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

Walk into any angel investing community meeting and you'll hear someone ask, "What's your customer acquisition cost?"

It's become the "Tell me about a time you showed leadership" of startup investing. Generic, useless, and asked by people who don't know what to do with the answer.

Real due diligence is harder than that. The best angel investing communities have frameworks that help investors evaluate startups systematically, not just ask whatever question pops into their head.

The Framework Hustle Fund Actually Uses

Elizabeth Yin, co-founder and General Partner at Hustle Fund who founded and sold LaunchBit, doesn't hide her process. After backing over 600 companies, the fund looks for specific signals.

First: Can this be a billion-dollar outcome? Not "will it be," but "can it be?" Most startups won't hit $1 billion valuations. But if there's no path to that outcome, the math doesn't work for venture returns.

This isn't about believing every founder's ambitious projections. It's about market size and business model. A bootstrapped, profitable SaaS company serving orthodontists might be a great business. It's probably not venture-scale.

Second: Do the founders have unique insight into this problem? You want founders who see something others don't. Maybe they worked in the industry for 10 years. Maybe they built the product for themselves first. Maybe they have distribution others can't replicate.

As Yin notes, "My best companies (on a revenue performance basis) were all started by people who were overlooked. Because they were 'too early' or had the 'wrong resume' or were in the 'wrong location' or were solving a problem that other VCs didn't care about."

The framework isn't about pedigree. It's about edge.

The Questions That Matter

Most investors ask about metrics. Revenue, growth rate, customer count. Those numbers are important, but they're backward-looking.

Better questions focus on what happens next:

• What's the unit economics at scale? Not today, at scale. If this company had 10,000 customers instead of 100, does the math work?
• What breaks first when you grow? Every startup has a constraint. Is it hiring, capital, founder capacity, or something else?
• Who are the non-obvious competitors? Founders always say they have no competition. Smart investors know that's never true. The question is who or what else solves this problem.

Eric Bahn, co-founder and General Partner at Hustle Fund and former Product Manager at Instagram, emphasizes the importance of understanding what's actually hard about the business. "Cheerleading is probably the biggest piece of my job," he admits. But before you can cheerlead, you need to understand what you're cheering for.

The Red Flags Framework

Due diligence is as much about disqualifying deals as qualifying them. Top communities train investors to spot red flags early.

Watch for founders who:

• Blame the market for slow growth (it's never just the market)
• Can't articulate why now is the right time for this business
• Have raised multiple rounds with no clear progress between them
• Speak vaguely about what they'll do with the money you're investing

These aren't automatic disqualifications. But they're signals that require deeper digging.

The most dangerous red flag is when founders are better at fundraising than building. They pitch beautifully, their deck is gorgeous, their references are glowing. But the product is mediocre and the traction is manufactured.

"VCs are wrong most of the time. And that is ok!" Yin reminds investors. The goal isn't perfection. It's making enough good bets that your winners cover your losers. Red flag frameworks help you avoid catastrophic mistakes, not eliminate all risk.

Market Sizing Without the BS

Every pitch deck has a market size slide showing billions in TAM (Total Addressable Market). Most of those numbers are fiction.

Real market sizing asks: How many customers exist who have this problem right now and have budget to solve it? Not in five years. Not if everything goes perfectly. Right now.

If a founder says they're after a $50 billion market, dig into that. Is it $50 billion in revenue? In value created? In an adjacent market they're hoping to disrupt? The number itself means nothing without context.

Better yet, ask about the first 100 customers. Who are they specifically? How will the founder reach them? What does the sales process look like? If they can't answer these questions clearly, the market size doesn't matter because they can't access it.

The Team Assessment Framework

Evaluating founders is subjective, but it doesn't have to be random. Angel Squad members learn to assess teams on specific dimensions:

• Adaptability: Have these founders pivoted successfully before? Can they change their minds when data contradicts their thesis?
• Execution speed: How fast do they move from decision to implementation? Slow founders lose in competitive markets.
• Self-awareness: Do they know what they don't know? The best founders hire to fill their gaps.

Shiyan Koh, co-founder and General Partner at Hustle Fund and former NerdWallet executive, values operators who've built things before. "We want people to have run a business to understand the entrepreneurial experience," she notes. That lived experience creates empathy for founders and better investment decisions.

Due Diligence for Different Stages

Pre-seed diligence looks different than seed or Series A. At pre-seed, you're betting on team and market. There's often no product and definitely no traction.

Questions shift to:

• Why are these specific founders uniquely positioned to solve this problem?
• Is the problem painful enough that customers will adopt an imperfect solution?
• What's the smallest thing they can build to test their core assumption?

At seed, you need evidence. Traction, retention, unit economics. The questions become more specific because you have data to analyze.

Angel Squad structures their deal reviews around stage-appropriate frameworks. A pre-seed company evaluated like a Series A will always look bad. The trick is knowing what good looks like at each stage.

Building Your Own Framework

The best investors develop their own frameworks over time. You learn what signals matter for the types of companies you back.

Start with a community's framework, but adapt it. Maybe you discover that technical founding teams convert better than business-focused ones. Maybe you find that certain accelerators produce consistently strong companies. Maybe you realize you're better at evaluating B2B than consumer.

That pattern recognition only comes from reps. You need to see 50+ deals, make 20+ investments, and track outcomes over years. Angel investing communities provide the deal flow and the structure to accelerate that learning.

Just make sure the community actually has frameworks worth learning, not just a list of generic questions that sound smart in meetings.