The typical angel investor has a portfolio of just seven companies, the American Angel Survey, an effort to gather information from nearly 1700 accredited investor angels, reveals. The 75th percentile is just 15 investments, and the maximum portfolio is only 106 investments.
The small portfolios of typical angel investors surprise me because numerous studies of angel investing show portfolios that size are too small to ensure that the investor will generate an acceptable financial return at minimal risk. For instance, Monte Carlo simulations of angel investment return data indicate that investors need to build a portfolio of more than 50 investments to have a greater than 90 percent probability of a two times return on investment. In this week’s column, I will try to explain why angel investors build small portfolios.
5 Reasons Angels May Have Small Portfolios
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