Once upon a time, there was a budding investor named Sarah. She was eager to dive into startup investments but was unsure about how many companies she should invest in to maximize her chances of success.

As she began her journey, Sarah sought advice from her old seasoned investor friend and did some research of her own. She soon discovered that there was a magic number when it came to investing in startups - and it was more than she initially thought.

"Think of it like planting a garden," explained Rajesh. "If you only plant one or two seeds, you're putting all your eggs in one basket. But if you plant a variety of seeds, you're more likely to have a successful harvest."

"Although the magic number is 50 companies if you want to maximize your outliers chances, practically you should aim to invest in at least 20 to 25 companies," advised Rajesh, her successful angel investor friend. "Investing in multiple startups helps spread your risk and increases your chances of backing an outlier. Outlier, in other words, means any company that gives you more than 10x returns. If you invest realistically in 20 companies, the chances of getting an outlier are just 60%. Similarly, if you invest in 50 companies with each getting 2% of the portfolio, then the probability of an outlier is 90% and it keeps on increasing.” Rajesh further cautioned “If you invest in lesser companies then the chances of gaining an outlier also decreases. For instance, if you have a portfolio of only 10 companies, then the chances of getting an outlier are just 40%.”

Sarah was amazed when she sat to invest. She had thought that investing in fifty companies would not be as difficult as Rajesh was making it seem. But as she learned more, she realized that startup investing was a numbers game.

Sarah started utilizing her weekends to conduct meetings with founders in order to better understand their business model, and their vision by listening to their pitches & how they see the respective industries growing, etc. When Sarah sat down to invest she realized that she could only select 5-6 high potential startups for investments instead of 10 per year.

Ultimately, she realized that instead of finding an investable company every month, it would be better to make an investment every 2 months. In other words, she planned to invest in 25 companies over 5 years. This way she planned to increase her chances of gaining an outlier.

Sarah understood by investing in multiple startups, she could diversify her portfolio and increase her chances of finding the next big success.

However, Sarah also knew that investing in startups wasn't just about the quantity of investments - it was also about the quality. She made sure to thoroughly research each startup before making an investment, looking at factors like the team, the market opportunity, the industry, and the company's traction.

Armed with this knowledge, Sarah set out to build her startup investment portfolio. She invested in a variety of companies across different industries, from healthcare to technology to consumer goods.

Years passed, and some of Sarah's investments thrived, while others faltered. However, because she had spread her investments across multiple startups, the successes far outweighed the failures. And in the end, Sarah's startup portfolio generated a healthy return on investment.

As Sarah reflected on her journey, she realized that there was indeed a magic number when it came to startup investments - and it was more than she had initially thought. By investing in at least 20 - 25 startups, Sarah had unlocked the key to success in the world of startup investing.

However, if you're thinking about dipping your toes into the world of startup investments, remember Sarah's story. Invest in multiple startups, do your research, consult your financial advisors, and diversify your portfolio. Who knows? You might just uncover the next big success story.