SeedInvest sits down with 3 professional investors and asks for their advice on startup portfolios
1. Plan to invest in thirty to forty companies over the course of the next five to ten years
Allocate your dollars as such to reflect that, as well as saving some dry powder for follow on rounds for companies that are successful.
I want to take 5 percent of my net worth and allocate it to this asset class. You take that five percent, whatever that might be, and you say, “alright I need to spread this over at least twenty or twenty five portfolio companies.”
You take that five percent of your net worth, you divide by twenty or twenty five and then you’re going to say, “okay maybe I’ll do four deals per year and have a little bit of extra for follow on investments in the companies that are performing well that I want to continue to invest in.”
-Erica Minnihan, Managing Director at DreamIt Ventures
Erica Duignan Minnihan is a Managing Director for DreamIt Ventures focusing on Community Development in the New York City region. DreamIt Ventures runs programs in Austin, Baltimore, New York City, Philadelphia and Tel Aviv. In the last 5 years, DreamIt has helped 127 companies and over 400 entrepreneurs turn their ideas into business. She is also Managing Partner of seed-stage investment fund Fortuna Ventures, which invests in technology-enabled early stage companies.
2. Have realistic expectations of your companies, but hope that one or two really pay off with a home run.
The companies that angels often do best on are the “singles” and “doubles” because they don’t need the company to raise large amounts of capital to go after the $100 million+ outcome.
Angels can often be best suited going for companies that are worth in the low single digit millions who are trying to go for the most likely outcome for any company, which is $20-50 million. That can be a ten times return without having to raise VC capital. That’s often a better approach than going after the VC model of finding the elephants in the room, or unicorns really.
-Graham Gullens, Founding Managing Director of Empire Angels
Graham is the Founding Managing Director of Empire Angels, focused on building the member network and leading group investments. Graham is an active angel, entrepreneur and board member. He led two round of financings into ZoomCar and sits on the board. Graham has a strong interest in fintech, social analytics and B2B startups and spends much of his time with portfolio companies. Graham blogs at Graham Unplugged VC
3. Are you a person who invests in market? Do you focus on teams? Or look for technology and market barriers?
I think there’s no wrong answer. There are people who have made money doing any of the three. For us, we’re trying to check all of the boxes at a sufficient level. So one thing I’ve learned through investing is that there are so many opportunities, that the idea that you need to sacrifice two of the three and just bet on the one is a false choice.
I think there are a lot of opportunities that have two of the three and some have three of the three. So, the goal is actually to check as many of those boxes and get to a level of comfort where you know you have a winner.
-Mark Peter Davis, Managing Partner at Interplay Ventures
Mark Peter Davis is a venture capitalist and an incubator. He’s currently a managing partner at Interplay Ventures and a Co-Founder of Kohort, DevSpark, Founder Shield, Nomad Financial, TwentyPine and Venwise. Prior, Mark was a VC at High Peaks Venture Partners and DFJ Gotham Ventures, where he invested in information companies. Mark is also an Adjunct Professor of Entrepreneurship at Singularity University and the author of The Fundraising Rules. To follow his blog, click here.
This post was written by James Han on October 2, 2014
Tips from 3 Professional Investors