I agree. That's the most accurate analogy for angel investors who enter the game believing they'll get rich quick: 1 out of 100 tickets will win.
The problem: They need to buy 100 tickets to get that one.
As you describe, the outsized returns come from venture funds that already invest in de-risked assets with excellent management teams.
CRISPR Therapeutics was never shopped around on the market. Link: https://www.labiotech.eu/trends-news/crispr-therapeutics-series-b-rodger-novak-125/
In my opinion, their success was closely tied to Rodger Novak. He started an antibiotics division at Novartis, then spun it out into Nabriva (where I helped him prepare the company for a quick Nasdaq IPO planned for 2008).
2008—everyone remembers why an IPO wasn't possible.
In Vienna, he met Emmanuelle Charpentier, who later won a Nobel Prize for her CRISPR IP.
Given that background and the VC network he has build at Novartis/Nabriva and his drug development expertise from lab to clinical phase 3, they immediately got the finest VCs on board in their Series A—Abingworth, GSK through SR One, and others. Vertex signed a co-development deal in 2017 worth hundreds of millions.
The fact is: those are the deals that lead to good exits for investors. Those are the ones never available to the average business angel.
To your point: Should everyone be allowed to invest in startups? Yes, as long as they receive enough warning signs.
The uneducated public is better off with an S&P 500 ETF. Even the pros struggle to beat that performance. My latest numbers show that only 5% of professional investors manage to consistently outperform the S&P 500.
I agree with your point. Stay away from startups unless you have access to a solid VC community to raise funds, have the know-how needed to move a startup forward with VCs willing to pay for it, and have time to join a startup as a founder or an advisory board member.
Besides the lottery ticket aspect, this also creates early cash flows through services, which is essentially the return on investment.
