insights: Stay on top of news and quarterly reports from your investments
- Monitor: Be aware of key dates and actions (e.g. warrant expiration dates)
- Optimize: Maximize tax-efficiency to improve your portfolio returns
- Share: Have the ability to easily share your records with advisors and family for tax and estate planning purposes
The above list is by no means exhaustive, but it’s a great start to organizing your early-stage venture investments. Staying on top of your portfolio doesn’t have to be a tedious, time consuming task. And, if you want to optimize your outcomes you can’t trust your portfolio to a spreadsheet and file folders!
Given how widespread this need was, we decided that rather than hacking together a quick and dirty solution, we would go ahead and build a professional tool for ourselves and make it available for others to use as well. That is what led to the launch of Seraf (seraf-investor.com).