The major portfolio variables are: • Percentage of total net assets • Number of investments • Amount of cash in reserve (dry powder) • Average amount per investment
Portfolio targets may also include preferred types of deals, such as industry sector, stage and location.
Portfolio Categories
Very Conservative Angel Portfolio $25,000 per investment x 2.0 (a powder reserve of 100%) x 15 investments = 10% of net worth Net worth required = $7,500,000 Conservative Angel Portfolio $25,000 per investment x 1.50 (a powder reserve of 50%) x 12 investments = 15% of net worth Net worth required = $3,000,000 Less Conservative Angel Portfolio $25,000 per investment x 1.35 (a powder reserve of 35%) x 6 investments = 25% of net worth Net worth required = $1,000,000 — Bill Payne , in Asset Allocation and Portfolio Strategy for Angel Investors Most of the Angels I have spoken with agree with Frank Erschen and frequently deviate from their portfolio targets. Many of them invest more money in fewer deals and keep less of their powder dry. In some cases, they augment this smaller number of deals and hit their portfolio diversification goals by also investing in an Angel sidecar fund or Angel group fund to reduce risk (see section 1.6). Mike Cegelski, on Angel portfolio targets: “I invest around 20% of my net worth – I know that’s considered a lot, but it’s something I know and feel comfortable with. I maintain a portfolio of more than 20 companies and try to keep it under 30. I’m early- stage but not too early – I like to see revenues. I keep 50% for powder and I like to follow-on invest when needed. I prefer “one-and-done” investments and earlier exits. I’m not seeking unicorns. I’m happy with 2–5X returns instead of 20–30X deals that need a lot of money. I’ll invest $100,000–150,000 and potentially another $300,000– 500,000 in a follow-on round per company.”
24 A Practical Guide to Angel Investing: How to Achieve Good Returns
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