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 beginners rush to write first check without adequate preparation. They're excited about angel investing and want to start immediately. This enthusiasm leads to mistakes that cost thousands and derail what could have been successful practice.

The work you do before your first investment determines your long-term trajectory more than the specific company you choose for that initial check.

What to accomplish before investing a dollar.

Week 1: Financial Reality Check

Verify Accredited Investor Status: Confirm you actually meet requirements: $200,000 annual income ($300,000 jointly) for past two years with expectation of same going forward, OR $1,000,000 net worth excluding primary residence. These are legal requirements, not suggestions.

Some people assume they're close enough or that requirements don't really matter. They do. Investing in private placements without accreditation creates legal exposure for both you and companies. Don't skip this verification step.

Calculate Risk Capital Available: Determine how much capital you can genuinely afford to lose completely. This requires honest assessment, not aspirational thinking. If losing this money would affect your lifestyle, delay major purchases, or create financial stress, it's too much.

Safe approach: allocate maximum 5-10% of liquid net worth to angel investing over 2-3 years. If you have $200,000 in savings and investments outside retirement accounts and primary residence, maybe $10,000-20,000 total for angel investing is appropriate maximum.

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." This requires having capital specifically allocated to high-risk investing where total loss is acceptable outcome.

Set Three-Year Budget: Map out deployment schedule. Year 1: $5,000-7,000 (5-7 investments at $1,000 each). Year 2: $6,000-8,000 (6-8 investments). Year 3: $7,000-10,000 (7-10 investments). Total: $18,000-25,000 across 18-25 investments over three years.

Commit to this budget formally. Write it down. Share with spouse or financial advisor. This commitment prevents emotional overinvestment when you get excited about specific opportunities later.

Week 2: Educational Foundation

Understand Portfolio Construction Theory: This is single most important concept to internalize before investing. You need 15-20+ investments minimum because you can't reliably predict winners at early stages. Power law returns mean few massive winners drive all portfolio returns while most investments fail.

Read specifically about venture capital math and power law distributions. Understand why professional VCs need 20-30 investments per fund despite decades of experience. Recognize that you need even more diversification because you have less pattern recognition.

Learn Angel Investing Terminology: Spend 3-5 hours learning the language: SAFEs versus convertible notes versus priced rounds, pre-money and post-money valuations, cap tables and dilution, pro-rata rights and follow-on investments, liquidation preferences and exit scenarios.

You don't need expertise, just basic literacy to follow conversations and understand deal terms without being lost by terminology.

Study Realistic Expectations: Read content from actual angel investors about realistic outcomes. Most investments fail (60-70%). Returns take 7-10 years. Average portfolio returns are 1-2x over decade for typical angels. Top quartile angels might achieve 3-5x.

These aren't exciting numbers, but they're realistic. Better to understand this upfront than be shocked later when early investments struggle.

Week 3: Community Research

Identify Candidate Communities: Research 5-7 angel investing communities worth evaluating. Look for high deal volume (100+ opportunities reviewed monthly), structured education (weekly programming from experienced investors), reasonable minimums ($1,000-2,000), transparent costs, and active member engagement.

Create comparison spreadsheet with key factors: deal volume, educational structure, investment minimums, membership costs, carry percentages, member demographics, and any other factors that matter to you.

Talk to Current Members: Request conversations with 2-3 current members from each top candidate community. Ask specific questions that reveal reality beyond marketing: How much time do you actually spend weekly? What's the quality of deal flow really like? Is educational programming genuinely helpful or generic? Would you recommend this community to others? What frustrations or downsides exist?

Current members provide unfiltered perspective. They'll tell you if deal volume is overstated, if education is superficial, or if hidden costs exist. This due diligence on communities is as important as due diligence on investments.

Evaluate Cost-Benefit: Calculate total cost over three years (membership fees plus carry on hypothetical successful investments) and compare to value provided (deal access, education, community). The best communities deliver far more value than they cost, but some expensive communities provide limited actual benefit.

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." Choose community that enables building that bigger portfolio efficiently.

Week 4: Systems Setup

Create Investment Tracking System: Set up detailed spreadsheet or use portfolio management software. Fields needed: company name, investment date, amount, terms (SAFE cap, discount, etc.), your thesis document, founder contact information, quarterly update space, and exit information when relevant.

This system serves multiple purposes: tax documentation, learning from outcomes over time, and portfolio management as it grows. Set it up before first investment so you build good habits immediately.

Schedule Recurring Calendar Time: Block 3-5 hours weekly in your calendar for angel investing activities: Tuesday evening for educational programming (60-90 minutes), Wednesday lunch for reviewing deal flow (30-45 minutes), Saturday morning for due diligence and decisions (60-90 minutes).

Make these recurring appointments non-negotiable. Without scheduled time, participation becomes sporadic and you don't build momentum needed for success. Treat angel investing with same seriousness as important professional commitments.

