Why your first 20 angel investments will probably suck

This week's edition is sponsored by Mercer Advisors*

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📰 Today's topic: The painful truth about your first angel investments

Your first 10-20 investments are the hardest. And that's probably because you're bad at picking companies since you don't know what good looks like.

You can't tell the difference between a founder who's actually crushing it versus one who's just really good at pitching. You haven't seen enough cap tables to know if those terms are founder-friendly or investor-friendly.

Even if you could spot the great deals, you probably wouldn't get into them. The best deals already have plenty of money chasing them.

This creates a brutal cycle where you need portfolio companies to build credibility but you need credibility to get into good deals.

Let’s talk about it.

Shadow investing: the strategy nobody uses

Before you write your first check, start building your investing muscles.

Let’s take Y Combinator. Go through every company at demo day, decide which ones you'd invest in, and write it down. You can do this with all of the accelerator programs.

Now…check back in 2-3 years.

That "obviously stupid" idea? It's now a unicorn. That "sure thing"? Dead.

An investor in my circle did this for 5-7 years before writing a check. By the time he had capital, he had pattern recognition most angels spend $200k learning.

You can also sign up for syndicates on AngelList to see a lot of deals. You’ll start to get a lot of repetitions on what good looks like simply by seeing a lot.

What to expect in your first 20

Here's some tough love on what to expect from your first few checks. (Sorry in advance):

• Your deal flow will be terrible. You'll likely hear about companies after the allocation is gone.

• Your value proposition will be weak. Founders will take your money but won't really want your advice.

• Your pattern recognition will be nonexistent. You'll invest based on vibes and incomplete frameworks.

This is normal.

Start with small checks

Fight the urge to write "impressive" checks.

Don't write a $25k check on your first investment just to feel serious. That's ego, not strategy.

Instead, write $1k-$2k checks through syndicates. Do 20 of those first.

Twenty $1k investments teach you more than one $20k investment. Founders always value the helpful $1k investor over the silent $25k one.

The magic after investment 20

After 20-30 investments, the flywheel starts spinning.

• Portfolio founders intro you to their friends who are raising

• You start seeing deals far earlier

• Your pattern recognition sharpens

Your portfolio will start referring to each other, and your value as a connector compounds automatically.

This is the compounding most angels never talk about. It's network effects, knowledge accumulation, and reputation building all at once.

The bottom line

Start shadow investing this week. Go to Y Combinator's website and pick 10 companies you'd invest in.

Or, sign up for syndicates on AngelList and other platforms to see deal flow. Look at companies that recently got funded and ask yourself: would I have invested? Write down why or why not.

Those angels with 240+ investments and 10 unicorns all sucked at the beginning too. The difference is they kept going.

What's stopping you from starting today?

– Brian from Angel Squad

🍫 A snack for the road: Zero to $14B in 30 Months

Poolside AI is now worth $14B, and the AI wave is minting decacorns faster than any category in history.

For context: Stripe, Uber, and Airbnb all took 4-6 years to reach a $10B+ valuation. Poolside did it in just over 2 years.

Another fun fact - they went from a $3B to $14B valuation in one year.

The lesson for early investors: if you're in early and the company goes to $14B in 2.5 years - even with all the dilution from multiple massive rounds - you're still looking at life changing returns.

📆 Upcoming Events

Hustle Fund events:

• November 10 - Batter Up SF

• November 10 - Batter Up NYC

• November 12 - Founder Friends SG Fintech Festival

Community Partner Events:

• November 5 - Wild Card: Game Night

• November 6 - Inside the mind of a Spanish VC

• November 6 - Monterrey Tech Week Early Stage Pitch Competition

• Nov 17-22 - Founders Live Prime Time Pitch Competition

Wanna volunteer? Join the events team in your city.

Overheard in SF…probably

“We don't have bugs, we have undocumented features. Every crash is actually a user experience waiting to be optimized.”

*Mercer Global Advisors, Inc. ("Mercer Advisors") is a SEC registered investment adviser. The firm only transacts business in States where they are properly registered or excluded or exempted from registration requirements. Mercer Advisors is not a law firm and does not provide legal advice to clients. Mercer Global Advisors has a related insurance agency. Mercer Advisors Insurance Services, LLC (MAIS) is a wholly owned subsidiary of Mercer Advisors Inc.Mercer Advisors is not affiliated with Hustle Fund.

Mercer Advisors does not promote or offer investment in the Hustle Funds or any of Hustle Fund's underlying portfolio companies or other start up opportunities introduced through Hustle Fund.