Portfolio Construction: Check Size and Number of Bets

The number of bets, not the quality of any one, drives the outcome

Lesson 2 already established that most individual angel checks return little or nothing, and the entire portfolio's return tends to come from one or two outliers. The practical consequence is that a portfolio's odds of ever landing a true outlier depend heavily on how many independent bets it contains, not on how confident you feel about any single pick. Even an angel with genuinely excellent judgment needs enough shots on goal for that judgment to show up in the results.

What this means for check size

Given a fixed amount of total capital allocated to angel investing, this shape argues for more, smaller checks over fewer, larger ones, up to a point. Most solo angels who take this seriously converge on somewhere between 15 and 30 active positions over a multi-year investing horizon, small enough that they can still do meaningful diligence on each one (Lesson 13), large enough for the power law to have a real chance to play out. This differs from a VC fund's much larger portfolio math mainly in scale, not logic: a fund with more capital and more diligence bandwidth can run more positions, but the same diminishing-returns curve applies.

The tension worth naming

More positions means less diligence time per position (Lesson 13's constraint), and smaller checks mean less ownership per winner, which matters at exit (Lesson 4). There's no formula that resolves this perfectly; it's a real tradeoff every angel has to set deliberately, rather than drifting into either extreme by accident, writing too few large checks with too much confidence, or too many tiny checks with no real diligence behind any of them.