One of the key axioms of angel investing is that you need to be diversified in a portfolio of companies because 1-2 companies will carry your portfolio’s returns given the high failure rate of between 75 to 90 percent of startups.
I set out to answer the question of:How many investments should an angel/seed investor make to be adequately diversified?
The easy answer is to say as many as possible. However, diversification is tough. It’s tough to find good companies to fund, and thus it’s tougher to fund 50 companies than it is to fund 5 or fund 500 instead of 50.
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