The holding period is what separates a good tax outcome from an expensive one. Sell within a year and the gain is short-term, taxed at ordinary income rates that can exceed 37%. Hold more than a year and it's long-term, taxed at the lower capital-gains rate (typically 15% or 20%). Since angel investments are illiquid for years anyway, most exits naturally land in long-term territory — and if the stock qualifies as QSBS, part or all of the gain may be excluded from federal tax depending on how long it was held.
Losses aren't just dead weight. Capital losses offset capital gains dollar-for-dollar, so a $50,000 loss on one company directly reduces the taxable gain on a winner. Given that most angel investments fail, this matters: a worthless position can often be claimed as a loss, and in some cases startup losses qualify for additional treatment under Section 1244. The practical takeaway is to track every position's outcome, including the failures, because the losses do real work at tax time.