As managing director at Gaingels, Thione had the ambitious task of creating social change in venture capital. The angel group began as a collection of LGBTQ investors who wanted to back founders from the community. But if Gaingels wanted to change the larger culture, it couldn’t just preach to the converted.
“You make change when you branch out of your echo chamber,” Thione said.
Starting in 2018, the New York angel group changed its structure to an investor syndicate and expanded its scope. Going forward, it would invest in startups of all stripes while making a commitment to help its portfolio companies improve diversity in the boardroom, the executive suite, among their employees and on the cap table.
Since then, the syndicate has become an engine of dealmaking. Gaingels has participated in more than 250 deals this year, nearly double last year’s total and up from 69 in 2019, according to PitchBook data. In the process, it has earned a place in some of the year’s largest deals, including Databricks’ $1.6 billion Series H round in August and BlockFi’s $350 million Series D in March.
The new structure has allowed Gaingels to build up a network of co-investors that includes venture capital firms like 10x Capital, which also prioritizes diversity in its investments, and the corporate VC arms of Salesforce and Citi.
The rise of angel groups and syndicates has contributed to the growing pool of US angel and seed-stage funding, which together totaled over $11 billion in the first three quarters of the year, out of the $239 billion in total US VC-backed deals, according to PitchBook data. Platforms like AngelList have contributed to a wider acceptance of the syndicate model, which allows members to invest on a deal-by-deal basis.
Gaingels’ approach is part of a trend of investors banding together to fulfill a purpose. Other prominent examples include Broadway Angels, a group of female investors, and Bill Gates’ Breakthrough Energy Ventures, a climate tech firm that was formed from a coalition of private investors.
Gaingels’ momentum has been helped by a buzzing venture market that is increasingly open to non-traditional sources of capital, as well as a cultural movement to prioritize diversity, equity and inclusion, Thione said.
That desire to create a diverse company is what attracted Caribou, an auto refinancing startup formerly known as MotoRefi, to work with Gaingels. Caribou CEO Kevin Bennett wanted underrepresented voices to be present among all stakeholders, not just employees.
“From a cap-table perspective, that can be hard,” Bennett said. “The investor group tends to be less diverse.”
Bennett brought in Gaingels during a Series A round in 2020 on the recommendation of another investor, Motley Fool Ventures. The idea was that the syndicate could leverage its network to help Caribou in its mission of inclusivity.
That theory was put to the test when Gaingels attended a company all-hands meeting as a guest speaker. There, a team member came out to their colleagues, Bennett said, in a striking example of the investor group’s impact.
Like many venture capital firms today, much of Gaingels’ efforts go into helping startups find talent, instead of merely acting as a funding source. The group operates a job portal for its portfolio companies and helps them to source applicants for board positions. According to Thione, those referrals are built on a network of around 2,400 members, about 70% of which identify as women, people of color or LGBTQ.
“Recruiting from your network cuts both ways,” Bennett said. “You get people who are as diverse—or not—as you are.”
Part of Gaingels’ success stems from a concerted effort to streamline its process. Members of the syndicate invest through special-purpose vehicles, which is simpler for companies than working with multiple angel investors. Gaingels is also flexible with check sizes and willing to take small allocations.
All of those features make the syndicate easier to work with than most angel groups, which from a founder’s perspective often require a lot of work for little investment, Bennett said.
For Gaingels, the double bottom line of promoting change and generating returns is self-reinforcing, Thione said. As the network grows, Gaingels attracts founders who find value in its talent-sourcing services. That deal flow in turn attracts more investors, growing the capital that the syndicate can deploy.
“It’s sort of a flywheel that starts to spin faster and faster,” Thione said. “I think that our growth this past year has been a demonstration that the flywheel has started spinning.”
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