Favcy 1stCheque on Why Diversification Wins in 2025: Many Eggs, Many Baskets

We’ve all had that moment. Reading the latest valuation of Zepto, seeing Mensa Brands scale across continents, or watching AI-first startups blitz through industries — and thinking, “If only I’d gotten in early.”

While timing and bold bets are part of the equation, seasoned investors know that breakout wins often come down to a much more grounded strategy: diversification.

In 2025, with funding cycles fluctuating and macroeconomic volatility still a reality, portfolio diversification has emerged as the most powerful tool in an early-stage investor’s arsenal.

As Favcy Venture Builders continues to nurture India's next wave of startups, we’ve seen firsthand how investors who spread their bets across sectors, founders, and timelines outperform those who go all in on “the next big thing.”

What Does Diversification Really Mean?

In simple terms, diversification is risk management.

In startup investing, it means spreading your capital across multiple companies that differ in:

• Industry verticals (fintech, healthtech, AI, sustainability, D2C)

• Geographies (urban vs rural, Indian vs global markets)

• Stages (pre-seed, seed, bridge)

• Founder backgrounds (first-time founders, serial entrepreneurs, women-led ventures)

• Timeframes (staggered across economic cycles)

This way, if one startup underperforms—or even shuts down—the rest of the portfolio can still deliver a positive return.

Why It Matters Now: The 2025 Reality Check

As per a June 2025 Indian Angel Network report, over 78% of first-time angel investors in the past two years saw a negative IRR due to concentrated portfolios of fewer than 5 startups. Conversely, investors with 10+ diversified bets showed a 2.3x higher chance of hitting a breakout.

Yamika Mehra, Partner at Favcy Venture Builders and investor in 50+ startuos - summed it up aptly:

"Diversification isn’t just a strategy—it's a survival mechanism in today’s startup investing environment."

The startup landscape is exciting, yes. But it’s also uncertain. Economic cycles, shifting customer behaviour, new tech, and geopolitical influences all create volatility. A diversified portfolio acts as a buffer—and often, a multiplier.

What Kind of Risks Are We Mitigating?

Early-stage startups carry what’s known as unsystematic risk—company-specific challenges that can’t be hedged by market patterns alone.

Some of the big ones:

• Execution Risk – Can the team actually build and scale?

• Market Timing Risk – Is the product early, late, or perfectly timed?

• Business Model Risk – Does the revenue strategy really work at scale?

• Technology Risk – Is the tech robust, future-ready, or just experimental?

  
  

While you can never eliminate these risks completely, diversification reduces your exposure to any one type of failure.

What Makes a Portfolio Truly Diversified?

Here’s the nuance most new investors miss:

Diversification isn’t about quantity. Ten B2B SaaS startups solving the same problem in the same city? That’s not diversification.

A well-structured portfolio in 2025 should look like this:

• Sector Mix: Healthtech + Fintech + D2C + Sustainability + AI/ML

• Time Spread: Some bets made pre-2024, some in current pipeline

• Geo Spread: Urban + Tier-2/3 markets + cross-border exposure

• Founder Variety: Different leadership styles, demographics, and networks

• Risk Profile Spread: Mix of high-risk moonshots and stable, revenue-focused businesses

How Much of Your Wealth Should Be in Startups?

While it depends on your personal risk appetite, the generally accepted range is 5–20% of your total investable corpus.

But the golden rule is:

• Pre-define your budget

• Invest in 10–15 startups over 1–2 years

• Stick to the plan. Avoid going heavy on one hot pitch or shiny new space.

Favcy’s Lens: Portfolio Thinking Built In

At Favcy Venture Builders, we’ve embedded the diversification philosophy into the way startups are built and how investors access them.

• Every startup is vetted for market-readiness before it hits the investment table.

• Investors through 1stCheque by Favcy can back deals with low ticket sizes, making it easier to build broad portfolios.

• Cross-sector opportunities across B2B SaaS, D2C, HealthTech, and more are available every month.

• We consciously scout for non-metro founders, increasing exposure to untapped markets.

As of July 2025, over 70% of active 1stCheque investors have backed more than five startups — and those with diversified portfolios have started seeing real traction and follow-on rounds in their winners.

Final Word: Don’t Wait for the Unicorn

The truth is, most unicorns are clear in hindsight. Not at seed stage.

Diversification lets you place multiple smart bets, learn along the way, and let time, thesis, and traction work in your favor.

Because in startup investing — the winners will come. Your job is to be invested when they do.