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

Mistakes are inevitable when you start investing in startups. The goal isn't to avoid all mistakes but to avoid the expensive and demoralizing ones that derail your investing journey before it really begins.

This is the guide to recognizing and avoiding the mistakes that matter most.

Mistake 1: Building Too Small a Portfolio

What beginners do: Make 5-10 investments and consider portfolio complete. Concentrate capital in "highest conviction" opportunities rather than diversifying broadly.

Why it happens: Diversification feels like diluting your best ideas. Conviction-based investing is emotionally satisfying. The math of power law returns is counterintuitive.

The cost: With small portfolio, probability of missing outliers entirely is high. Even good judgment can't overcome bad portfolio math. Many small portfolios return zero despite containing decent companies.

How to avoid it: Commit to 20+ investments before starting. Maintain consistent check sizes regardless of conviction. Understand that portfolio math, not selection brilliance, drives outcomes.

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."

Small portfolios can't absorb the failures that portfolio construction expects.

Mistake 2: Varying Check Sizes Based on Conviction

What beginners do: Invest $5,000 in companies they love and $1,000 in companies they merely like. Let excitement determine allocation.

Why it happens: Higher conviction feels like it should equal higher investment. Holding back on exciting opportunities feels like missing out. Conviction feels predictive.

The cost: Conviction doesn't reliably predict outcomes. Your biggest check might go to your worst investment. Unexpected winners receive smallest allocation.

How to avoid it: Same check size for every investment. Period. No exceptions for excitement or confidence. Discipline beats conviction every time.

Mistake 3: Investing Through Personal Network Only

What beginners do: Invest exclusively in companies founded by friends, colleagues, or direct introductions. Rely on existing relationships for deal flow.

Why it happens: Trusted relationships feel safer. Network deals come easily. Building new deal sources requires effort.

The cost: Network quality varies wildly and often doesn't match your investment needs. Obligation investments in friends' companies rarely perform well. Limited deal volume prevents proper diversification.

How to avoid it: Join community providing institutional-quality deal flow. Angel Squad offers access to Hustle Fund's pipeline of 1,000+ monthly applications. Supplement network deals with curated community opportunities.

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."

Quality deal flow from community beats random network opportunities for building proper portfolio.

Mistake 4: Skipping Foundation Learning

What beginners do: Jump directly into investing without understanding portfolio construction, investment structures, or evaluation frameworks.

Why it happens: Eagerness to start. Learning feels like delay. Confidence in general business acumen.

The cost: Structural mistakes that basic education would prevent. Agreeing to bad terms without recognizing them. Building concentrated portfolio without understanding why diversification matters.

How to avoid it: Spend 4-6 weeks on foundation learning before first investment. Understand portfolio construction, SAFE mechanics, and basic evaluation before deploying capital.

Mistake 5: Over-Analyzing Individual Investments

What beginners do: Spend 20+ hours on due diligence for $1,000 investment. Build detailed financial models for pre-revenue companies. Seek certainty before committing.

Why it happens: Thoroughness feels responsible. Uncertainty is uncomfortable. More analysis feels like risk reduction.

The cost: Time investment doesn't match check size. Analysis paralysis delays portfolio construction. False precision from modeling unmeasurable variables.

How to avoid it: Calibrate diligence to check size. For $1,000 investment, 2-3 hours is appropriate. Accept that uncertainty can't be analyzed away at early stages.

Mistake 6: Expecting Quick Results

What beginners do: Evaluate portfolio performance after 1-2 years. Feel disappointed when investments haven't produced returns. Question strategy based on early results.

Why it happens: Impatience. Public market expectations transferred to private investing. Need for validation.

The cost: Abandoning strategy before it has time to work. Making reactive changes based on noise rather than signal. Missing eventual returns by exiting mentally or actually.

How to avoid it: Internalize 7-10 year timeline before starting. Don't evaluate portfolio performance until year 5 at earliest. Focus on process quality, not early outcomes.

As Shiyan Koh, co-founder and GP of Hustle Fund, notes: "Great founders can look like anyone and come from anywhere."

Patience applies to both timeline and recognizing that unexpected outcomes from unexpected sources are normal.

Mistake 7: Ignoring Portfolio After Investing

What beginners do: Make investments then disengage completely. Stop reading updates. Lose track of what they own. Check out until exit happens.

Why it happens: Investments feel passive after decision. Updates seem irrelevant when you can't act. Other priorities take over.

The cost: Missed learning opportunities. Can't help portfolio companies if you're not paying attention. Disconnection leads to abandonment of practice.

How to avoid it: Read every company update. Maintain tracking spreadsheet. Stay engaged even when nothing dramatic is happening.

Mistake 8: Chasing Hot Sectors

What beginners do: Concentrate investments in whatever sector is currently exciting. AI, crypto, climate, whatever is trending.

Why it happens: Hot sectors feel like obvious opportunities. Media attention suggests validation. Fear of missing the wave.

The cost: Sector concentration reduces diversification. Hot sectors often have inflated valuations. Today's hot sector isn't necessarily tomorrow's winner.

How to avoid it: Diversify across sectors. Don't let current narratives dominate allocation. Maintain discipline even when specific areas seem compelling.

Mistake 9: Following Without Own Thesis

What beginners do: Invest because impressive people are investing. Follow without independent evaluation. Rely on others' judgment entirely.

Why it happens: Experienced investor participation feels validating. Own judgment feels inadequate. Following is easier than evaluating.

The cost: Can't learn from outcomes because you don't know why you invested. Can't evaluate developments intelligently. No feedback loop for judgment improvement.

How to avoid it: Write personal thesis for every investment. Document your reasoning. Use others' participation as input, not as substitute for your own evaluation.

Mistake 10: Investing Money You Might Need

What beginners do: Invest capital that isn't genuinely surplus. Use money that might be needed within 10 years. Stretch financially to participate.

Why it happens: Excitement about opportunity. Optimism about returns. Underestimating how long capital is locked.

The cost: Financial stress when capital is inaccessible. Forced to reduce other priorities. Relationship strain from financial pressure.

How to avoid it: Only invest true surplus capital. Money whose complete loss wouldn't affect your life in any way. Be honest about what's genuinely extra.

The Mistake Prevention Checklist

Before starting:

• [ ] Commitment to 20+ investments at consistent check size
• [ ] Foundation learning complete (portfolio construction, structures, evaluation)
• [ ] Community membership for quality deal flow
• [ ] Capital verified as genuinely surplus
• [ ] Timeline expectation calibrated (7-10 years)

For each investment:

• [ ] Diligence appropriate to check size (2-3 hours for $1,000)
• [ ] Personal thesis written before committing
• [ ] Check size consistent with previous investments
• [ ] Sector diversification considered
• [ ] Decision based on own evaluation, not just following others

Ongoing:

• [ ] Updates read for all portfolio companies
• [ ] Tracking maintained
• [ ] Engagement with community and education continued
• [ ] No early performance judgment (before year 5)
• [ ] Process discipline maintained regardless of individual outcomes

Angel Squad helps beginners avoid these mistakes: curated deal flow prevents network-only investing, $1,000 minimums enable proper portfolio construction, educational programming builds foundation before costly errors, and community provides accountability for sustained engagement.

Every beginner makes some mistakes. Make the cheap ones, avoid the expensive ones, and you'll develop into capable investor over time.