Portfolio maths
One investment will decide the whole thing
Angel returns are not distributed the way intuition expects. Most investments return nothing, and the portfolio's entire result comes from one or two positions that nobody could identify in advance. Everything else — how many cheques, how large, how much to hold back, when to sell — follows from that single fact.
Do it yourself
Three calculators
Reading about dilution is less useful than watching your own numbers move. All three run in the browser, store nothing, and send nothing anywhere.
Dilution calculator
What your stake becomes after four rounds — and what following on would preserve.
Open →CalculatorPortfolio simulator
Size your allocation and cheques, then see the chance of holding no outlier at all.
Open →CalculatorExit waterfall
What actually reaches ordinary shareholders after costs, debt and the preference stack.
Open →The shape of returns
Why one investment decides the result, and what follows from that.
Portfolio construction
How many, how large, and how much to hold back.
How many investments
Why the answer is larger than most new angels expect, and how to think about the number without pretending to a precision the maths does not support.
Read the chapter →Cheque sizing
How to set the size of a single investment from the total you are prepared to lose, working backwards rather than forwards.
Read the chapter →Follow-on reserves
Why holding capital back for later rounds in your winners is the highest-quality use of angel money, and how much to reserve.
Read the chapter →The arithmetic
Dilution, expected returns, loss rates and what pro-rata is worth.
Modelling dilution
How to work out what your percentage becomes after four rounds and an option pool refresh — the calculation that turns an entry percentage into a real one.
Read the chapter →Expected returns
How to build an honest expectation for an angel portfolio, and why the average outcome and the likely outcome are very different numbers.
Read the chapter →The loss ratio
How many of your investments will return nothing, why that number is higher than feels tolerable, and how to hold it without changing your strategy.
Read the chapter →What pro-rata is worth
Putting a number on the right to keep investing — how much following on actually preserves, and what it costs to do it.
Read the chapter →Time and cash
The J-curve, the metrics, and how long the money is gone for.
The J-curve
Why a portfolio looks worse before it looks better, and how to tell an ordinary J-curve from a portfolio that is genuinely not working.
Read the chapter →DPI, TVPI and IRR
The three numbers used to describe venture performance, what each one hides, and why only one of them is money you can spend.
Read the chapter →Time to exit
How long angel money is actually locked up, why the period has lengthened, and what that does to the return you should require.
Read the chapter →Putting it together
The one-page plan that makes the rest of it operational.
A note on the numbers here
Every figure on these pages is either an explicitly labelled illustration you can reproduce with a calculator, or a stable arithmetic conversion such as turning a multiple into an annual rate. None of it is presented as an observed industry statistic, because the honest position is that angel return data is patchy, survivorship-biased and rarely comparable between sources.
What is reliable is the shape: a long tail of failures, a small number of outliers, and a result dominated by the top of the distribution. That shape is robust to almost any assumption you plug into it, which is why the chapters here teach you to build your own expectation rather than adopt somebody else's number.
Angel portfolio maths: common questions
How many startups should an angel invest in?
How much of my money should go into angel investing?
Why does one investment dominate the whole portfolio?
How long before angel investments return money?
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The maths tells you how to build a portfolio
It does not tell you which companies belong in it, or what the paperwork means when one of them sends you a term sheet.