The portfolio approach to investing in startups
Should startup investors bet heavily on one sexy startup? Or, should you keep your investments in startups relatively small and spread them out over multiple early stage companies? This question of how many startups an investor should invest in is one of the most frequently asked questions in the startup investing world. For people who invest in venture capital funds, it’s not really a question they need to address. They assign a representative — a venture capital fund — to make investment decisions on their behalf. But with the rise in popularity of angel investing and crowdfunding, investors are becoming more active in the startup investment process. The issue of the right number of startup investments an investor should make becomes a more integral part of the investment process. 2 approaches to investing in startups Concentrated, large bets: This approach is all about zeroing in a single or small number of investments with a relatively large bet on their success. It’s like a sniper who is down to just a couple of bullets in his investment gun. When he pulls...
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