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

Venture capitalists have systems for evaluating startups that took decades to develop. Those systems work because VCs have seen thousands of companies and tracked outcomes over time.

You can't replicate that experience, but you can borrow their frameworks.

How professional VCs think about early-stage investing, translated for individual angels.

The VC Mindset Difference

Portfolio, Not Picks

Professional VCs never bet on individual companies succeeding. They build portfolios where some massive winners offset many failures.

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."

This isn't humility. It's statistics. Even the best VCs can't reliably predict which specific company will succeed. They know most will fail and structure portfolios accordingly.

Individual angels often think they can pick winners because they're smarter or have better judgment. This confidence usually proves expensive.

Expected Value Over Certainty

VCs make decisions based on expected value, not certainty of outcomes.

They invest knowing company will likely fail but that the small probability of massive success creates positive expected value across portfolio.

This is counterintuitive. You're intentionally investing in companies likely to fail because the rare winners compensate for many losses.

Long Timeline Acceptance

VCs raise funds with 10-year lifecycles because that's how long early-stage investments take to mature.

They're not checking portfolio performance quarterly or even annually. They're thinking in 7-10 year horizons.

Individual angels often get frustrated after 2-3 years without returns. This impatience causes mistakes.

The VC Evaluation Framework

Team First, Always

When professional VCs evaluate early-stage companies, team quality dominates decision-making. Market and product matter, but team is most important.

Why? Because at pre-seed/seed, everything will change. The specific product will evolve. The go-to-market strategy will pivot. The only constant is founders.

Questions VCs ask:

• Can this team actually build what they're proposing?
• Will they figure things out when original plan fails?
• Are they learning quickly from customer feedback?
• Do they have complementary skills?
• Can they attract strong team members?

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."

Part of that practice is learning to evaluate founders systematically, not just trusting gut reactions.

Market Size Reality Check

VCs need markets large enough to support billion-dollar outcomes. For funds returning capital to LPs, this math is non-negotiable.

For individual angels, the same principle applies but thresholds are different. You need markets where 100x returns are theoretically possible, even if unlikely.

How VCs assess markets:

• Is this market growing? (Mature markets rarely create venture-scale outcomes)
• Is timing right? (Too early means education costs; too late means saturation)
• Can this company capture meaningful share? (1% of $10B market = $100M revenue)

If market can't support $100M+ revenue company, returns will be limited regardless of execution.

Product/Market Signals

At pre-seed, product/market fit doesn't exist yet. But VCs look for early signals:

Customers engaging without being paid to. Users returning organically. Word of mouth happening naturally. Any form of traction that's not just paid acquisition.

The strongest signal: customers using product despite it being incomplete or buggy. This suggests genuine need exists.

The VC Due Diligence Process (Simplified)

Level 1: Initial Screen (30 minutes)

Review pitch deck and materials. Do basics make sense?

• Team has relevant experience
• Market is large and growing
• Business model is plausible
• Traction (if any) seems real

Most opportunities fail initial screen. That's fine. You're filtering aggressively.

Level 2: Deeper Evaluation (2-3 hours)

For opportunities passing initial screen:

Talk to founders. Assess communication skills, clarity of thinking, self-awareness about challenges.

Research market. Who are competitors? What do customers say? Is growth rate real?

Check references. Talk to people who've worked with founders before. Look for patterns of execution or red flags.

Angel Squad members get benefit of Hustle Fund's professional screening before seeing opportunities—the Level 1 and 2 work is already done by experienced investors evaluating 1,000+ applications monthly.

Level 3: Final Decision (1-2 hours)

Write investment memo. Force yourself to articulate:

• Why are you investing?
• What has to be true for this to succeed?
• What are major risks?
• What could you be wrong about?

This memo serves two purposes: clarifying your thinking before investing, and creating record for future learning.

Portfolio Construction Like a VC

The 20-30 Company Minimum

Professional VC funds make 20-30 investments per fund minimum. Many make 50-100.

Why so many? Because even professional investors with decades of experience can't predict which specific companies will succeed.

They need enough shots on goal that law of large numbers works in their favor.

You need the same volume. 15-20 investments absolute minimum. 20-30 is better.

Check Size Consistency

VCs generally write similar-sized checks in each opportunity. This creates portfolio balance.

As individual angel, maintain consistent check sizes. $1,000 per investment for first 20 investments. Don't vary between $500 and $5,000 based on excitement level.

Your excitement is not a reliable signal. Consistency is more important.

Stage Focus

VCs typically focus on specific stages: seed, Series A, Series B, etc. Mixing stages creates portfolio management complexity.

As angel, focus on pre-seed and seed. Don't invest in Series A or later companies. The dynamics are different and you lack information advantages later-stage investors have.

Reserve Capital for Follow-Ons

Professional VCs reserve 40-50% of fund for follow-on investments in portfolio companies raising next rounds.

