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

Most angel investing guides tell you what to do. This guide tells you what not to do, because avoiding mistakes matters more than making perfect decisions.

These seven mistakes cost beginners thousands of dollars and years of time. Each is completely preventable if you understand the pattern before falling into it yourself.

Mistake #1: Concentrating Capital Too Early

What It Looks Like: You invest $5,000-10,000 in one or two companies instead of $1,000 each in 10+ companies. You find a company you're really excited about and decide this is the one that will succeed. You put substantial capital into this concentrated bet because your conviction is high.

Why Beginners Do This: You think you can pick winners better than you actually can. You mistake strong conviction for predictive signal. You see opportunity that seems obvious and convince yourself this is different from companies that fail. The excitement of finding "the one" overrides portfolio construction discipline.

The Real Cost: When your concentrated bets fail (which is likely since 60-70% of all investments fail), you've lost substantial capital with no diversification to offset it. If you invested $10,000 in two companies and both fail, you lost $10,000 total. If you invested $1,000 in ten companies and seven fail, you lost $7,000 but three survivors might compensate.

As Elizabeth Yin, co-founder and GP of Hustle Fund, explains: "Don't try to pick a company. Select a portfolio. One of the biggest mistakes new investors make is thinking they can really pick well and putting a big chunk of cash on one company." Your conviction is not reliable signal, it's emotional noise that often misleads you.

How to Avoid: Commit to $1,000 maximum per investment for your first 15-20 investments. No exceptions, even when you find company you're extremely excited about. Trust the portfolio approach over your conviction. The math works through volume of bets, not accuracy of individual picks.

Mistake #2: Investing in Friends' Companies

What It Looks Like: Your friend or colleague is starting a company. They ask if you want to invest. You have reservations about the opportunity but feel social pressure to support them. You invest $1,000-5,000 despite your concerns because you don't want to seem unsupportive or damage the relationship.

Why Beginners Do This: Social obligation overrides investment judgment. You can't separate friendship from financial decision-making. You convince yourself the opportunity is better than it is because you like the founder personally. You fear that passing on investment will hurt friendship.

The Real Cost: These investments fail at even higher rates than normal because you're deliberately ignoring red flags for social reasons. When company struggles or fails, the friendship often suffers too. You've lost money and potentially damaged relationship you were trying to preserve. The conversation becomes awkward every time the failing company comes up.

How to Avoid: Keep friendship and investing completely separate. Be supportive to friends without investing capital. Offer to provide introductions, advice, or other help that doesn't involve money. Explain that you don't mix personal relationships with investment decisions, good friends will understand and respect this boundary.

Communities like Angel Squad provide curated deal flow from Hustle Fund's pipeline of 1,000+ monthly applications, so you never feel obligated to invest in friends' companies just to participate in angel investing.

Mistake #3: Going Solo Without Experience

What It Looks Like: You decide to angel invest independently without joining any communities or groups. You'll source your own deal flow, make your own decisions, and handle everything yourself. This seems like it saves membership fees and gives you complete independence.

Why Beginners Do This: You overestimate how easy deal sourcing will be. You underestimate value of structured education and peer community. You want independence and control. You think you can figure everything out yourself through reading and trial-and-error.

The Real Cost: You spend 2-3 years trying to build what communities provide immediately: consistent deal flow, evaluation frameworks, and peer support. Most solo beginners make 3-5 investments over three years then quit because maintaining momentum is too difficult. You waste years of time and make expensive mistakes that structured learning would prevent.

The opportunity cost is massive. The time you spend trying to source deals, figure out terms, and learn through trial-and-error could have been spent building proper portfolio through community infrastructure.

How to Avoid: Join established community for your first 2-3 years and 15-20 investments. Learn the fundamentals within supportive structure. Build track record and develop independent deal flow organically. Consider solo investing only after you've demonstrated ability to build portfolio successfully through community.

Mistake #4: Moving Too Fast

What It Looks Like: You join community and immediately invest in everything that looks interesting. You make 8-10 investments in first two months before developing any evaluation frameworks or pattern recognition. You're so excited about angel investing that you rush to deploy capital quickly.

Why Beginners Do This: Fear of missing opportunities. Excitement about being angel investor. Impatience with learning process. Not understanding that your early decisions before pattern recognition develops will be your worst decisions.

The Real Cost: Your first 5-10 investments made before you developed judgment tend to be worst performers in portfolio. By deploying capital too quickly, you've locked up significant money in your weakest decisions. You have less capital available for later investments when your judgment has improved.

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 requires time between investments to reflect and learn, rushing eliminates this crucial feedback loop.

How to Avoid: Spend first 6-8 weeks observing without investing. Make 1-2 investments per quarter, not per week. Give yourself time to learn between decisions. The opportunities will keep coming, you don't need to invest in everything immediately. Patient deployment builds better portfolio than rushed decision-making.

Mistake #5: Overconfidence in Your Judgment

What It Looks Like: After making 3-5 investments, you start believing you can identify winners. You increase check sizes based on conviction level. You concentrate capital in opportunities you're most excited about. You trust your gut over frameworks or data.

Why Beginners Do This: Early successes create illusion of skill when outcomes are mostly luck. You confuse confidence with competence. You see patterns that may not exist. You overweight your recent experience and underweight base rates about how difficult prediction is at early stages.

