How to Avoid Groupthink When Investing

Brian Nichols is the co-founder of Angel Squad, an angel investing community where aspiring and active angels learn from Hustle Fund’s approach, review curated deal flow, and connect with peers.

A respected investor says they're in. The group chat gets excited. Your unanswered question about customer demand starts to feel like a reason you're missing the opportunity.

That pressure can affect your next check, a follow-on investment, or an exit decision. A few deliberate habits can help you learn from other investors while keeping ownership of your reasoning.

What groupthink looks like in angel investing

Groupthink happens when pressure to agree crowds out independent assessment and honest disagreement. A friendly, experienced group can still make it uncomfortable to question the deal everyone loves.

Consensus alone isn't evidence of groupthink. Several investors can reach the same conclusion after doing their own work. The warning sign is how the group reaches agreement, especially when concerns disappear without being answered.

Watch for these moments:

• Status replaces reasoning. “She's a great investor” becomes the entire case for writing a check.
• Silence becomes approval. Nobody asks each person for a view, so an unanswered concern vanishes.
• Urgency closes the discussion. A deadline ends questions about the business rather than setting a decision time.
• Dissent becomes personal. Someone raising a concern is described as negative, inexperienced, or unsupportive.
• Every new fact supports the favorite. Weak customer evidence becomes “early days,” while strong customer evidence proves the thesis.

Group enthusiasm can also affect which information you seek. In three decision experiments, Stefan Schulz-Hardt and colleagues found stronger preferences for supporting information when more group members initially favored the same option. Agreement deserves scrutiny even before the final vote.

Adam Spector's lesson from following the crowd

When we interviewed angel investor Adam Spector, he shared a decision he regretted after a portfolio company was acquired by Block, then known as Square.

In Adam's account, investors had two choices:

1. Take cash at a loss, receiving at most 25 cents for each dollar invested.
2. Exchange their ownership stake for Block shares in what he described as a 1:1 swap at the same value.

This was before Block's initial public offering, when its shares began trading publicly. Adam and his fellow investors didn't know what those shares would eventually be worth. Prominent investors in the round chose cash, and his team followed.

His regret centered on the reasoning. As he put it, “We made an investment decision by following the crowd, without thinking independently through our own principles.”

That recollection doesn't establish which choice was appropriate for every investor. Someone who needs liquidity, meaning access to cash, can reasonably make a different decision from someone willing to hold uncertain equity for years.

The missing step was an independent comparison of the options against his team's own goals, constraints, and beliefs. Another investor's decision can inform yours. It leaves your reasons unwritten unless you do that work yourself.

How to avoid groupthink before you write a check

Build the discussion around independent views, the evidence behind them, and a clear decision rule. These habits preserve your starting position and expose unanswered questions. They can't establish which startup will succeed.

1. Write your view before reading everyone else's

Before the deal lead shares a recommendation or the group chat fills with commitments, write a short, private assessment. A deal lead is the person coordinating the opportunity or its review.

Use five prompts:

• Current decision: Invest, pass, or wait.
• Investment thesis: The specific reason you believe this company could become a valuable business.
• Strongest support: The customer, product, founder, or financial evidence behind that belief.
• Strongest objection: The risk or alternative explanation that could overturn your case.
• Change-of-mind condition: The information that would move your decision, plus your current confidence and why.

Date the note and keep the original. You can write a deal memo when a decision needs more depth, but a few clear sentences preserve a starting position.

If you've already heard the room's view, record that too. You can still separate the reasons you held beforehand from the reasons you adopted during discussion.

2. Separate business evidence from investor signals

Social proof is the reassurance you get from seeing other people make a choice. “Three well-known angels are investing” is social proof. A customer explaining why they renewed is business evidence.

The investor signal can contain useful information. Its value depends on what sits behind it.

A 2025 angel-group study by Henrik Wesemann Lekkas and colleagues distinguishes visible commitments by investors who haven't previously invested in that particular venture from reinvestments by its existing backers. Those signals may reflect different information. The study's field evidence comes from one angel group, so it doesn't make either signal a universal rule.

Ask the lead what they personally reviewed, which conclusions depend on the founder's account, and what remains unknown. Ask whether another investor's goals, time horizon, or terms differ from yours. Keep shared material within appropriate confidentiality boundaries.

Organize the case into observed evidence, company claims, investor assumptions, and unknowns. Our angel diligence checklist gives those questions more structure.

3. Let the influential person give their verdict later

A lead can share documents, customer findings, and open questions before everyone forms a view. Hold their invest-or-pass recommendation until each participant has submitted an assessment or had a first turn to speak.

This is a useful facilitation habit when one person's reputation carries extra weight. In a small field experiment on leaders, teams whose leaders delayed their opinions generated more alternative solutions. The setting was university residence-life teams, so treat it as support for the discussion habit rather than evidence about investment returns.

