📕 Startup term you should know

Ever heard of a Simple Agreement for Future Equity (SAFE)?

It's basically an IOU for equity. Investors give companies cash today, and in return, they get to convert that into actual shares later - either when the company does a proper priced round or if it gets sold or liquidated.

My insider scoop: SAFEs aren't slices of pizza directly, but think of it like a ticket for a slice of pizza - investors receive these tickets, which gives you the right to come back later to claim your slice. The concept of a fundraising "round" is basically dead at the early stages because most rounds get done on SAFEs, which means you don't need a lead to raise money.

📰 Today's topic: Why following big-name VCs doesn't actually work (unless it's later than you think)

A common question that angel investors grapple with: should I follow high-signal investors into rounds?

You know the situation. You see Andreessen Horowitz or Sequoia leading a seed round. The FOMO kicks in hard.

"If they're in, it must be good, right?"

Actually... no.

The data shows something surprising.

The counterintuitive finding

In very hyped rounds at the earliest stages – seed rounds or even Series A – those hyped rounds are not correlated with high success.

But for much later stage rounds? It's highly correlated.

If you co-invest alongside top-tier VCs in late-stage rounds (think Series B+), your likelihood of doing well in those deals is very high.

So what's going on here?

The product-market fit problem

This all boils down to what is actually the number one problem when companies get started: the ability to find product-market fit.

Everyone's got a different definition for PMF. But in essence, it's when a company builds a product that solves a problem people want to pay for, and the company can find those customers repeatedly, sustainably, and scalably.

There's a lot packed into that definition.

And here's the thing: most companies don't get to real product-market fit until at least Series B or even later.

Series A companies may have some semblance of product-market fit. But generally not all the components. They haven't proven they can scale customer acquisition yet. Or their unit economics are still being figured out.

Finding product-market fit is incredibly hard. Like, even serial entrepreneurs often struggle with it.

They may know how to run a business. They may know how to hire and manage teams.

But finding PMF is a lot of luck mixed with skill.

Why early-stage investors can't predict PMF

Here's what this means for investors: early-stage investors also don't know what products will end up finding product-market fit.

In those hyped seed rounds, nobody knows whether that company will be able to find PMF.

Not even the smartest investors in the world.

The failure rate is still really high at that stage, regardless of who's writing the checks.

When signal actually becomes reliable

But in late-stage rounds these companies have already found product-market fit.

They've proven they can acquire customers scalably. They've shown their unit economics work. They've demonstrated sustainable growth.

So now it's much more of a matter of figuring out whether you're paying the right price for the growth rate, the traction, and the trajectory of that company.

It's still not a guarantee. But the evaluation becomes way more reliable because you're analyzing existing data instead of predicting the future.

The company is clearly a going concern. The hard part – finding PMF – is behind them.

What this means for your angel strategy

If you're looking at later-stage deals (Series B+), following high-signal investors makes a lot of sense.

Those brand names mean something at that stage. They've done their diligence. The company has proven traction. You're buying into something real.

But if you're looking at early-stage deals like seed rounds?

Sure, consider the perspective of experienced investors. Their pattern recognition matters.

But just know that even with the best investors involved, the failure rate is still really high.

Don't let FOMO drive your seed-stage decisions. The brand name on the cap table doesn't reduce the fundamental risk of pre-PMF companies.

The takeaway

Early stage: Signal doesn't predict success. Even top VCs can't see through the PMF fog.

Late stage: Signal becomes meaningful. The hard part is done, and smart money tends to cluster around proven winners.

Adjust your strategy accordingly.

And maybe save your "follow the smart money" instinct for when the money actually has something concrete to follow.

What stage are you seeing the most FOMO in right now – seed or later rounds?

-Brian from Angel Squad

🍫 A snack for the road: Title

Ever wondered how people actually break into venture capital without fancy degrees or knowing the "right people"? Nicole DeTommaso did it with a 10-page deck and a whole lot of hustle. Now she's here to spill the tea.

She started doing the work of a VC before anyone gave her the title. Writing checks (even small $1K ones), sourcing deals, and supporting startups built the credibility that made traditional credentials irrelevant.

Now Nicole helps other aspiring investors do the same. Through her newsletter VC Demystified, she's guided people into roles at NEA, Eniac, Coinbase Ventures, and more, proving that angel investing is the fastest way to demonstrate you can do the job.

Nicole is joining us November 13, 2025 at 1 pm EST for a 45-minute bootcamp on how to break into VC through angel investing. She'll share her firsthand story, give tactical tips, and answer your questions alongside me!

If you've been waiting for permission to start your VC journey, this is it.

Pro tip: RSVP and you’ll get the recording

Overheard in SF…probably

We're building a platform for platforms. It's a meta-meta-business that connects businesses that connect other businesses.