Putting it together
Writing a portfolio plan
A one-page document that turns everything in this section into rules you set before the next attractive company appears.
Every chapter here produces a decision, and every one of those decisions is easier to make in the abstract than in the moment. A portfolio plan is a one-page document written while nothing is happening, which is the only condition under which people set sensible rules.
Its purpose is not to be clever. It is to remove the decisions that are reliably made badly under enthusiasm and time pressure: how much to invest, whether to stretch for a minimum, whether to follow on, and whether to sell.
It should fit on one page, and it should be re-read before every investment. That is the whole method.
What the plan contains
Six numbers and three rules. The numbers: total allocation, follow-on reserve, first-cheque size, target portfolio size, investments per year, and the number of years you intend to deploy over. Each comes from the chapters above.
The rules: what you will invest in and what you will not, what would make you follow on, and what would make you sell. Written in advance and in specific language, these are the sentences that hold when a compelling founder is in front of you.
Add a short statement of what you are trying to achieve. An angel investing to learn about a sector should behave differently from one seeking a financial return, and being honest about which you are doing prevents a great deal of confusion later.
| Item | Decision |
|---|---|
| Total allocation | £250,000 over five years, money I can lose entirely |
| Follow-on reserve | 40% — £100,000 |
| First cheque | £6,000 standard |
| Target portfolio | 25 positions |
| Pace | 5 new investments a year |
| Scope | Pre-seed and seed, software and marketplaces, markets I understand |
| Follow-on rule | Top third of the portfolio only, through Series B, then stop |
| Sell rule | Consider selling half at 10× or more in any structured secondary after year six |
The numbers are illustrative — yours come from your own allocation and circumstances.
The rules that do the most work
The cheque size rule prevents the single most common error, which is investing four times your standard size in the third company you meet because it is exciting. Standard size, with a written exception process, is the discipline that keeps portfolio size achievable.
The minimum-investment rule matters more than it sounds. Deciding in advance that you will use a syndicate or decline, rather than stretch, removes a decision that is otherwise made under social pressure in real time.
The sell rule is the one most angels never write and most need. Deciding in advance that you will consider selling half a position at a stated multiple, in any structured secondary after a stated year, means the decision is made by your plan rather than by whatever you feel at the time.
Reviewing it
Once a year, and not more. Read the plan, update the numbers for what you actually did, and note what you learned. Frequent revision defeats the purpose — the plan is meant to be a constraint on the version of you that is enthusiastic about a company.
The one thing worth tracking honestly is whether you followed your own rules. An angel who exceeded their cheque size three times in a year has learned something important about their process, and it is more useful than any performance figure at that stage.
In short
What to take away
- Write the plan before the next attractive company appears, not after.
- Six numbers and three rules on one page. Longer plans do not get read.
- Include a sell rule — almost nobody does, and it is the decision most improved by being made in advance.
- Review once a year, and track whether you actually followed it.
From the decoder