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

1. Introduction and The Healthcare Angel Paradox

2. Empirical Data on Healthcare Venture Outcomes

3. The Mathematics of Portfolio Survival

4. Healthcare-Specific Risk Factors and Their Quantification

5. Optimal Portfolio Size Calculations

6. Risk-Weighting Frameworks Beyond Stage and Sector

7. Practical Implementation Strategies

8. Capital Deployment Timing and Reserve Allocation

9. Conclusion and Actionable Recommendations

INTRODUCTION AND THE HEALTHCARE ANGEL PARADOX