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

"Is angel investing worth it?" is asked constantly but answered poorly. Most responses are either promotional ("Yes, huge returns!") or dismissive ("No, too risky!"). The data-backed answer is more nuanced and depends entirely on what "worth it" means to you.

This is the honest, data-driven assessment of angel investing value.

The Financial Return Data

Median returns: Studies suggest median angel investor achieves 1.1-1.5x return over portfolio lifetime. After accounting for time value of money and illiquidity, this barely exceeds (or matches) keeping money in index funds.

Top quartile returns: Best-performing 25% of angels achieve 2.5-4x+ returns. This represents meaningful outperformance but requires either skill, luck, or both.

Bottom quartile returns: Worst-performing 25% lose significant capital. Returns of 0.5x or less are common among poorly constructed portfolios.

Power law concentration: Even within successful portfolios, 1-2 investments typically drive majority of returns. Most investments return zero regardless of overall portfolio performance.

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."

The data confirms this: 60-70% of angel investments fail completely.

What Determines Financial Returns

Factor 1: Portfolio size. Angels with 20+ investments significantly outperform those with fewer investments. Diversification captures outliers that drive returns. Concentrated portfolios more likely to miss winners entirely.

Factor 2: Deal access quality. Angels with access to better deal flow (through community or network) outperform those investing in whatever they find. Quality in, quality out.

Factor 3: Investment period. Angels who invest consistently over time outperform those who concentrate investments in single period. Temporal diversification matters alongside company diversification.

Factor 4: Patience. Angels who maintain positions for 7-10+ years outperform those who seek early exits. Best returns require longest holds.

Factor 5: Check size discipline. Angels maintaining consistent check sizes outperform those varying based on conviction. Discipline beats enthusiasm.

Non-Financial Value (Often Underestimated)

Learning value: Angels consistently report significant educational value from exposure to startups, business models, and investment mechanics. This learning has professional applications beyond investing.

Network value: Connections with founders, other investors, and startup ecosystem participants create relationships with compounding value. Network effects extend far beyond portfolio returns.

Professional development: Understanding startup dynamics, investment evaluation, and portfolio thinking creates skills applicable to careers in tech, finance, consulting, and entrepreneurship.

Intellectual engagement: Regular exposure to new business models and innovative approaches provides stimulation many angels find genuinely enjoyable.

Purpose and meaning: Supporting founders building companies provides sense of contribution that financial returns alone don't capture.

The "Worth It" Calculation Framework

Financial-only assessment: If you're optimizing purely for financial returns and have alternatives (index funds, real estate, etc.), angel investing probably isn't worth it for most people. Median returns don't justify illiquidity and risk.

Blended value assessment: If you value learning, networks, and professional development alongside potential returns, angel investing becomes more attractive. Non-financial value makes modest financial returns acceptable.

Wealthy investor assessment: If angel investing capital is small portion of overall wealth and you enjoy the activity, returns matter less. Participation value may exceed return importance.

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."

The practice itself has value beyond whatever returns it produces.

Who Should Conclude "Worth It"

Strong fit indicators:

• You value learning about startups and business models
• Professional network expansion is valuable to your career
• You have true risk capital ($15-20K) whose loss wouldn't affect lifestyle
• You find business evaluation intellectually engaging
• You can commit 3-5 hours weekly for years
• You have patience for 7-10 year outcomes

Weak fit indicators:

• You're optimizing primarily for maximum financial returns
• You need liquidity within 5 years
• The capital would be missed if lost entirely
• You don't find business analysis interesting
• Time commitment seems burdensome rather than engaging

Who Should Conclude "Not Worth It"

Clear mismatches:

• You need the money for other purposes
• Risk tolerance is low
• Time horizon is short (under 7 years)
• No interest in startups or business models
• Expecting quick or guaranteed returns

Alternative approaches for these situations:

• Index funds for long-term growth with liquidity
• Real estate for tangible asset appreciation
• Career investment for highest expected returns
• Other interests for intellectual engagement

The Honest Expected Outcome

Most likely scenario (median): You invest $20,000 over 3 years. Portfolio returns approximately $25,000-30,000 over 10 years. Net financial gain of $5,000-10,000 doesn't justify time invested if measured purely financially. But you learned significantly, built valuable network, and found engagement valuable.

Optimistic scenario (top quartile): Same investment returns $60,000-80,000. Net gain of $40,000-60,000 represents meaningful return. Plus learning and network value.

Pessimistic scenario (bottom quartile): Same investment returns $8,000-15,000. Net loss of $5,000-12,000 represents real financial setback. Learning and network value may or may not compensate depending on your situation.

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

Part of angel investing value is participating in this diverse founder ecosystem regardless of your specific returns.

Improving Your Odds

Portfolio construction discipline: Build 20+ investment portfolio. Maintain consistent check sizes. Deploy over 2-3 years.

Deal access quality: Join community with institutional-quality deal flow. Angel Squad provides access to Hustle Fund's pipeline of 1,000+ monthly applications.

Education investment: Learn from experienced practitioners. Attend programming consistently. Develop evaluation frameworks.

Patience maintenance: Commit to 7-10 year timeline. Don't evaluate portfolio until sufficient time has passed. Maintain engagement through boring years.

Realistic expectations: Expect median outcome. Hope for better. Prepare for worse. Don't depend on angel investing for financial security.

The Decision Framework

Step 1: Assess whether you meet basic requirements (accreditation, risk capital, time availability).

Step 2: Evaluate how you weight financial returns versus non-financial value.

Step 3: Consider whether angel investing fits your interests and provides engagement you'd value.

Step 4: If above answers align, proceed with realistic expectations about median outcomes.

Step 5: If answers don't align, pursue other options without feeling you're missing out.

The Bottom Line

Is angel investing worth it?

Financially: Probably not for most people if pure returns are the goal. Median returns don't justify illiquidity and risk compared to alternatives.

Holistically: Potentially yes if you value learning, networks, and engagement alongside modest expected returns. Non-financial value can make the activity worthwhile.

For you specifically: Depends on your situation, values, and alternatives. Use framework above to assess honest fit.

Angel Squad makes angel investing more likely to be worth it: quality deal flow from Hustle Fund's pipeline improves potential returns, structured education accelerates learning value, 2,000+ member community enhances network building, and $1,000 minimums enable proper portfolio construction without excessive capital commitment.

Answer the question for yourself based on your specific situation, not based on promotional promises or dismissive warnings. The data-backed answer is nuanced. Your personal answer should be too.