A simulation of angel investing, part 2
jmillerinc.com
jmillerinc.com
Taking this to heart might get dangerous. The benefit of going from 2 to 20 deals exists only if the quality of the extra deals remains high - but what are the chances of that happening?
An angel that's doing a few investments would be cherry picking from a moderately larger deal flow, and so each extra deal would almost certainly be a step down in quality.
I'd say that doing math like this is a bit of a leaky abstraction, and it could just as easily cloud judgement if not taken with a large grain of salt.
Well-known angels have more and better-quality dealflow than lesser-known angels. When a round is oversubscribed, it's the well-known angels who are in it. And you only get to be a well-known angel by doing deals. Therefore I would expect some net benefit from doing more deals - up to a point, anyway.
All of which would have far more effect on the bottom line than spreading risk - it's just that, unfortunately, there's no simple way to build a model of it!