As individual angel, reserve 30-40% of your annual budget for follow-ons. If your total budget is $10,000 annually, invest $6,000-7,000 in new companies and reserve $3,000-4,000 for supporting companies already in portfolio.

Return Expectations (Reality-Based)

What VCs Actually Return

Top quartile VC funds return 3-5x to LPs over 10 years. Median VC funds return 1-1.5x. Bottom quartile lose money.

These are professional investors with deal flow advantages, pattern recognition from seeing thousands of companies, and ability to provide meaningful value-add to portfolio companies.

Your returns as individual angel will likely be worse unless you have specific advantages (unique deal flow, industry expertise, etc.).

Realistic Individual Angel Returns

Good outcome: 2-3x over 10 years Decent outcome: 1-2x over 10 years Most likely outcome: Break even or modest loss

This isn't pessimistic. It's realistic based on data from individual angel investors.

The value comes from learning about startups, building networks, and potentially having 1-2 successful investments that make the portfolio worthwhile.

Don't angel invest expecting to get rich. Do it as educational experience with potential for decent returns.

As Shiyan Koh, co-founder and GP of Hustle Fund, notes: "Great founders can look like anyone and come from anywhere." Learning to recognize great founders early is valuable skill regardless of financial returns.

Time Allocation Like a VC

Deal Flow: 40% of Time

VCs spend massive time on deal sourcing and initial screening. For individuals, communities handle this.

Your time should focus on evaluating opportunities presented, not hunting for deals.

Due Diligence: 30% of Time

Deep evaluation of opportunities that pass initial screen. This is where you actually make investment decisions.

Most important use of your time as individual investor.

Portfolio Support: 20% of Time

Helping portfolio companies through introductions, advice, and general support.

This is high-value activity that improves your reputation and future deal flow.

Learning: 10% of Time

Consuming educational content, attending industry events, and staying current on markets you care about.

Continuous learning is how you improve over time.

Common VC Principles Individual Angels Ignore

Not Falling in Love

VCs remain dispassionate about investments. They know most will fail. They don't get emotionally attached.

Individual angels fall in love with founders or products. This clouds judgment and causes bad decisions.

Walking Away from Good Companies

VCs regularly pass on good companies because they don't meet specific criteria, even when company seems promising.

Individual angels convince themselves to invest in almost-right opportunities because they don't want to miss out.

Better to pass on good company that doesn't meet criteria than invest in mediocre company that does.

Following Process Over Hunches

VCs follow systematic processes even when gut says otherwise. Process consistency matters more than individual decisions.

Individual angels trust gut reactions over frameworks. This leads to pattern-matching errors and biases.

Adapting VC Frameworks for Smaller Scale

You Can't Do Everything VCs Do

VCs have team members, extensive networks, and ability to spend 40+ hours weekly on investing.

You have 3-5 hours weekly and limited network. You must simplify.

Focus on High-Impact Activities

You can: Evaluate opportunities systematically using frameworks. Build diverse portfolio. Track thinking and learn from outcomes. Help portfolio companies occasionally.

You can't: Deeply diligence every investment. Take board seats. Provide extensive strategic guidance. Lead rounds or negotiate terms.

Accept these limitations and optimize for what you can do effectively.

Leverage Community Infrastructure

VCs have internal infrastructure for deal sourcing, due diligence, and portfolio management.

You need community providing similar infrastructure. Angel Squad handles deal sourcing through Hustle Fund's pipeline, standardizes terms, and manages portfolio administration so your limited time focuses on evaluation, exactly where it should.

The VC Perspective on Your Situation

VCs Would Tell You:

Build 20-30 investment portfolio minimum, not 3-5. Write consistent check sizes, not emotionally varied amounts. Focus on team quality over product specifics. Accept most investments will fail completely. Think in 10-year timeframes, not 2-3 years. Use systematic frameworks, not gut reactions.

These principles separate successful investors from unsuccessful ones.

Making It Work at Individual Scale

The Accessible Version

$1,000 per investment over 2-3 years builds 20-30 company portfolio. Total capital: $20,000-30,000. This is achievable for successful professionals.

Weekly time commitment of 3-5 hours covers evaluation, learning, and portfolio support. This is manageable alongside full-time career.

Communities provide infrastructure professional VCs build internally. You get access to curated deal flow, systematic evaluation frameworks, and administrative support.

Angel Squad demonstrates professional VC principles work at individual scale: curated deal flow from Hustle Fund's professional investors screening 1,000+ monthly applications, educational programming teaching VC evaluation frameworks, $1,000 minimums enabling 20-30 investment portfolios, and community of 2,000+ investors learning together. 

The structure translates institutional approaches into accessible individual practice.

Professional VCs have learned through decades of experience what works in early-stage investing. You can shortcut that learning by adopting their frameworks rather than inventing your own through expensive trial and error.

Think like a VC even if you're investing at much smaller scale. The principles that make VCs successful apply to individual angels too.