Set Up Document Storage: Create organized system for storing investment documents, pitch decks, due diligence notes, and company updates. Whether cloud-based folder structure or document management software, have system ready before documents start accumulating.

You'll need these documents for tax purposes, tracking company progress, and reviewing your historical decision-making. Setting up organization before you need it prevents scrambling later.

Week 5: Psychological Preparation

Accept the Failure Reality: Truly internalize that 60-70% of investments will return zero. Not as abstract statistic but as concrete reality that you'll experience. You'll watch most companies struggle over 18-36 months before shutting down. This is emotionally difficult but unavoidable.

Prepare mentally for watching investments fail. Remind yourself that portfolio approach protects you financially even though individual failures feel bad. Develop ability to separate emotional attachment from financial outcomes.

Understand Seven-to-Ten-Year Horizon: Seven years is enormous portion of your life. Circumstances will change dramatically. Capital you invest today will be illiquid through major life changes: career transitions, family situations, financial needs shifting. Only invest capital you genuinely won't need for decade, not capital you "probably won't need."

Commit emotionally to the timeline. Don't expect or need returns in years 1-5. Evaluate success by learning and portfolio construction, not financial outcomes that won't materialize for years.

Manage Expectations About Influence: With $1,000-2,000 checks, you're not influential investor. Founders will be polite but won't seek your advice on major decisions. Your introductions are appreciated if relevant, but you're not central to company success.

Accept this peripheral role upfront. You're making portfolio bets for financial returns, not becoming integral to companies' operations. Lower expectations about involvement prevents frustration later.

Week 6: Developing Initial Thesis

Identify Your Advantages: What do you actually know well from professional experience? What markets do you understand deeply? What business models make intuitive sense to you? What types of founding teams can you evaluate effectively?

Write down your initial investment thesis based on your actual strengths, not aspirational expertise. If you're engineer, maybe you focus on technical startups initially. If you're in healthcare, maybe health tech is natural starting point. If you worked in operations, maybe you emphasize operational excellence.

This thesis will evolve as you see more companies, but starting with some focus prevents completely random decision-making.

Understand Your Limitations: What don't you know? What markets are beyond your competence? What types of founders or business models confuse you? Being explicit about limitations is as important as understanding advantages.

You'll invest outside your core expertise sometimes (diversification requires it), but knowing when you're in unfamiliar territory helps you adjust confidence levels appropriately.

Week 7: Making the Decision

Final Commitment Check: Before joining community and starting to invest, verify one more time: Do you meet accredited investor requirements? Do you have $15,000-25,000 risk capital available over three years? Can you commit 3-5 hours weekly consistently? Have you internalized realistic expectations about failure rates and returns? Are you prepared emotionally for long timeline and inevitable losses?

If you answer "no" to any of these, address the gap before proceeding. Angel investing done without proper preparation leads to expensive mistakes and early abandonment.

Join Your Selected Community: Make the commitment. Join the community you've identified as best fit. Complete onboarding thoroughly. Introduce yourself to other members. Schedule your recurring calendar blocks. Set up your tracking systems.

You're now ready to start observing opportunities without pressure to invest immediately.

As Shiyan Koh, co-founder and GP of Hustle Fund, notes: "Great founders can look like anyone and come from anywhere." The preparation you've done positions you to recognize great founders when you see them rather than making rushed, poorly-considered decisions.

What Happens Next

Weeks 8-10: Observation Phase: Spend 2-3 weeks reviewing opportunities and attending programming without investing. You're building initial pattern recognition and evaluation frameworks without financial risk.

Weeks 11-12: First Investment: Make your first $1,000 investment in company where you understand market, believe in team, and think model makes sense. Document your thesis thoroughly before investing.

Ongoing: Continue making 1-2 investments per quarter over next 2-3 years to build proper portfolio. Maintain educational participation. Help portfolio companies occasionally. Track everything systematically.

The Seven-Week Investment

These seven weeks of preparation require 15-20 hours total commitment. That's meaningful time investment before investing any capital. But this preparation prevents mistakes that cost thousands of dollars and years of time.

The beginners who succeed long-term are those who prepare properly. The ones who fail typically skipped this foundation work and learned expensive lessons they could have avoided.

Angel Squad provides infrastructure that respects this preparation timeline: prospective members can research thoroughly before joining, educational programming begins immediately upon joining so first weeks are learning-focused, curated deal flow from Hustle Fund's professional pipeline provides quality opportunities when you're ready, and $1,000 minimums enable starting small after preparation is complete. The 2,000+ member community demonstrates what proper preparation enables, sustainable angel investing practice over years rather than quick enthusiasm that burns out.

The work you do before your first investment matters more than the investment itself. Prepare properly. Set yourself up for long-term success. Then start investing systematically based on solid foundation rather than rushing in unprepared.