Why it is important to build a startup portfolio
An angel investor is someone who provides early-stage funding for startups in exchange for an ownership stake in the company.
One of the best ways to do this is by building a startup portfolio. By having a portfolio, you'll be able to lessen the risk associated with startup investment and get a better understanding of the industry as a whole.
In this article, we'll discuss why every angel should build a startup portfolio and how to go about it.
What Is a Startup Portfolio?
If you're an angel investor, or even if you're just thinking about getting into the startup game, make sure you build a portfolio. It's the best way to increase your chances of success. You might be thinking, "Why do I need a startup portfolio?" A startup portfolio is a collection of startups that you've invested in. You don't need to invest in hundreds of startups, but you should have at least 20 to 40 startups in your portfolio.
Why is this important? Well, it's important because you want to have a diverse investment base. You don't want to put all your eggs in one basket, right?
That's why it's important to invest in startups from different domains and at different stages. This will help you reduce your risk and increase your chances of making a return on your investment.
Why You Should Build a Startup Portfolio
When you're an angel investor, one of the hardest things to do is to know which startups to invest in. Out of the hundreds (or thousands) of startups that are out there, most of them are going to fail. You just don't know which ones will succeed. But that's okay. Because investing in startups is a numbers game. The more startups you invest in, the more likely you are to hit one that's going to take off.
The historical returns have shown that 50% of the startups of your portfolio will eventually fail. 20% will return the original investment. 20% will return profit 2-3 times of the investment.9% will return a profit of 10 times the investment and 1% will return a profit of more than 20%.
That's why it's so important to build a startup portfolio. By spreading your bets among a bunch of different startups, you're increasing your chances of hitting one that's going to be a home run. And it's not that hard to do. You don't need to invest a ton of money in each startup. You can start by investing a few thousand through ezeseed platform, that can still add up to a lot if one of them takes off.
How to Build a Portfolio
Select an amount you want to invest every year. Generally angel investors go for 10% of their free cash flow income every year. Keep an horizon of two to five years to keep invested. Select startups from various domains. Invest a small amount in every startup you want to invest in and keep a tab on their progress. Ezeseed provides a dashboard to every investor to keep the updates of the startup in their portfolio. Invest a higher amount in the startups that are performing well in your portfolio in the next rounds of funding for optimal performance.
Building a startup portfolio is a smart way to spread your risk and increase your chances of hitting it big. So if you're an angel investor, start building your portfolio today. But don't just invest in any startup that comes your way. Do your homework and only invest in companies that you believe in. With a little luck, one of them will be the next big thing.