Building a Startup Portfolio

Private returns are driven by a small number of extreme outcomes. In a representative portfolio, the majority of positions return little or nothing and a small minority produce nearly all of the return.

That distribution has a direct consequence: a concentrated private portfolio is not a bolder version of a diversified one, it is a substantially different bet with a much higher probability of total loss. Experienced angels commonly build toward twenty or more positions over several years rather than a handful.

It also argues for pacing. Deploying an entire allocation in one vintage year concentrates exposure to whatever market conditions happened to prevail that year.