The big idea: Angel investing follows a Power Law. One company can drive most of your returns.

Why it matters: If you build your portfolio assuming every investment matters equally, it’s one of the fastest ways to misjudge a portfolio.

Many new angels expect their returns to come from an even spread of companies, a few wins, a few losses, and the rest somewhere in the middle. That belief lasts until they see their first real portfolio distribution. Early-stage investing isn’t symmetrical. It is heavily skewed. A handful of companies create nearly all the value, while the majority return very little or nothing at all.

This is not a flaw in the system. It is the system. Which is why the Power Law exists: make ten to twenty early-stage investments over three to four years. Not because ten or twenty is a magical number, but because it is the minimum exposure you need for the Power Law to work for you rather than against you.

Early-stage outcomes do not form a tidy bell curve. They form a long tail. Most companies struggle. A few do fine. And one becomes so disproportionately successful that it can overshadow everything else you invested in.

Your job is not to guess which one it will be. Your job is to stay in the market long enough and diversify widely enough for that company to exist within your portfolio.

When you accept that investing is asymmetric, your behaviour changes. You stop obsessing over micro-signals. You stop trying to optimise for perfection. You start focusing on exposure, patience and consistency.

The Rule of Ten (or Twenty) is not a slogan. It’s a practical guardrail.

It forces calm discipline and gives structure to a world full of noise. Ten to twenty investments across three to four years ensures you don’t cluster risk or rely too heavily on instinct before you’ve built any real judgement. It also helps you avoid the classic new-angel behaviour: falling in love with an early deal and overweighting it without the experience to justify the conviction.

Here is what the Rule of Ten (or Twenty) achieves in practice:

Conviction comes from volume. Accuracy does not.

The earlier the stage, the less precision you can realistically have. The data is incomplete. The product is evolving. The founding team is still growing into the role. This is why experienced angels don’t waste energy pretending they can pick the winner upfront. They focus on seeing many companies and developing pattern recognition over time.

The more founders you meet, the more you learn to separate clarity from charisma, traction from noise, story from substance. You develop an instinct for non-negotiables. You sharpen the questions that matter.

Volume is not about spraying and praying.

Volume is structured exposure that makes you smarter.

The Rule of Ten (or Twenty) only works if the plan is simple enough to follow in reality, not just theory. That means choosing a consistent ticket size you can sustain across three to four years, picking sectors you genuinely care about, and setting a pace that matches your income, time and appetite.

Your plan is not a prediction mechanism. Its job is to keep you disciplined while everything around you, markets, founders, hype cycles, tries to pull you off course.

Startups are chaotic by nature.

Your structure is the counterweight.

Before we move forward, and as the year draws to a close, I invite you to pause for a moment and reflect on what 2025 has held. I’ve gathered a few highlights from Arāya’s year here, and I’d love to read what resonates from your own, in the comments.

Your first ten to twenty investments won’t define your returns; they will define your investor identity. They will teach you what a strong founding team looks like in practice rather than theory. They will expose your blind spots. They will reveal your natural biases. They will sharpen your judgement, build your confidence and shape your thesis.

And somewhere in that set of ten to twenty, the goal is that at least one company will behave differently. It will grow faster, execute cleaner, or capture customer love in a way the others don’t. It becomes the one that makes the entire strategy make sense.

That is the Power Law in action.

Angel investing is not about being right often. It is about being meaningfully right once or twice. The Rule of Ten (or Twenty) gives you enough diversification, patience and exposure for that “once” to happen. This is how intelligent capital behaves: start with structure, stay consistent, let the outliers reveal themselves.

As mentioned recently, I teach an in-person angel investing course, with a focused cohort in London each year. It is for readers who want to learn more about topics like this, disciplined frameworks and work through live case studies. You can click here to find out more.

Arāya Signal is where modern angels learn the frameworks that build long-term wealth.

If you found this useful, forward it to a friend who wants to become a more intelligent angel investor.

Warmly,

Rupa Popat

with Team Arāya