Give each person an uninterrupted first turn. Ask quieter participants what their work experience helps them notice, especially if it differs from the lead's background.

4. Make genuine disagreement safe and specific

Writing about our team in Democratizing Knowledge (2021, p. 60), our co-founder and general partner Elizabeth Yin notes that “we often DISAGREE!” Investors can share a mission and reach different conclusions about a company.

A facilitator should invite the strongest concern and ask for the reasoning behind it. Thank the person who raises it, then give it a real response before moving on. Critique the assumption or evidence. Leave judgments about the person's loyalty or intelligence out of the discussion.

For example, “This feels risky” gives the group little to address. “The founder describes repeatable onboarding, but both customer calls described weeks of custom setup” identifies a specific tension.

An assigned critic doesn't replace this openness. In a study of genuine dissent, Schulz-Hardt and colleagues found that real differences in initial preferences reduced the search for supporting information more effectively than assigned devil's advocacy. Give people room to hold a different view before asking someone to play a role.

5. Choose a challenge that fits the decision

Sometimes everyone starts enthusiastic, or the disagreement stays vague. A structured challenge gives the group a defined job. Three useful formats serve different needs:

• Devil's advocacy: One reviewer challenges the favored case. Ask them to identify the weakest assumption and present the strongest evidence against it. This fits a focused question, such as whether customers will pay without extensive custom work.
• Dialectical inquiry: Two reviewers develop plausible recommendations based on different assumptions. One might argue for investing because onboarding can become repeatable; another might argue for waiting because services work appears essential. Each explains what evidence supports their case and what would change it.
• Red-team review: A fresh reviewer or small group looks for overlooked weaknesses, alternatives, and failure paths. Give them the relevant materials and a narrow question. A short pre-mortem, imagining that the investment failed and explaining why, can surface assumptions the pitch left unexplored.

Choose one format and set a short time limit. End with the unanswered question, its decision impact, and who will gather the missing information. A long argument without a next step adds meeting time without improving the case.

6. Decide without requiring unanimity

Agree beforehand on who has decision authority. In a discussion among individual angels, each person may be deciding about their own money. A formal investing group may have a defined voting rule.

After the challenge, collect invest, pass, or wait decisions again, preferably privately before anyone announces theirs. Ask what changed and which evidence caused the change.

A wait decision needs a named missing fact and a decision deadline. If the financing closes before that fact is available, passing is an available choice. The group's excitement doesn't remove the uncertainty or expand your risk budget.

Unanimity can emerge. Allow a reasoned minority view to remain in the record even when the group proceeds.

7. Review your reasoning after the decision

Keep your original assessment beside the final one. Record the evidence that changed your mind, the uncertainty you accepted, and any question that stayed unresolved.

As our co-founder and general partner Elizabeth Yin writes in Democratizing Knowledge (2021, p. 131), “The more disciplined you are in your thought process/rubric, the more you can improve over time.”

Revisit the relevant assumptions when company updates arrive. If you expected customers to adopt the standard product, compare that expectation with onboarding work and customer behavior. If you passed, preserve what you knew then instead of rewriting your reasons after the company succeeds or struggles.

Adam also warned about becoming jaded after hearing versions of an idea fail repeatedly. Record what is different about the current founder, customer need, or market conditions. Past experience should give you better questions while leaving room for new evidence.

A good process can still produce a loss. A weak process can get lucky. Startup investments can fail, and a thoughtful debate can't remove that risk.

Put the process to work in one deal discussion

Consider a hypothetical software startup raising an angel round. A respected investor is participating, and the group chat sounds ready to commit. You like the founder, but you don't yet understand how much work each customer requires.

Your private note says “wait.” Your thesis depends on customers adopting a repeatable product. One peer writes “invest” because the customer problem is painful; another writes “wait” because implementation appears labor-intensive.

That difference sets the agenda. The group requests onboarding examples, asks customers about the work involved, and distinguishes standard product use from custom services. The lead explains what they learned after everyone has shared an initial assessment.

The final decisions can still differ. One investor may accept the uncertainty; another may pass. Each can now explain the choice using business evidence and their own constraints. The prominent investor's name remains context rather than the whole investment case.

Learn with peers while keeping your own judgment

Our community gives you people to learn from and investment reasoning to question. Bring your own assessment to the conversation, including the part you're least sure about.

Apply to Angel Squad to learn from our investing approach, discuss opportunities with peers, and build your own decision process.

This material is educational and is not investment, legal, or tax advice. Startup investments are speculative, illiquid, and long-term; you can lose your entire investment. Seek independent advice from qualified financial, legal, and tax professionals for your circumstances.