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

Let's start with what everyone cares about: money.

Angels typically see 20-40% returns annually when things work out. VCs shoot for higher numbers, often 50%+ average annual returns before exit. Sounds like VCs win, right? Not so fast. VC investments come with massive volatility. We're talking standard deviations around 100% compared to about 10% for most S&P 500 stocks.

That volatility isn't accidental. It's structural.

VCs are playing a portfolio game where most investments fail completely, a few do okay, and one or two need to return 100x to make the entire fund work. Angels can be profitable with more modest outcomes. A 5x return on an angel investment is a win. For a VC, that same 5x might not even move the needle on fund performance.

The Money Question Changes Everything

The difference comes down to whose money you're investing. Angels invest their own capital. VCs invest money raised from limited partners, pension funds, endowments, high net worth individuals. Those LPs have expectations. They want specific returns within specific timeframes. VCs have a fiduciary duty to chase those returns.

Angels answer to no one. If you want to invest in your friend's coffee shop because you believe in them, you can. If you want to support a mission-driven company that might only return 2x, that's your call. VCs don't have that luxury.

When Eric Bahn from Hustle Fund angel invests outside the fund, he asks a simple question with his wife: will this company lose our money? If they think they can get any multiple on the investment, that's worth exploring. A 3x return wouldn't be bad at all. But when he's investing Hustle Fund's capital, the mental math shifts entirely. VCs can't just be investing without knowing what that investment will buy them.

The typical VC expects you to grow into a company that can exit for 100x their initial investment. If a fund invests at a $1M valuation, they're hoping you exit or IPO at $100M. Angels don't have that burden. If they love you and your idea, they can invest even if they think they'll only get a 2x or 3x return.

Due Diligence Looks Completely Different

When you're investing your own money as an angel, you can move fast. One meeting, gut check, write the check. Some angels do extensive diligence, but many rely on their assessment of the founder and the opportunity without months of analysis.

VCs can't operate that way. They're spending other people's money, which means they need to justify every decision to their LPs. Expect deep dives into your business model, financials, market size, competitive landscape, team background, and unit economics. VC diligence can take weeks or months.

The depth of diligence also means VCs are less likely to take truly early bets. They want data. They want proof points. Angels can bet on potential before the data exists.

What You Actually Get Beyond Capital

Angels often bring operating experience. Many are successful entrepreneurs or executives who've built companies themselves. They can offer tactical advice on hiring, product development, or navigating specific challenges. Some angels are incredibly hands-on. Others write the check and disappear.

The variability is part of the angel game. You're dealing with individuals, each with their own style, availability, and expertise.

VCs bring institutional resources. Portfolio support teams, recruiting help, PR connections, introductions to potential customers or partners. The best VCs open doors that would otherwise stay closed. They can also bring follow-on capital in later rounds, which matters when you need to raise a Series A or B.

But VCs also bring opinions. They have a seat at the table, often literally on your board. They'll push for faster growth, bigger markets, or strategic pivots. Sometimes that pressure is valuable. Sometimes it's destructive.

Investment Amounts Tell the Real Story

Angels typically write checks between $1,000 and $25,000. Some go higher, but most stick to smaller amounts. If you're raising $1M, you'll need to close a lot of individual angel deals to hit your target.

VCs write checks in the hundreds of thousands to millions. A single VC can anchor or close your entire round. That concentration of capital gives VCs leverage. They often get board seats, voting rights, and significant influence over company direction.

The check size also determines when each investor type shows up. Angels typically invest in pre-seed and seed stages when companies are still figuring out product-market fit. The risk is highest here, but so is the potential upside if you pick right. VCs usually wait until there's more traction, revenue, user growth, some signal that the company might actually work.

Portfolio Construction Changes Everything

You need to invest in enough companies to diversify. 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. Don't try to pick a company. Select a portfolio.

Your winners need to make enough money to cover all your losses plus make more money. As an angel, you don't need to go for the biggest outcomes ever, but you need a similar mindset. 2x wins aren't good enough. Most of your investments will return zero. Some will continue to do well but never have liquidity. Others will have liquidity, but you're at the bottom of the preference stack and later stage investors will leave you with nothing.

Which Path Makes Sense for You

If you're trying to decide between angel investing and pursuing a VC career, ask yourself what you actually want to do every day.

Angel investing is part-time for most people. You have a day job, you make investments on the side, you help founders when you can. It's a way to participate in startups without making it your full-time focus.

VC is a full-time job. You're sourcing deals, sitting in partner meetings, managing portfolio companies, raising funds, reporting to LPs. It's also extremely competitive to break into. There are far more people who want to be VCs than there are VC jobs.

If you're trying to decide between raising angel capital or VC capital for your startup, the answer depends on your business model and growth trajectory. Any business expecting to exit and provide meaningful returns should consider raising from angels, even if you also plan to raise from VCs later. Angels are more accessible, move faster, and can help build momentum.

But if you're building something that needs millions to scale, deep tech, hardware, life sciences, you probably need VC backing. Angels can't write the checks you'll need.

The Hybrid Approach Actually Works

Start with angels to get initial traction and validation. Use that momentum to attract VCs for larger rounds. The angels who believed in you early become advocates when you're pitching VCs later.

As an investor, you can participate in both. Write angel checks in companies you're excited about. If you're building a track record to eventually raise a fund, your angel investments become your portfolio. Elizabeth Yin invested as an angel before co-founding Hustle Fund. Those early investments taught her what to look for and built relationships that carried forward.

The path you choose matters less than understanding what you're actually choosing. Too many people stumble into angel investing or VC without understanding the mechanics, expectations, or realities of either. Figure out what game you're playing, then play it well.

If you're serious about learning to invest in startups alongside experienced VCs, Angel Squad gives you direct access to deal flow and education from Hustle Fund's team. You'll see hundreds of deals, learn evaluation frameworks, and build the track record you need whether you're angel investing or breaking into VC professionally.