Optimizing your Angel Returns
Spray and Pray?
Most of the info we get on Angel is from VCs, and VCs mostly know how to VC. A broad portfolio is counterintuitive to how they need to invest. In startup investing they call building a diverse portfolio spray and pray. In public markets we call it index funds. Index funds outperform professional fund managers > 75% of the time. Turns out the same is true in private markets.
We have the Receipts
Abe Othman, Chief Data Scientist at Angel List, analyzed a decade of data to show that diverse portfolios outperform over 75% of VCs. If you are investing at the earliest stages (pre-seed and seed), you’ll outperform 90%-95% of all VC funds with a diverse portfolio. We’ll share links to this full analysis at the end.
The real problem is…
The real reason so few groups talk about building diverse portfolios is that up until now it has been too hard. Even making 6-8 angel investments a year is hard. You’d likely have to review 120-240 deal. Hitting 10-15 is nearly impossible unless you make angel a full time job. Until Now.