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

The first time I caught a founder in a lie, it was over something stupid.

They had a slide that said "Signed $700k" next to a large company's logo. My eyes lit up. Seed stage companies almost never have contracts that big already closed. Then I dug deeper.

The contract wasn't signed. It was "out for review" and they expected it to be signed "any day now." To them, this felt like a minor distinction. To me, it was game over. Trust dropped to zero instantly.

I get it. Founders are selling a vision. They're optimistic people who genuinely believe that contract will close. But there's a line between optimism and lying, and crossing it even once tells me everything I need to know about how they'll communicate when things go sideways.

After investing in hundreds of companies, I've seen every flavor of claim that needs verification. Some are innocent mistakes. Others are deliberate deception. Your job as an angel is to figure out which is which before you wire the money.

The Stuff Founders Lie About Most

Revenue and contracts top the list. "We're doing $50k MRR" often means "We did $50k total last month but $40k was one-time setup fees." Or "We have three signed enterprise contracts" turns out to be three pilot agreements with tiny budgets and no commitment to renew.

Customer traction gets inflated constantly. "10,000 users" might technically be true, but when you ask about active users in the last 30 days, suddenly it's 147. That's not the same thing.

Team credentials are another area where founders stretch the truth. "Our CTO worked at Google" could mean they were a contractor for three months. "We have an advisor from Y Combinator" might be someone who agreed to one coffee meeting.

The worst ones are the completely fabricated claims. I've seen founders claim partnerships that don't exist, customer testimonials from companies that never used their product, and even fake revenue numbers in their metrics dashboard.

How to Actually Verify Claims

Start with customer references. This is non-negotiable. If a founder says they have happy customers, ask to talk to three of them. Not the three they suggest. Ask for their full customer list, then you pick who to call.

When you call those customers, don't just ask "Do you like the product?" Ask specific questions: How much are you paying? How often do you use it? What would happen if it disappeared tomorrow? Would you recommend it to a peer? The answers tell you whether this is a nice-to-have or something they actually care about.

For revenue claims, ask to see their Stripe dashboard or bank statements. Most honest founders will show you. If they hesitate or make excuses, that's a red flag the size of Texas.

With partnerships or contracts, get the actual documents. A signed contract is a PDF you can read. A partnership agreement has terms you can verify. If everything is verbal or "in progress," it doesn't count.

Background checks matter more than you think. Google every founder. Check their LinkedIn. Look for past companies and what happened to them. I once found out a founder had been fired from two previous startups for ethics violations. That's information you want before you invest.

Call their investors. If they've raised money before, those investors will tell you things the founder won't. Ask: Would you invest again? What surprised you about working with them? What do they need to improve? The pauses and tone matter as much as the words.

For technical claims, this gets harder if you're not technical yourself. I recommend having a technical friend review their product or codebase. One of my portfolio companies claimed they'd built revolutionary AI technology. Turned out they were just using a standard OpenAI API. That's not revolutionary. That's Tuesday.

The Reference Call That Saves Your Ass

The most important verification step is investor reference calls. Before you accept money from a founder (yes, you're evaluating them as much as they're evaluating you), talk to other investors who've worked with them.

Get at least four references. Two that the founder gives you, plus two that you find on your own. The ones they don't suggest will tell you the real story.

My favorite question comes from Scott Cook, founder of Intuit: "On a scale of 1-10, how would you rate this founder?" They'll probably say 8 or 9. Then ask: "What would it take for them to become a 10?" That's when you hear the truth. "I wish they were more focused." "I wish they communicated better during tough times." "I wish they actually followed through on what they promise."

Those answers matter way more than the initial rating.

Red Flags That Should Make You Walk

Some things are automatic nos for me now. If a founder can't articulate their business clearly in writing, that's a problem. Running a company requires written communication. If they can't do it during fundraising, it won't magically improve after you invest.

If they dodge questions about burn rate or runway, walk away. Good founders know their numbers down to the dollar. If they're vague about how much money they have or how fast they're spending it, they either don't know or don't want you to know. Both are bad.

If they trash talk previous investors or employees, listen carefully. Sometimes they have legitimate grievances. But if everyone else was always the problem, that tells you who the actual problem is.

If the numbers in their deck don't match the numbers in their data room, that's not a small mistake. That's intentional deception, and you should run.

The Due Diligence Checklist Nobody Uses

Most angels skip this stuff because it feels awkward or time-consuming. But you're about to give someone tens of thousands of dollars. A few hours of work is worth it.

Verify revenue: actual bank statements or Stripe dashboard, not just their word Check incorporation: are they a Delaware C-corp? If not, this will cost you later Review the cap table: who else invested and at what terms? Confirm IP ownership: do the founders actually own the technology? Background checks: criminal records, past company failures, lawsuit history Customer calls: talk to at least three real customers who pay money Investor references: talk to at least two investors not suggested by the founder Team verification: confirm employment history and credentials on LinkedIn

This list takes maybe four hours total if you're efficient. That's a tiny investment to avoid a massive mistake.

When Verification Isn't Possible

Sometimes you're investing so early that there's nothing to verify. Pre-revenue, pre-product, just a team and an idea. That's fine, but adjust your evaluation accordingly.

In those cases, focus on the team's track record. Have they built and sold things before? Do they have domain expertise? Can they articulate their thinking clearly? At Hustle Fund, we invest in plenty of pre-product companies. But we're betting on the team's ability to execute, not on metrics that don't exist yet.

The key is knowing what stage you're investing at and adjusting your verification process accordingly. Seed stage with revenue? Verify everything. Pre-seed with just a prototype? Focus on the team.

Why This Matters More Than You Think

One bad investment based on lies doesn't just cost you money. It costs you reputation. If you bring a deal to your network and it turns out the founder was lying, people remember that. They'll be less likely to co-invest with you next time.

Verification is also how you build pattern recognition. The more you dig into claims, the better you get at spotting BS immediately. After a few hundred companies, I can smell inflated metrics from the first slide.

Most importantly, verification protects founders from themselves. Sometimes they're not lying intentionally. They're just optimistic and haven't done the math. By asking hard questions, you help them see their business more clearly. That makes you a better investor and them a better founder.

Want to practice these skills with other angels who actually verify claims before investing? Angel Squad gives you access to a community that takes due diligence seriously. We share notes on deals, compare reference calls, and help each other avoid the obvious scams. Because the best way to get better at verification is learning from people who've already made the expensive mistakes.