Brian Nichols is the co-founder of Angel Squad, a community where you’ll learn how to angel invest and get a chance to invest as little as $1k into Hustle Fund's top performing early-stage startups

Angel investing content focuses on exciting parts: finding the next unicorn, meeting innovative founders, being part of startup ecosystem. These topics generate clicks and enthusiasm.

But experienced angels know five uncomfortable truths that fundamentally shape the experience. These realities aren't secret, they're just rarely emphasized to beginners because they're not exciting.

What you'll wish someone told you before you started.

Thing #1: You Will Watch Most of Your Investments Die Slowly

The Sanitized Version

Introductory content mentions that "most startups fail" and "60-70% of investments return zero." This is factually accurate but emotionally sanitized. The reality is significantly harder.

What Actually Happens

You don't just invest in company and then later learn it failed. You watch it die slowly over 18-36 months. The initial optimism erodes. Updates become less frequent. Founders start sounding uncertain. Runway shrinks. Customer traction stalls. The team begins fragmenting. Finally, the company shuts down or becomes zombie (technically alive but never going anywhere).

This happens to most of your investments. Not as abstract statistic, but as real companies with founders you've met and believed in. You'll see their stress in emails. You'll feel guilty that you can't help more. You'll wonder if you should have noticed red flags earlier.

As Elizabeth Yin, co-founder and GP of Hustle Fund, explains: "Most of your investments will return $0. You will lose money. So it's important to have great portfolio construction." The portfolio approach protects you financially but doesn't eliminate emotional toll of watching most companies struggle.

Why This Matters

Many beginners make 2-3 investments, watch them all struggle, and quit angel investing entirely. They expected some failures but not the grinding, visible process of companies slowly running out of options. If you understand this upfront, you prepare mentally and don't let early failures discourage you from building proper portfolio.

The psychological preparation matters as much as financial preparation. You need emotional resilience to stay engaged through inevitable failures.

Thing #2: Seven Years Feels Much Longer Than You Think

The Sanitized Version

Everyone mentions angel investments take 7-10 years to mature. This timeline is stated matter-of-factly, as if it's just technical detail to acknowledge.

What Actually Happens

Seven years is enormous portion of your life. Circumstances change dramatically in seven years: careers shift, family situations evolve, financial needs transform, and priorities reorder. Capital you invested when you were 35 and single might be desperately needed when you're 42 with two kids and mortgage.

You'll forget why you invested in some companies. You'll lose track of what excited you initially. Some investments will feel like ancient history you barely remember. This isn't theoretical distant future, it's third of your adult working life.

The first 3-4 years are particularly difficult because nothing happens. Companies are still early. No exits materialize. You're just watching capital sit illiquidity while question marks accumulate. Many investors get frustrated and lose interest during this valley.

Why This Matters

Only invest capital you genuinely won't need for a decade. Not "probably won't need" but "absolutely certain won't need." The opportunity cost of illiquid capital is real. Money locked in startups can't go toward down payments, emergencies, or other investments that might be more pressing.

As Eric Bahn, co-founder and GP of Hustle Fund, emphasizes: "For beginners, a bigger startup portfolio is better. It helps with diversification and helps you learn and get reps in. Investing requires practice like everything else." That practice happens over many years, not months. You must commit to the timeline emotionally, not just intellectually acknowledge it.

Thing #3: Your Best Investment Won't Be the One You Expected

The Sanitized Version

Portfolio construction matters because you can't predict winners. This principle is taught early and often.

What Actually Happens

The company you were most excited about, the one where you did extensive diligence, where everything looked perfect, where you felt certain it would succeed, will probably disappoint you. Meanwhile, the company you invested in almost as afterthought, where you had reservations, where the pitch wasn't impressive, might become your best outcome.

This pattern repeats so consistently it's almost law. Your conviction is inversely correlated with actual outcomes. The investments you make quickly often outperform ones you agonize over.

This is psychologically disorienting. You'll question your judgment constantly. You'll wonder why you can't tell which companies will succeed if you're seeing same information professional investors see.

Why This Matters

Stop trying to pick winners. Seriously. Not as platitude but as actual strategy. Make diversified portfolio of reasonable companies rather than concentrated bets on "obvious" winners. Your conviction is not predictive signal, it's emotional noise that often misleads you.

This realization is liberating once you accept it. You stop agonizing over whether specific investment is "good enough." You focus on building diversified portfolio of decent opportunities rather than seeking perfect investments.

Thing #4: Your $1,000 Check Buys Zero Influence

The Sanitized Version

Angel investors provide value beyond capital through introductions, advice, and support.

What Actually Happens

With $1,000-2,000 check, you're not influential investor. Founders are polite but don't seek your advice on major decisions. They don't call you when facing critical challenges. Your introductions are appreciated if relevant but you're not central to company's success.