The Real Cost: Your "obvious winners" fail at same rate as other investments, but now you've concentrated capital in them. The companies you were lukewarm on outperform ones you loved, but you put minimal money into them. Your portfolio returns suffer because your conviction was inversely correlated with actual outcomes.

How to Avoid: Maintain extreme epistemic humility. Assume you can't predict outcomes. Keep check sizes consistent regardless of conviction level. When you find yourself thinking "this one is different," recognize that as warning sign, not valid signal. Trust the portfolio approach over your judgment, especially in first 20 investments.

Mistake #6: Inadequate Due Diligence

What It Looks Like: You invest based purely on pitch deck without any verification or deeper evaluation. You don't Google founders, check LinkedIn backgrounds, research market, or talk to company. You treat evaluation as binary (sounds good = invest) rather than process requiring some basic verification.

Why Beginners Do This: Laziness or not knowing what due diligence entails. Assuming pitch materials are accurate without verification. Being caught up in excitement of opportunity and not wanting to slow down. Not understanding that even lightweight diligence catches obvious problems.

The Real Cost: You invest in companies with easily discoverable red flags. Maybe founders have poor reputations you could have found with 10 minutes of Googling. Maybe their traction claims are inflated. Maybe there are team conflicts visible on social media. You lose money that basic diligence would have saved.

How to Avoid: Spend 1-2 hours on basic due diligence for every $1,000 investment. Google founders thoroughly. Verify LinkedIn backgrounds match claims. Research market briefly. Talk to company if possible. You're not conducting institutional-grade analysis, but you should catch obvious problems before investing.

Mistake #7: Unrealistic Expectations

What It Looks Like: You expect to see returns in 2-3 years. You calculate potential portfolio returns assuming 30-40% of investments succeed significantly. You think about angel investing as wealth-building strategy that will provide meaningful income. You get discouraged when first 5-10 investments all struggle.

Why Beginners Do This: Misunderstanding the actual math of early-stage investing. Optimism bias about your outcomes versus base rates. Not internalizing that 60-70% failure rate applies to your portfolio specifically, not just startups generally. Expecting your judgment to produce better results than statistical averages.

The Real Cost: You quit angel investing after 2-3 years when you haven't seen returns yet, missing the 7-10 year window when exits actually happen. You get discouraged by inevitable failures and stop building proper portfolio. You make poor decisions because you're desperate for wins rather than accepting base rates. You damage your finances by treating angel investing as wealth-building when it's really expensive learning with potential for modest returns.

How to Avoid: Internalize upfront that 60-70% of investments will return zero, meaningful exits take 7-10 years, and realistic portfolio returns are 1-2x over decade for most angels. View angel investing as educational experience that might produce decent financial returns, not as wealth-building strategy. Only invest capital you genuinely won't need for 10+ years.

As Shiyan Koh, co-founder and GP of Hustle Fund, notes: "Great founders can look like anyone and come from anywhere." Learning to recognize them takes years of practice and many investments, not quick success from first few bets.

The Compounding Cost of Multiple Mistakes

Individual mistakes are expensive. But beginners often make several simultaneously, and the costs compound. Someone who concentrates capital, moves too fast, invests in friends, skips due diligence, and has unrealistic expectations might lose $15,000-25,000 and years of time before recognizing the pattern.

The worst part: these mistakes destroy your chance to build proper portfolio. You've deployed capital poorly, gotten discouraged by inevitable failures, and quit before reaching the 15-20 investment minimum where portfolio math starts working in your favor.

The Prevention Framework

Before each investment, ask yourself: Am I maintaining consistent $1,000 check size? Is this a friend's company I'm investing in for social reasons? Did I do basic due diligence? Am I moving at sustainable quarterly pace? Is my conviction making me concentrate capital? Do I have realistic expectations about outcomes and timeline? Am I learning from community rather than trying to figure everything out alone?

If answer to any of these questions reveals mistake pattern, pause and correct course before investing.

Why Communities Prevent Mistakes

Quality angel investing communities like Angel Squad prevent many of these mistakes through structure. Consistent deal flow removes pressure to invest in friends' companies or rush into weak opportunities. Educational programming teaches frameworks that prevent overconfidence and inadequate diligence. Community norms around $1,000 investments and portfolio construction prevent concentration. Peer support maintains realistic expectations and sustains engagement through inevitable failures.

The 2,000+ member community demonstrates what sustainable angel investing practice looks like. Members build proper portfolios through Hustle Fund's curated pipeline, maintain disciplined approaches through peer accountability, and develop realistic expectations through shared experiences. The infrastructure prevents common beginner mistakes that cause most angels to quit before building meaningful portfolios.

The Long-Term Perspective

Angel investors who avoid these seven mistakes don't necessarily pick better companies, they just build better portfolios through disciplined processes. They diversify properly, maintain consistent check sizes, stay engaged through failures, and reach the 15-20 investment threshold where portfolio mathematics work in their favor.

Avoiding mistakes matters more than making brilliant decisions. Perfect execution of basic portfolio construction beats clever concentrated bets. Discipline trumps conviction. Structure prevents emotionally driven errors.

The question isn't whether you're smart enough or well-connected enough for angel investing. It's whether you'll follow proven frameworks and avoid predictable mistakes that cost thousands.