Bad Angels: When Early-Stage Investors Hurt More Than Help
In the startup world, angel investors can be a powerful catalyst. They often come in early, take a bet on the founder, and write that critical first check. Beyond capital, they bring strategic advice, open doors through their networks, and share insights or introduce experts who can offer deeper guidance. When it clicks, a great angel can provide the early momentum that propels a startup from zero to one—and sometimes, far beyond.
But not all angels wear halos. Some are, well... *bad*.
Whether driven by ego, ignorance, or misaligned incentives, "bad angels" can cause long-term damage to startups in their most fragile moments. And because these issues often surface quietly, they’re rarely discussed until it’s too late.
So, what actually makes an angel investor “bad”? And more importantly, how can founders spot the warning signs before it’s too late?
Below are seven types of bad angels—along with the red flags that often give them away.
The Hobbyist Angel: These angels are often accomplished in other fields—finance, accounting, law, dentistry, oil, media—you name it. But they have little to no experience with software, AI or advanced technology startups. They might question your exit timeline right away or wonder why you're not using his brother’s CPA firm instead of your seasoned part-time CFO and controller with 40 years in tech. Their expectations are wildly misaligned with startup reality. That’s what makes them a bad angel.
Red flag: They call or want in-person meetings and ignore pleas to take it easy, get to understand the market and products, etc.
The Overstepping Angel: This type of investor is sometimes a former operator from a large company who thinks the first check buys them a co-founder title. They micromanage want a seat at every table, input on every decision, and veto power over things outside their lane. Their involvement drains time, adds confusion, and makes it harder for the team to move fast and learn.
Red flag: They push for operational influence before you’ve even found product-market fit—sometimes based on nothing more than a single customer intro. They may also ask for an advisor title to formalize their involvement early on.
The Phantom Angel: These investors promise all manner of support-customer introductions, engineer resumes, introductions to other angels, personal follow-on funding, mentorship-but disappear after wiring the money. In some ways, that's fine (not every check needs to come with guidance), but if a founder was counting on their involvement, it's a silent gut punch.
Red flag: They over-promise before the round closes but show little follow-through – especially when it counts.
The Messy Cap Table Angel: Some angels bring more complexity than capital. They push for aggressive terms—like outsized ownership for a small check, board seats, or liquidation preferences that raise eyebrows with future investors. Rather than helping the company move forward, they create structural friction that can stall future fundraising.
Red flag: They prefer convertible notes to a standard YC SAFE, push for side letters, and expect the startup to cover their legal fees.
The All Talk, No Action Angel: This angel claims they “badly” want to be your next round, promises a specific check size, and then quietly ghosts when it's time to sign the DocuSign and wire the funds. In the startup world, many see this as the lowest form of angel—talking a big game with zero follow-through.
Red flag: Masters of being everywhere and nowhere, they offer lots of smiles, vague advice, and empty enthusiasm—but nothing of real value.
The Ego-Driven Angel: These angels aren’t in it for the startup journey—they’re in it for themselves. Rather than supporting you through the ups and downs, they judge, second-guess, and sometimes quietly sow doubt among other investors or within your team. Their motivation is rooted in ego, not in helping you beat the odds and build something great.
Red flag: Early tip-off: they talk about themselves extensively and don’t to care deeply about your startup. In addition, over time you will discover they care more about being right than being useful.
The Ghost Angel: These angels write a check and vanish—not just in presence, but in reputation. When it comes time to raise the next round, they’re nowhere to be found. Worse, their silence or reluctance to publicly back the company can cast doubt for future investors.
Red flag: They dodge conversations about pro-rata rights or any follow-on commitment.
For a deeper look at problematic angel investor behavior, check out an earlier post “Crappy Angel Behavior”.
Why This Matters
Early-stage startups are fragile. A single misstep during the zero-to-one phase—especially one that affects financial structure or leadership perception—can have lasting consequences. Even a well-meaning angel can unintentionally weigh a startup down, or throw it off course, grounding its potential instead of helping it soar.
What Founders Can Do
Do more than just a Google search (though definitely start there—and go deep):
Reference-check your investors the same way they vet you. Aim for at least three solid references.
Ask for specific examples of how they've helped other startups succeed—not just vague promises.
Stick to standard terms like YC SAFEs and clean ownership structures. Complexity early on can backfire.
Set expectations early. Be clear about what kind of support you want—and don’t want.
If they’re taking on an advisor role too, make sure what they promise is clearly scoped out in an SOW in writing.
Be disciplined with your cap table. Early dilution should be a calculated move—not a move made out of fear or pressure.
What Good Angels Look Like
The best angels are calm, curious, and aligned. They have domain expertise and years of experience – a literal track record – helping companies. They understand the odds, respect the founder’s vision, and contribute with humility. They know when to offer advice—and when to simply cheer from the sidelines.
Not every angel investor is good, and not every bad one is malicious. But for founders navigating the chaos of early building, pattern recognition matters. Spotting a “bad angel” early might just save you a lot of grief, and possibly your company.
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If you're a founder who’s had a brush with a bad angel—or an investor working to be better—I’d love to hear your thoughts.