Angel Investing Is a Volume Game

If you're considering angel investing, here's an uncomfortable truth: your first investment probably won't be the next Uber. Neither will your second, third, or even tenth. Understanding this math is the difference between treating angel investing as a lottery ticket and approaching it as a disciplined asset class.

The most common mistake new angel investors make is not making enough picks at all.

The Power Law Reality of Venture Returns

Venture capital and angel investing operate under what's known as a power law distribution. Unlike traditional investments where returns cluster around an average, startup returns are wildly skewed. A small number of massive winners generate the vast majority of returns, while most investments return little to nothing.

Consider the typical venture portfolio: roughly 50-70% of investments will fail or return less than the initial capital. Another 20-30% might return 1-3x—hardly enough to move the needle. Then there are a handful of companies that return 10x, 50x, potentially 100x+ your investment. These rare outliers don't just contribute to your portfolio returns—they are your returns. They are what really moves the needle.

The implication is clear: if you only make a handful of investments, your odds of catching one of these outliers are vanishingly small. You're essentially buying a few lottery tickets and hoping to win. But angel investing shouldn’t be a lottery. With enough investments, you're positioning yourself to increase your chances of investing in an outlier.

The Danger of Concentration

When writing large checks, the temptation to concentrate capital is real. You meet a brilliant founder, a massive market, a resonant product. Why spread money across twenty companies when this one feels certain? P.s. I made this mistake at the beginning of my angel career. It can be hard to avoid.

Because there are definitely no sure things in venture.

Every investment carries substantial risk. Markets shift. Competitors emerge. Teams break up. Companies backed by top VCs fail all the time.

Going too big on any deal exposes you to idiosyncratic risk—the unpredictable factors that doom individual companies regardless of initial promise. A founder's health. A key hire who doesn't work out. Regulatory changes. You can't predict or prevent these through due diligence.

Smart portfolio construction means accepting you cannot predict which companies will succeed. Instead of picking the one winner, build a portfolio where you don't need to be right about which one—just that one breaks out. Another way of saying this is you can be wrong the vast majority of the time in venture capital and still make a ton of money. 

This requires discipline: writing smaller checks than you'd like, passing on tempting "double down" opportunities, diversifying across sectors, stages, and cycles. None of this guarantees success, but it dramatically improves your odds of capturing it.

Optimizing for the 100x: Why You Need Lots of Shots on Goal

Here's what separates good angel investors from great ones: great angels aren't trying to avoid losses. They're optimizing to get lucky. The best angel investors all have a massive graveyard of portfolio companies.

Getting lucky sounds passive, even reckless. But in power law markets, "getting lucky" means putting yourself in position for it to happen enough times that probability works in your favor.

The data is striking: investors who make fewer than 10 investments rarely see a 100x return. Not because they're bad at picking companies, but because the math doesn't favor them. The hit rate for 100x outcomes is simply too low—well under 1% even for experienced investors. If you only make 10 investments, your odds of seeing even one company achieve that level of success are statistically minimal.

But investors who make 50, 75, or 100+ investments? They start seeing different results. Not because they're smarter or better connected (though experience definitely helps), but because they've given themselves enough shots on goal. They've accepted that most investments won't pay off and positioned themselves to be present when that outlier hits.

This is why the best angel investors maintain aggressive investment paces. They're not desperately throwing money at every opportunity—they're maintaining disciplined check sizes while maximizing the number of compelling opportunities they can back. Each investment is a call option on exponential growth. The more options you hold, the more likely one of them pays off dramatically.

Diversification isn't about hedging your losses—it's about multiplying your chances of capturing the wins that matter.

The Marathon, Not the Sprint: Investing Across Multiple Cycles

Even with a broad portfolio, there's another dimension that separates sustainable angel investing from a brief experiment: time.

The best returns come from investors who commit to 7-15+ years of consistent investing, making well over 25+ investments over that period. Why?

• Vintage year diversification. Startup ecosystems move in cycles. By investing consistently across multiple years, you avoid deploying all your capital at the peak of a bubble. You catch down cycles when valuations are attractive and up cycles when momentum builds.

• Learning compounds. Your first investments will likely be your worst—you're still learning to evaluate founders and identify early signals. Investors who quit after a few years never benefit from this compounding expertise. Those who stay a decade become exponentially better at spotting opportunities.

• Relationships deepen. The best deal flow can come from founders you've backed introducing you to peers, co-investors pulling you into rounds, and a reputation built over years. An investor making 30 investments over three years will have shallower relationships than one making 50-100 over ten years.

• Exits take time. Successful startups typically take 7-10+ years to exit. Investors who commit to longer horizons see exits from earlier vintages while still making new investments, allowing them to refine their approach in real-time.

A portfolio of 25+ companies built over multiple cycles isn't just more diversified—it's more resilient, more informed, and more likely to capture exceptional companies across different market environments.

The Singles and Doubles Matter Too

In a portfolio of 50-100 investments, you'll see a handful of 3-5x returns and perhaps several 10-20x outcomes. These aren't venture home runs, but ideally they keep you in the game by providing recycled capital that lets you continue investing without adding fresh capital from your income or savings.

This creates a virtuous cycle. Early modest wins fund can ideally fund later investments, which include the next cohort of singles and doubles. Over time (7+ years maybe), this compounding transforms angel investing from capital-depleting to self-sustaining.

These wins also validate your strategy, signaling you're finding companies that achieve product-market fit and execute toward exit. While important to have line of sight to the fund-type returners, they keep you psychologically invested during inevitable dry spells.

The goal isn't to settle for singles and doubles—it's to build a portfolio large enough that you collect these along the way to the grand slams. They're essential fuel for the journey.

The Path Forward

Building a meaningful angel portfolio requires a fundamental mindset shift. You're not trying to find the one perfect company—you're building a systematic approach to capture exceptional opportunities across a large enough sample size that probability works in your favor.

This means writing smaller checks to spread capital across more companies, investing consistently over many years, accepting that most investments won't return capital, and thinking in longer timelines about when you'll truly know if your strategy succeeded.

The investors who see 100x outcomes stuck around long enough and made enough investments that when extraordinary companies emerged, they were there. Angel investing is a long game played with a large portfolio.

If you enjoyed this article, feel free to view our prior posts on adjacent topics 

• How We Closed 14 SPVs in One Month

• Are VCs the New Bankers

• VC Scouts: Why Waiting for Lead Investors Maximizes Syndicate Success

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✍️ Written by Zachary and Alex