When you picture successful angel investing, you might imagine a savvy investor picking just a handful of winners and riding them to glory. In reality, the data tells a different story: broad diversification—making many, smaller bets—often leads to better overall returns.
The Power of Many Bets
AngelList has published several reports over the years showing that angel investors who make more investments (think 25, 50, or even 100+ deals) tend to see more consistent and higher returns than those who concentrate their capital in only a few startups. Their 2022 analysis shows that the odds of hitting a true outlier—the kind of startup that returns 10x or more—increase dramatically as you expand your portfolio. It’s a numbers game: more tickets, better chance of a jackpot.
Startups are risky. Even the smartest investors can’t reliably predict which early-stage companies will break out. By spreading your investments across more companies, you increase your chance of catching a big winner while reducing the sting of inevitable failures. This approach is especially important in venture and angel investing, where power-law returns (a few big hits drive most of the gains) are the norm.
How Many Investments Should You Make?
There’s no magic number, but many experienced angels aim for at least 20-30 investments to start seeing the benefits of diversification. Some go much higher. The exact number depends on your capital, risk tolerance, and access to deals. Just keep in mind: don’t put all your eggs in one startup’s basket.
Other Allocation Tips
- Don’t chase every deal—focus on opportunities that fit your interests and thesis.
- Consider smaller check sizes to stretch your capital across more startups.
- Revisit your allocation periodically. You may want to double down on later-stage follow-ons or rebalance over time.
- Stay mindful of your overall financial plan. Angel investing is risky and should only be a slice of your net worth.
While investing in startups will always involve some luck, the evidence is clear: spreading your bets gives you the best shot at startup investing success. And if you hit the next unicorn, you can always tell your friends it was pure skill.