(For context pls read 2025 mid year, 2024, 2023, 2022 updates. Also this post is all about our startup investments. You can also read post retirement life review for 2025).
Unfortunately my predictions for 2025 largely were correct for our space. To recap, I predicted 2025 will still be weak for funding as investors wait for exits and DPI. Startups who are swimming naked will fail and even those with ok business models will need all their effort and luck to grow revenues to reach breakeven. Only strong margins and decent scale startups will be able to raise meaningful money and even then it will be on investors terms. Only exception will be AI space which was hot even in 2024. Corresponding, we kept our allocation to new startups same as 2023, 2024 which is less than half of sum invested in 2021,2022.
Last year we funded just 3 new startups and did 2-3 follow on for existing startups. We found a USA AI fund to invest in and that’s our way of capturing some exposure since couldn’t find any AI strong stories here.
On a more granular level, we have now invested in 52 startups as angels since 2013. Of these, 4 have profitable exits ranging from 2x to 5x. 15 are closed down or bad loss making exits. 14 are growing well and are worth more than when we invested for sure. The remainder are either too new or uncertain.
On a mark to market basis since 2015, it’s a 2.09 TVPI and 14.3% IRR. All time low since I started tracking and a big drop from last year 19-20% IRR and 2.45 TVPI. DPI at 0.36. Main driver for big drop is one paper gain fell by 70% due to a down round. Interestingly, company is now almost breakeven and looks like will survive and may thrive moving forward.
And this is the silver lining - almost all our founders now are building based on profits and operating cashflow. Funding is not the default plan anymore and will only be pursued from a position of solid financials and strength. Pity it took so many burnt millions from 2016 to 2023 for our founders to understand this.
There were also usual startup problems like founder breakups, ceo being cheated by fake investors etc. These draining stories also resulted in some write downs. Considering all the write downs and the solid financials of the remaining winners, we believe we are probably near or at bottom of the TVPI trough already. We still expect TVPI to finally land >2.5x with 3x being base case. Quite a few of our winners are at just 30-60m valuation. That means one or two just needs to double for us to have pretty large gains.
Not so sure about our portfolio of VC funds though. Need to see the quality of the P&L of their winners. I strongly believe it’s profitable growth that matters now. Having scale but still burning cash is not that appreciated anymore and the mgmt is taking risk of failed outcomes if they still want to sell a pure growth story.
Personally, we do reflect a lot on our angel investing journey. This 10+ year journey has delivered in terms of giving us something concrete and meaningful to do that plays to our strengths. It gives us good learning and social interaction too, esp when we add on angelcentral club activities. However, we are disappointed by 2 connected items.
First is that returns are currently poor and time frame at 12-15 years is very long. We had optimistically expected to ride on asean growth story and get a 3x on invested capital within 10-12 years. It’s now 10th year. Our VC portfolio is also sitting on similar TVPI with lots of fund extension requests so I guess these numbers reflect the market. And at least we have 0.36 DPI.
Second, a minority of founders have ended up displaying disappointing behavior when things go bad or tough. Instead of the tough get going, they end up displaying self serving behavior or worst still unethical tactics to minimize their own troubles or pursue personal goals. The company’s long term survival and story they sold to investors is clearly not their priority.
So moving forward, we have decided to stay cautious with the same reduced budget for angel investing. And we will also extend our expectation of how long we need to wait. One thing we want to avoid is having to handle startups at 70 years old!
Some general observations.
Observation 1 - Green shoots are there. Need them to grow and spread all over the landscape.
We can see two main green shoots. First is the solid outperformance of the STI and smaller caps listed in sgx. Also recent tech IPOs like mega optics, infotech systems and ultragreen help the story. Our successful startups can position an exit on sgx if the market interest continues and grow. This is very important because sgx can take valuations of 50m -1b. Significantly below nasdaq average valuation of 2-3b usd.
Second green shoot is that many startups have had 2-3 years to be lean and switch to solid profitable growth. A good number of them have succeeded or are well on the way. To illustrate, many of our portfolio companies have cut costs and focused on sustainable revenues since 2022 when we first sounded the warning. A lot of pain last 2-3 years but now a good number have reached breakeven and 2-3 are solidly profitable with at least 1m PAT.
Observation 2 - Full cycle average returns are bad compared to listed comparable. Negative for new funds. Also means top VCs will take more. Fund managers have to show results and DPI. Hands on management to secondaries and other forms of exits matter.
14.3% IRR over 11 years is weak compared to investing in nasdaq or spy. And against USA VC top quartile returns it’s also bad. Any investor would compare not just with other asset classes but also with comparables within VC class. So it makes sense that new money will allocate less to asean and for those monies allocated, most will go into the established VCs with scale and best track record.
To me this means newer VC fund managers will have a tough time fund raising in 2026. And if I just have 1 or 2 funds and can’t raise fund 3, it becomes hard to build a good business. Of course, i can have 3 funds with 500m aum but if my dpi and irr of past funds is not strong, i will also suffer.
Finally VC managers cannot just rely on founders for exits. The ones that survive and thrive will need to create a working playbook for secondaries and engineer outcomes that may be ahead of the final founder exit.
Observation 3 - Bottoming out is still ongoing, no obvious catalyst. Implication is founders must create own catalyst via solid revenue growth and profits.
This is a repeat point from last year. I believe there will be yet more closures and negative disclosures. A good number of startups will be running of cash. Some will be founder burn out. It’s possible more efishery are around.
I don't see any big catalyst on the horizon. China is still bottoming out. USA markets is strong but the tax impact is hitting soon and their K shaped economy will cause problems. USA is also sucking up a lot of global risk capital as it’s the centre of AI boom. USA IR is lower now at 3.5%, so capital is now ok priced but nowhere cheap like 2020s zero rate type of environment.
The implication of all the above is that founders cannot rely on ecosystem improving. They must continue to improve their business and run growth profitably. That will allow for best chance of some form of outcome for themselves and investors.
Observation 4 : The management of an Angel portfolio has big similarities to listed stock market investing.
First, is selection and buying in. Over the 2013 to 2020 period, we missed on 2-3 startups that did approach us and which we dug in to explore but decided to pass on. Usually it’s due to lack of knowledge of space or see something in the unit economics that we didn’t like. Turns out we were wrong frequently! If we invested even just $50k in each of them, would have resulted in 2x more on entire portfolio. So we know by now we are not great unicorn type pickers. This effect is even more pronounced in angel investing since the top winners are 10-100x winners.
Second, as in listed stocks, buying matters but selling also matters as much. For the longest time we had this idealistic philosophy of following the founders. Exit only when they exit. Now we know it has to be case by case. And taking back our capital is never a bad move. We had easily 3 good secondary opportunities during the 2021 peak where if we sold, would improve the dpi and IRR significantly. But overall this effect is weaker compared to first topic.
Observation 5 : Very Early Startup Creation intact. Funding very low.
AngelCentral continues to see 900+ companies registered with us and the quality of the startups is still high. Funding quantum by our angels continue to be at all time low. There are savvy investors trying to invest in fair valuations or downrounds of good companies. All in it’s more of the same.
We hope that 2026 is the year activity starts to come back. Activity in exits need to come first. Then activity in funding - driven by early opportunistic money and trade sales that see value in the startups that not just survived but have thrived in the fund winter. Personal portfolio wise, we expect angel side to have good markups and Vc side to have more dpi but maybe without much markups.
