Optimal Portfolio Sizing and Risk Weighting for Healthcare Angel Investors
Disclaimer: The views and opinions expressed in this essay are solely my own and do not reflect the positions, strategies, or opinions of my employer or any affiliated organizations.
ABSTRACT
This essay examines the mathematical and strategic principles underlying optimal portfolio construction for angel investors operating in healthcare technology. Drawing on empirical data from healthcare venture outcomes, actuarial risk modeling, and portfolio theory, the analysis argues that healthcare angel investing requires distinct approaches compared to traditional technology investing due to unique regulatory timelines, capital intensity patterns, and binary outcome profiles. The synthesis includes data from over two thousand healthcare venture outcomes between 2010 and 2024, exploring how power law distributions manifest differently in healthcare compared to other sectors, and proposes specific portfolio sizing recommendations based on capital availability, risk tolerance, and outcome variance. Key findings suggest that healthcare angels should target portfolios of fifteen to thirty companies depending on check size strategy, with risk-weighting approaches that account for regulatory stage, reimbursement pathway clarity, and capital efficiency metrics rather than traditional venture signals alone.
TABLE OF CONTENTS
Introduction and The Healthcare Angel Paradox
Empirical Data on Healthcare Venture Outcomes
The Mathematics of Portfolio Survival
Healthcare-Specific Risk Factors and Their Quantification
Optimal Portfolio Size Calculations
Risk-Weighting Frameworks Beyond Stage and Sector
Practical Implementation Strategies
Capital Deployment Timing and Reserve Allocation
Conclusion and Actionable Recommendations
INTRODUCTION AND THE HEALTHCARE ANGEL PARADOX
