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

Let's talk about something nobody wants to discuss: most of your angel investments will fail.

Not struggle. Not pivot. Fail. The company will shut down, the founders will move on, and your capital will vanish. This isn't pessimism. It's math.

The standard venture math says that out of 10 investments, 5-6 will return zero, 2-3 will return something close to your money back, and 1-2 will be big winners that make up for everything else. If you're lucky, that one big winner returns 10-100x and your overall portfolio works out.

But here's what communities often don't emphasize: getting to that portfolio outcome requires losing money on most deals, waiting 7-10 years to see any returns, and having enough capital to make 10+ investments in the first place. That's expensive, time-consuming, and emotionally draining.

The Actual Dollar Cost

Angel investing requires capital you can afford to lose.

The rule of thumb is that you should only angel invest with money you'd be comfortable seeing go to zero. This isn't just risk management advice. It's reality. Your first several investments will likely fail, and you need to be psychologically prepared for that.

So what does a reasonable angel portfolio actually cost?

Most experienced investors recommend making 10-20 investments over 2-4 years to have a shot at portfolio-level returns. If you're writing $5K checks, that's $50K-$100K. If you're writing $10K checks, that's $100K-$200K. And those are minimums.

Can you start smaller? Sure. You can write $1K-$2K checks through platforms or communities. But you need to understand that at that check size, you're learning, not building a meaningful portfolio. A $2K investment that returns 10x is $20K. That's nice, but it's not life-changing wealth.

Angel Squad and similar communities don't eliminate these capital requirements. They do make your capital go further by helping you avoid disasters and access better deals. But you still need money to invest.

The Hidden Time Cost

The capital cost is upfront and obvious. The time cost sneaks up on you.

Let me break down what active angel investing actually requires:

Deal evaluation: 2-3 hours per company to read the deck, research the market, check references, and write an investment memo. If you're evaluating 50 companies per year to make 5 investments, that's 100-150 hours.

Community participation: Weekly events, Slack discussions, helping other members evaluate deals. Figure another 50-100 hours per year if you're active.

Portfolio support: Once you've invested, good angels help their companies. That might mean making intros, providing feedback, or advising on specific challenges. Assume 1-2 hours per month per company. With 10 investments, that's 10-20 hours monthly or 120-240 hours annually.

Add it up and you're looking at 300-500 hours per year. That's a part-time job. Some people love this and consider it valuable learning. Others realize they don't have the time and shouldn't be angel investing in the first place.

Communities like Angel Squad make the time investment more efficient by curating deal flow and providing structure. Instead of finding and evaluating 200 companies on your own to identify 50 worth considering, you're seeing pre-filtered opportunities. But you still need to put in the work.

The Emotional Cost Nobody Mentions

Here's what surprised me most about angel investing: how emotionally draining it is to watch companies fail.

You invest in a company because you believe in the founders. You get to know them. You introduce them to potential customers. You give them advice when they're struggling. And then, 18 months later, they shut down.

It feels personal in a way that public market investing never does. When your tech stocks go down, that's abstract. When the founder you advised can't make payroll and has to let their team go, that hurts.

The failure rate in early-stage investing means you'll experience this repeatedly. It's part of the game. But communities often don't prepare people for the emotional reality of loss.

The investor mindset requires compartmentalization. You need to care enough to be helpful but detached enough to handle failure without taking it personally. That balance is hard, and some people never find it.

The Opportunity Cost of Capital

Let's be brutally honest about returns. The opportunity cost of angel investing is significant.

If you put $50K into an S&P 500 index fund and leave it for 10 years, you'll likely have $100K-$130K based on historical returns. That's a double with zero effort.

If you put that same $50K into angel investments, most scenarios look worse. You'll probably lose $30K-$40K on failures, get $5K-$10K back from mediocre outcomes, and hope that one big winner returns $100K+. If you hit that winner, you might end up with $75K-$125K after 10 years.

The best-case angel scenario is slightly better than index funds. The median scenario is significantly worse. The work required is incomparably higher.

So why does anyone angel invest? Three reasons:

Learning: Angel investing teaches you things about business, technology, and evaluation that you can't learn any other way. That knowledge compounds.

Network: The relationships you build with founders, other investors, and communities create opportunities that go way beyond financial returns.

Optionality: Building a track record as an angel investor opens doors to raise your own fund, join a VC firm, or become a sought-after advisor.

