10 Red Flags That Make Smart Angel Investors Walk Away - 1/15/26

📆 Upcoming Events

• 🇰🇷 January 20 – Seoul, South Korea – Founder Friends

• 🇲🇽 February 2 – Mexico – Founder Friends

Applications for the HF ambassador program are open! Join the events team in your city

Crying Over Your Talent Budget? Fractional Jobs Is Your New Best Friend*

Are you thinking, "I need expert-level help for my startup... like yesterday." But a full-time hire is either too expensive or just not needed?

We just found Fractional Jobs - They connect you with operators from places like Figma, Airbnb, and Stripe who have done it before, and you can hire them for 5-20 hours a week.

They can help you find:

• A Fractional Marketing Director who'll ship an actually effective launch campaign

• A Fractional Head of Sales who'll build the right sales process the first time

• A Fractional CFO who can get you ready for your next fundraise

Hustle Fund portcos, and other founders who read this newsletter, have already used Fractional Jobs to make hires.

And the best part is you can hire talent directly. No 20% markup. No middlemen.

The Founder Playbook readers get 40% off if you mention Hustle Fund when booking a call.

Find your fractional talent here →

*this is sponsored.

📰 Today's Edition: 10 Red Flags That Make Smart Angel Investors Walk Away

Early-stage investing is a game of stacking probabilities.

You can't measure any single variable with absolute certainty, so the question becomes: what variables should you care about, and what should make you pause?

The data is clear on why startups fail. The two biggest reasons: nobody wants what you're selling, and co-founder conflict tears the team apart.

Everything else is noise.

Here are 10 warning signs related to these areas that should make you walk away.

Customer Red Flags

Flag #1: Vague customer profile

The founder can't clearly articulate who will use the product. They say "everyone could be our customer" or "any business that wants to save money.”

Test them: Ask what a good customer looks like. Then ask what a bad customer looks like.

Strong founders can draw clear boundaries. Weak ones think boundaries limit their TAM.

Flag #2: "We have no competition"

This is almost always wrong.

Even if there's no tech solution, people are solving the problem somehow—Excel spreadsheets, manual processes, or elbow grease.

If someone is spending money or time on an existing solution, you need to be 10x better to get them to switch.

Flag #3: Can't speak in customer language

The founder describes the problem using their own terminology, not the words customers actually use.

Ask: "What exact words do customers use when describing this problem?"

If they can't tell you, they haven't talked to enough customers.

Flag #4: Falling in love with the solution, not the problem

They talk more about features than pain points. When you push on whether customers actually want this, they deflect to how cool the technology is.

The best founders are problem-obsessed.

Their solution is just their current best hypothesis.

Flag #5: No learning velocity

Early stage is about learning faster than you're burning cash.

The founder can't tell you what they've learned in the past month, or what assumptions they've validated or invalidated.

They're still operating on the same hypotheses from six months ago.

Team Red Flags

Flag #6: Equity split doesn't make sense

50-50 despite clearly asymmetric contributions, or it's been "left to decide later."

Both signal the team is avoiding hard conversations.

If they can't talk honestly about equity, they won't be able to discuss strategy, hiring, or pivots.

Flag #7: Weak founder-market fit

The founder has no particular insight into this market. They're not a customer, haven't worked in the industry, have no unfair advantage.

You don't need domain expertise to start a company.

But you need some edge. Otherwise, why will you win?

Flag #8: Can't attract early talent or customers

The founder says they can't hire or get customers until they raise money.

But the best founders find ways to get initial traction with almost nothing.

Inability to attract anyone before funding signals poor resourcefulness and salesmanship.

Flag #9: Founder lacks self-awareness

They can't articulate their own weaknesses or what they need to learn. They think they can do everything themselves.

Or they blame external factors for every setback.

The best founders have deep self-awareness and take responsibility for outcomes.

Business Fundamentals Red Flag

Flag #10: Unit economics are magical thinking

The founder waves away questions with "we'll figure it out at scale" or "the model will improve over time."

You don't need profitability on day one.

But you need a credible path where the math eventually works.

The Bottom Line

None of these flags are absolute disqualifiers in isolation.

Sometimes a brilliant founder with weak market knowledge is worth backing because they'll figure it out.

But these are the variables I'm weighing.

Early-stage investing is about stacking probabilities in your favor. Each flag is a probability against you.

Stack too many, and the odds stop making sense.

The question is never "Is this company going to succeed?"

The question is: "Given what I can observe today, what are the odds this team can pull this off?"

Red flag! Green flag!

Dunky from Hustle Fund

🎥 Watch This