The Benefits of Investing as an LP in VC Funds Compared to Angel Investing in Startups
There are a number of reasons why investors may choose to invest in venture capital (VC) funds as limited partners (LPs) rather than angel investing in startups directly. Learn about three below.
Benefits of investing as an LP in VC funds vs startups
First, investing in a VC fund gives you access to a wide range of startups. Spreading investments across multiple companies instead of putting a lot of money into a single startup can reduce risk. This can also make it possible to invest in high-quality startups that may not be open to individual investors.
In 2022, angel groups invested in an average of 17.7 deals, according to the Angel Capital Association’s 2022 Angel Funder Report. Early-stage funds, on the other hand, aimed to invest in 35 startups, according to data collected by the GP-LP Matching Tool during the same year. In comparison, Ganas Ventures targets investing in 75 companies. As a reminder, it is worth considering that spreading investments across more companies, which is best done at the fund level, can help reduce risk and increase the chances of a good return on investment.
Second, VC funds are run by professional investors who know how to find and evaluate startups, are well equipped to navigate the various legal contracts involved in investing in private companies, and can provide advice to help companies grow and get the most out of their investments. This can give LPs peace of mind that their investments are being handled by professionals with a lot of experience.
Research shows that angel investors who spent less than 20 hours on due diligence for each deal ended up with a return multiple of just 1.1x (i.e., 1.1 times their original investment, or a 10% return). But when they put in more than 20 hours, their return multiple jumped to 5.9x. And if they dedicated over 40 hours, the return went up even more to 7.1x. Since fund managers are full-time investors and will spend more time on due diligence, investing in funds could lead to some really impressive returns.
Third, investing in a venture capital fund can give you access to unique ways to network and learn. LPs can connect with other successful investors and learn from their experiences and insights, which can help them make better investment decisions.
Overall, investing in VC funds as an LP can give you access to a broader range of startups, professional management of your investments, and unique opportunities to network and learn. This can make it a better choice than investing as an angel in startups directly.
Connect with Ganas Ventures
If you’re exploring investing in VC funds and are interested in joining and contributing to a startup-VC community, consider Ganas Ventures. Ganas Ventures is a venture capital fund that invests in pre-seed and seed community-driven startups in the US and Latin America. We offer support and investment to founders with a big vision and a passion for addressing big problems in growing markets. We provide expertise, tools, and access to our community of over 78K+ members to help our portfolio companies succeed. Our fund is led by solo Latina GP Lolita Taub (me!). It is focused on producing outsized returns and changing the narrative of who VCs invest in and how companies become unicorns.
If you’re interested in learning more about Ganas Ventures and are considering investing in our fund, let us know here, and let’s hop on a call.
About Ganas Ventures: Ganas Ventures invests in pre-seed and seed community-driven startups in the US and Latin America. To learn more visit us at ganas.vc.
Disclaimer: The views above should not be taken as financial or legal advice. Please do your own research before making any financial and legal decisions.
Other reading
- How to become an LP in a VC fund
- Early-stage micro-fund VC 101: What Investors, Founders, and Scouts Should Know
- Welcome to Ganas Ventures!
- Community-Driven Companies: What They Are and Why We’re Investing in Them
- Ganas Ventures: How We Source, Select, and Support Startups
- Ganas Ventures Resources
- Ganas FAQ
About Lolita Taub: As a Latina emerging manager and general partner at Ganas Ventures, I always want to work with or invest in community-driven founders, funders, and friends. I have a strong track record with 15 years of experience in the Silicon Valley ecosystem. I have sold over $70 million in tech products and services, made over 90 investments as an angel investor and venture capitalist with Backstage Capital, Lightspeed, and The Community Fund, and had 3 successful exits from my portfolio.
Forbes, Inc Magazine, Nasdaq, and others acknowledge my efforts in advocating investment in underestimated and undervalued founders. I completed my undergraduate studies at the University of Southern California and earned my MBA from the IE Business School.
In addition to my professional accomplishments, I am a dedicated community builder with more than 78,000 founders, funders, and ecosystem friends. And I want to back founders who care about the community, invite LPs into the Ganas Ventures family, and build wealth in the community that will last for generations.
