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.

When you're writing checks into early-stage startups, most of your decisions will be wrong. That's not pessimism, it's math. Even top-tier VCs have hit rates around 10-20%. The question isn't whether you'll make mistakes. The question is whether you'll learn from them.

This is why you need to write deal memos.

What Is a Deal Memo, Actually?

A deal memo is your documented reasoning for why you're investing (or passing) on a company. It's not a formal legal document. It's your investment thesis on paper. You write it before you commit capital, while your thinking is still fresh and before hindsight bias kicks in.

We write these for every investment. Not because we're required to, but because the process itself makes us better investors. Writing forces clarity. You can't hide behind vague gut feelings when you have to articulate why you believe this founder, at this stage, building this thing, will succeed.

A good deal memo typically covers:

• What problem is the company solving?
• Why is this solution unique or better?
• Why this team, why now?
• What are the key risks and assumptions?
• What needs to go right for this to be a big outcome?
• What's our investment thesis?

The format doesn't matter much. What matters is forcing yourself to think through the decision systematically.

The Real Value: The Six-Month Review

Here's the part most people skip, which is actually the most valuable: six months after you invest, go back and read your memo.

What were you right about? What were you wrong about? Which assumptions held up? Which fell apart? This feedback loop is how you develop better pattern recognition.

What to Actually Include

The best deal memos identify the key drivers of success and risk upfront. What specifically needs to happen for this company to work?

For a marketplace, maybe it's achieving liquidity on the supply side first. For a SaaS product, maybe it's proving retention in a specific customer segment. For a hardware company, maybe it's hitting a certain cost structure in manufacturing.

Be specific. "The team needs to execute well" isn't useful. "The team needs to close at least 10 enterprise contracts at $100K+ ARR within 12 months to prove the enterprise sales motion works" is useful.

You also want to call out the known unknowns. What are the things you can't evaluate yet because it's too early? For example, at pre-seed, you might not have retention data. That's fine, just note it as something you'll need to monitor closely.

Deal Memos for Solo Angels

You might be thinking, "I'm just a solo angel investor. Who am I writing this for?"

You're writing it for future you.

Twelve months from now, when this company either takes off or implodes, you won't remember your exact reasoning for investing. You'll remember the outcome and reverse-engineer a story that makes sense. This is how bad investors stay bad, they never learn from their mistakes because they convince themselves they had different reasons for investing than they actually did.

The memo prevents this. It's your past self talking to your future self, saying, "Here's what I actually believed when I wrote this check, not what I wish I'd believed."

The Portfolio Company Perspective

There's a secondary benefit to writing deal memos that people don't talk about: it helps you be a better board member or advisor.

When you've documented your original investment thesis, you can track whether the company is executing against those key drivers you identified. If the thesis was "they need to prove retention before scaling sales," and they're instead burning cash on sales and marketing while retention is still weak, you can flag that issue early.

It's not about being right or wrong in your original memo. It's about having a framework for evaluating progress that's grounded in the specific challenges and opportunities you identified at investment time.

The Feedback Loop Is Everything

The startups that work often work for different reasons than we expected. That's normal. The deal memo helps you identify when your thesis is playing out versus when the company is pivoting into something new (which might be better or worse than the original plan).

We're obsessed with building these feedback loops. We write memos. We revisit them. We talk about what we got wrong. This is how we get better at seeing patterns in early-stage companies, not because we have some magical intuition, but because we've built a system for learning from our mistakes.

If you're an angel investor and you're not writing deal memos, start today. They don't need to be long. They don't need to be perfect. They just need to capture your thinking before you write the check.

Then, six months later, pull them out and be honest with yourself about what you got right and what you got wrong. Do this for 20-30 investments and you'll start seeing patterns. You'll get better at identifying which companies are likely to succeed and which risks are worth taking.

That's the whole game: making slightly better decisions than you did last year, compounded over a decade.

If you're serious about becoming a better angel investor and want to learn alongside people who are building these same systems and feedback loops, Angel Squad offers a community of investors committed to improving their craft through shared learning and tactical insights.