If your only goal is maximizing financial returns with minimal effort, angel investing is probably wrong for you. If you value learning, relationships, and career optionality, the non-financial returns might justify the risk.

What Communities Actually Cost

Beyond the capital you deploy into companies, angel investing communities charge fees. Understanding these costs matters.

Angel Squad operates on a membership model with access to co-investment opportunities alongside Hustle Fund. The fees are structured to be accessible while ensuring members are serious about participating. Many communities operate on similar models, typically charging annual membership fees ranging from $1K-$5K.

Some syndicates charge carry on profits (typically 15-20%), meaning if your investments succeed, the syndicate takes a percentage. Others charge flat fees or membership dues. Make sure you understand the fee structure before joining.

The key question is whether the fees are worth it. If a community helps you avoid one disastrous $10K investment, that's paid for itself. If it gives you access to a deal that returns 10x, the fees are noise. If it provides neither, you're wasting money.

The Cost of Bad Advice

One cost that doesn't get enough attention: following bad advice in communities can be expensive.

Not all community members know what they're talking about. Someone might have made three good investments and suddenly think they're the next Peter Thiel. Someone else might have strong opinions based on zero actual experience.

In community settings, it's easy to get caught up in groupthink. Everyone's excited about a deal, so you invest without doing your own diligence. That's expensive. Or someone you respect hates a deal, so you pass, and it becomes a unicorn. That's also expensive.

The solution is to treat community advice as input, not gospel. Listen to people with real track records. Ignore hot takes from people who haven't seen outcomes. Do your own work and own your own decisions.

The Long-Term Financial Reality

I want to be really clear about something: angel investing probably won't make you rich.

Unless you get extremely lucky and invest in the next Uber or Airbnb at seed stage, angel investing returns are nice but not life-changing for most people. The median successful angel investor makes returns that justify the time and effort but don't fundamentally alter their financial situation.

The real wealth creation in venture capital happens at the fund management level. If you raise a $100M fund and charge 2% management fees plus 20% carry, you can make serious money even if your returns are merely good. But building a track record to raise a fund takes years of angel investing first.

That's why many people approach angel investing as a learning experience that might lead to something bigger rather than as a direct wealth-building strategy.

How to Think About These Costs

Given all these costs—capital, time, emotional energy, opportunity cost, fees—should you still angel invest?

Here's my framework:

If you have less than $50K to deploy over 2-3 years: Probably not ready. Focus on building more capital first or consider investing smaller amounts purely for learning.

If you don't have 5-10 hours per month for deal evaluation and portfolio support: Not the right time. Angel investing requires active participation to be worthwhile.

If you can't emotionally handle watching investments fail: Be honest with yourself. Some people can compartmentalize loss; others can't. There's no shame in choosing not to angel invest.

If you're primarily optimizing for financial returns: Index funds are better. Angel investing makes sense when you value learning and network alongside potential financial returns.

If you want to build expertise in startups and potentially transition into venture capital: This might be worth it. The costs become investments in a career transition rather than pure financial speculation.

The Role of Communities in Managing Costs

Angel investing communities like Angel Squad can't eliminate these costs, but they can help you manage them.

By providing curated deal flow, communities reduce the time spent finding opportunities. By offering educational programming, they accelerate your learning curve and help you avoid expensive mistakes. By connecting you with experienced investors, they give you access to advice that would otherwise cost thousands in consulting fees.

The Venture Fellows Program specifically helps people who want to get serious about angel investing by bringing them into Hustle Fund's deal pipeline every quarter. That hands-on experience with professional investors is invaluable if you're considering a career in venture capital.

But communities can't make the fundamental economics of angel investing better. They can help you be smarter about how you deploy capital, but they can't guarantee returns or eliminate the risk of loss.

The Bottom Line

Angel investing is expensive in ways that go beyond the checks you write. It costs capital, time, emotional energy, and opportunity cost. Communities can help manage these costs but can't eliminate them.

If you're considering angel investing, go in with eyes open. Understand that most investments will fail. Accept that returns take 7-10 years to materialize. Recognize that the non-financial benefits might be more valuable than the financial returns.

And most importantly, only invest capital you can truly afford to lose. Not capital you'd prefer not to lose. Capital that could go to zero without affecting your lifestyle.

Angel investing through communities offers a better path than going solo, but it's still hard, risky, and requires resources most people underestimate. That's not a reason to avoid it. It's a reason to approach it seriously and make sure you're actually ready for what you're signing up for.