This is a guest post from business angel Nicolaj Højer Nielsen, one of the most active business angels from this region.
Most angels show you their winners. Here is what happened to every euro I have invested in startups. The chart below covers the 55 startups I backed before I moved to Andorra in 2024. It is only my own money, and the shares I still own are marked conservatively.
Yes, I know “conservative” is also the word founders put in their decks, right above the hockey stick. The difference is that my method is printed in Appendix B in my upcoming book.
So far, every €1 I invested has become €4.18. €2.95 of that is cash in the bank. The rest is still on paper. But only 17 cents of every euro went into the five companies that ended up carrying everything, and those 17 cents became €3.03. 74 cents went into companies that are still running, and so far they have turned it into €1.14, mostly on paper. The last 9 cents went into companies that died and returned almost nothing.
This is the power law. The best single investment in a portfolio often returns more than all the others combined.
It is also why you need a much larger portfolio than you think. If your portfolio follows the same shape as mine, roughly one in ten of your investments will become a carrier, the kind of exit that pays for everything else. In that simple model, five investments give you a 59 percent risk of catching zero carriers. Even with ten investments, the risk is still 35 percent. Invest in fifty, and it drops to half a percent.
Most new angels do the opposite. They find a founder they love and put most of their money into one or a few startups. That is financial suicide. So my advice is boring: build a big portfolio, slowly. You cannot know in advance which five will turn out to be the carriers. The only decision you control is to own enough different tickets, before any of them becomes obvious.
The usual counterargument is conviction: real investors only back the few companies they truly believe in. I disagree. Every company I have ever backed was going to be the next big thing, at least on the day I invested. In reality, that rarely happens.
Conviction is why you write the check. It is not a reason to write fewer of them.
Editors note: Nicolaj is about to release his book, “The Burden of Being Right“, which builds on his lessons from being an European business angel. We highlight insights from it here, and advise anyone who invests in startups or thinks about investing to buy it. Because it is really filled with insights. And an almost unbearable amount of hubris, based on facts.
