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

If you talk to an early-stage VC, almost all of them will tell you that the thing they care about most is the team. Makes sense, right? Most early-stage startups have little to no revenue, traction, or users. So many investors look at the team to predict the likelihood of success.

But saying "I care about the team" does not mean the same thing to everyone.

Some investors consider a "great team" to be founders with domain expertise or pedigree. Experience at a big company, a degree from a fancy school. At Hustle Fund, we think about this differently. And the way we think about it has everything to do with product-market fit signals.

How Hustle Fund Evaluates Companies

We look at five categories when evaluating a new startup: team, problem, solution, market, and traction. We rank the startup in each of these and use that framework to decide whether to invest.

We do not expect any startup to knock it out of the park in all five. At the early stage, that is not realistic. But they do need to score high on the thing that matters most to the probable success of the company.

If the company is in a super crowded space, we want to see a product that is highly differentiated, or that they are targeting an underserved market. If the company is trying to solve an incredibly challenging problem, we want to see that the team is uniquely positioned to address it.

This is what we call identifying the "must have."

The "Must Have" Framework

Instead of asking "does this person have a background in the thing they are building?" we ask: "What is the one thing this team needs to succeed, and does the founder bring that to the table?"

That one thing changes dramatically depending on the business.

Think about a dating app. The online dating space is already overcrowded. A startup in this space needs to go after a new market to gain traction. So we would want to see a founder who is already immersed in that market. Maybe it is a dating app for veterinarians. A founder who used to be a vet will have deep connections in that community and can get early customers more easily than an outsider.

Now think about a medical insurance platform. This industry is heavily regulated. Different regions have different laws, and those laws change constantly. In this case, the team's knowledge and experience in the insurance world is the must-have. Customers will not buy insurance from someone who cannot help them navigate those complexities.

Same question, totally different answers.

Real Examples from Our Portfolio

Let me share some real investments that illustrate this.

There is the direct-to-consumer jewelry company. D2C jewelry brands have popped up everywhere. So why did we invest in this one? The founder's family had been in the jewelry industry for generations. The founder knew the business inside and out and already had trusted suppliers. In a business where margins make or break you, that supply chain advantage was the must-have.

Then there was the Uber competitor. This founder needed something big to set apart from the competition. And he had it: a strong background in performance marketing. He did not need to play around with different channels to find what worked. He was able to acquire customers quickly and profitably from day one. In a business where customer acquisition cost is literally everything, that skill was the must-have.

And then there is the startup that white-labels NFTs for luxury brands. Their opening slide explains that the founder's family has worked with luxury brands for decades. They know everyone at Gucci. In a business that only works with strong ties to the luxury brand world, those pre-existing relationships were the must-have.

How to Apply This to Your Own Investing

The next time you evaluate a startup, try this exercise. Before you look at the team, look at the business model and the market. Ask yourself: what is the single biggest challenge this company will face?

If it is a crowded market, the must-have is a distribution advantage. If it is a regulated industry, the must-have is domain expertise. If it is a technically complex product, the must-have is engineering talent. If it is a business with thin margins, the must-have is supply chain or operational efficiency.

Then look at the founding team through that specific lens. Do they bring the one thing that matters most?

Elizabeth Yin has observed that product-market fit is really what matters in the end. She has seen founders with seemingly less ambition early on find product-market fit and go on to run $100M+ valuation companies. The must-have is whatever gives a team the best shot at finding that fit.

Many startups are run by capable, smart, determined founders. That does not always mean the startup will survive. Asking "what is this company's must-have?" helps you distinguish between the ones that probably will not make it and the ones that just might. If you want to practice this framework alongside 2,500+ investors who evaluate deals every week, Angel Squad is where that skill gets sharpened. Learn more at Angel Squad.