Angel Portfolio Construction

A framework for building an angel investment portfolio, focusing on capital requirements, investment timeline, and expected returns.

Portfolio Size & Capital Requirements

• Minimum 20-30 total investments needed
• Average check size of $25k per investment
  • Can go as low as $10k if needed
  • $25k is the "realistic big buy in"
• Total capital needed: ~$500k
• Timeline: Spread over 3-4 years
  • Roughly $125k per year needed
• Don't go below 20 investments
  • Need enough bets for variance to work in your favor
  • AngelList study shows indexing provides best returns

Expected Return Distribution

• 40-50% of investments go to zero
• 20-30% return between 1-3x
• Remaining 10-20% need to be 10x+ winners
• Goal is to find the rare 1000x+ or 10,000x+ investment

Alternative Approach: Scout Model

• If lacking capital, partner with established investors
• Typical structure:
  • Scout sources deals
  • Investor provides capital
  • Scout gets 10% carry after return of capital
  • No capital requirement from scout
• Benefits:
  • Build track record without capital
  • Get logos/portfolio companies to reference
  • Learn while using others' capital
  • Zero financial risk

Deal Sourcing Methods

• Inbound leads provide quantity
• Direct outreach provides quality
  • Best deals come from reaching out to founders
  • Focus on products/companies you genuinely love
• Network referrals
  • Friends starting companies
  • Other investors sharing deals