This is perfectly reasonable. Founders are busy. They prioritize investors who wrote $25,000-100,000 checks or who have unique expertise/networks. Your small check doesn't justify significant founder time.

You'll watch from sidelines as companies make strategic decisions you disagree with. You'll see mistakes you could help prevent if anyone asked. But they won't ask because you're not significant enough stakeholder for your opinion to matter.

Why This Matters

Don't invest expecting influence or insider access. You're making portfolio bets, not becoming part of companies' inner circles. This is fine—you're optimizing for financial returns across portfolio, not ego gratification from individual involvement.

The value-add you can provide is limited: occasional relevant introduction, answering specific questions when asked, and being responsive voice of support. This is helpful at margins but doesn't make you integral to company.

Lower your expectations about involvement. Focus on building portfolio rather than deep engagement with each company. This adjustment prevents frustration when you realize how peripheral you are.

As Shiyan Koh, co-founder and GP of Hustle Fund, notes: "Great founders can look like anyone and come from anywhere." Your role is recognizing and supporting great founders financially, not directing them operationally.

Thing #5: The Opportunity Cost is Larger Than You Calculate

The Sanitized Version

Angel investing returns are uncertain and take time to materialize.

What Actually Happens

The real cost isn't just capital invested, it's what you could have done with that capital and time over 7-10 years. $20,000 invested in angel portfolio versus S&P 500 index could mean $50,000-80,000 difference in outcomes over decade (index grows steadily while angel portfolio sits illiquid with uncertain ultimate returns).

The time cost compounds too. The 3-5 hours weekly you spend on angel investing for 3-4 years is 500-1,000 hours total. That's time you could have spent building business, advancing career, or learning skills with more certain payoff.

Most angel investors would have been better off financially putting money in index funds and time into career advancement. The returns from angel investing rarely compensate for opportunity cost unless you're exceptional (top 10% of angel investors).

The Uncomfortable Math

If you invest $20,000 over 2-3 years and most investments fail, you might get back $25,000-40,000 in 7-10 years if you're reasonably successful (1.5-2x return). That same $20,000 in S&P 500 at 10% annual return becomes $38,000-52,000 over 7-10 years.

You're taking dramatically more risk for potentially worse returns. The hope is that 1-2 exceptional outcomes push your portfolio to 3-5x return, but this is unlikely for most angel investors.

Why People Do It Anyway

Angel investing provides value beyond financial returns: you learn how startups work, you build network with founders and other investors, you participate in innovation ecosystem, and you enjoy the process. These non-financial benefits can justify opportunity cost even if returns are mediocre.

But enter with clear eyes. You're probably not doing this as optimal wealth-building strategy. You're doing it as expensive hobby with learning value and potential for decent returns if you're skilled and lucky.

Thing #6 (Bonus): The Community Matters More Than You Think

The Sanitized Version

Angel investing communities provide deal flow and education.

What Actually Happens

The community becomes your primary source of sustained engagement. When investments are struggling (most of time), when you're waiting years for exits, when you're questioning why you're doing this, the community keeps you engaged.

Other investors become friends who understand the experience. The weekly educational sessions maintain learning even when your portfolio isn't exciting. The shared experiences of failure and occasional success create bonds you don't expect.

Without community, most individual angels quit after 2-3 years. The isolation of solo investing combined with slow feedback loops and high failure rates is demotivating. Communities provide structure and peer support that sustains long-term practice.

Why This Matters

Choose your community carefully. You'll be part of it for years. The relationships you build matter more than you initially realize. The quality of community determines whether you sustain angel investing practice long enough to see results.

Angel Squad demonstrates community importance: 2,000+ members across 40+ countries maintain engagement over years through shared learning from Hustle Fund's professional investors, peer support during inevitable failures, and celebration of occasional successes. The community infrastructure keeps members active through long valleys between outcomes.

Accepting These Truths

These five realities (plus bonus sixth) aren't reasons to avoid angel investing. They're reasons to approach it with appropriate expectations. If you understand upfront that most investments fail slowly, timelines are longer than you imagine, your conviction isn't predictive, your influence is minimal, and opportunity cost is real—you won't be surprised or discouraged by these realities.

You'll build properly diversified portfolio because you know you can't pick winners. You'll commit only capital you won't need for decade because you understand timeline. You'll focus on financial outcomes rather than influence because you accept your peripheral role. You'll evaluate opportunity cost honestly and choose angel investing for right reasons.

The investors who succeed long-term are those who accept these uncomfortable truths early and structure their approach accordingly. The investors who fail are often those expecting different experience than reality delivers.

Angel investing is worthwhile despite (and sometimes because of) these difficult realities. But you should know what you're getting into before you start.