Angel investing cannot be charity investing.

Angel investing cannot be charity investing. Angels need to earn a return on their investment commensurate with the risk that they take, if angel investing is to be sustainable. If they do not earn sufficient return, then they will run out of capital or appetite and invest elsewhere.

It is instructive to think about what the target rate of return should be. Venture capitalists frequently target 35% per annum rates of return.

In my view, as angels are in earlier than VCs and thus assume more risk (of all kinds, including execution risk, financing risk, and technology risk), angels should target a rate of return at or exceeding 40% per annum.

In any event, regardless of the right target rate of return, angel investing needs to be approached with a business-like manner if it is to have any hope of being a sustainable, growing source of capital for innovators.