How Gaingels Gets Access to Great Deals by Promoting LGBT+ Leadership

Gaingels launched in 2014 with a simple premise: Invest in LGBT+ founders.

Gaingels’ commitment to fostering inclusion and representation in the venture ecosystem has earned its membership network access to a number of great deals. These include Varo, Philo, Better.com, YieldStreet, Overtime, Cerebral, Brex, and Masterclass, to name a few.

To date, the Gaingels syndicate has invested $300M in over 300 deals and built a network of over 1k accredited investors—many of whom identify as LGBT+. Together, the group aims to change how startups are founded, funded, and led.

“Venture is lacking in diversity in the C-suite, the boardrooms of portfolio companies, and in the LP networks that contribute the value and receive the wealth,” said Lorenzo Thione, former founder of PowerSet (sold to Microsoft in 2008) and current managing director at Gaingels. “Our group of diverse investors is aimed at addressing the shortcomings of diversity in all those areas and helping the LGBT+ community reinvest in itself.”

Gaingels makes investments ranging from $100k to $2M in late-seed to pre-IPO companies with LGBT+ representation in leadership roles or companies that actively value diversity and resolve to enlist Gaingels’ help in building diverse and inclusive teams. These investments typically come in the form of special purpose vehicles (SPVs).

Lorenzo recently talked to AngelList about Gaingels’ investment thesis and the importance of investing in LGBT+ and other underrepresented founders.

Matthew Speiser: How does Gaingels’ brand and positioning get your members access to great deals?

Lorenzo Thione: Whenever we have a conversation with a founder or co-investor, it’s about the value we can bring to an organization beyond capital. That falls under four different pillars:

• Recruiting. We co-founded a talent recruitment business that allows companies to hire from a population that is intrinsically diverse.
• Diversifying leadership. As a free service to our portfolio companies, we source, vet, and recommend independent board members from underrepresented backgrounds. This is increasingly important because board diversity is becoming a requirement for listing on certain stock exchanges.
• Business development introductions: Through our membership network, we are able to provide founders with access to additional capital, as well as our investors’ business acumen and contacts. We also hold monthly events for our portfolio companies and membership network.
• Follow-on investment: We aim to carry our diverse membership (70% identify as LGBT+, 30% are women, and over 25% are BIPOC) with us on cap tables as our portfolio companies scale. We see this as strategic and also the right thing to do—as it often provides employees with representation in the leadership of the company.
  

MS: What value do you provide to companies you invest in?

LT: Besides the recruiting and networking aspects, we often help spur conversations internally that might not have been happening before. This month during Pride, I’ve met with the teams from 12 different portfolio companies to talk about the importance of DEI (diversity, quality, and inclusion) in business and venture.

Sometimes just having our name on the cap table is impactful. A company we invested in recently announced the funding round to their employees, and many of them thanked the CEO for including us in the round. To them, it meant their work to help the company succeed would benefit investors from diverse communities, which they recognized as their own communities. It meant a lot to them to see their own values aligned with those of the stakeholders in their work.

MS: How does Gaingels support the LGBT+ startup/venture ecosystem?

LT: So often the diversity conversation in venture has revolved around binary gender and ethnicity at the expense of other forms of underrepresentation and diversity. We focus on diversity in leadership broadly in venture—but with the very explicit inclusion of LGBT+ and gender-expression. This is reflected in the way we support diverse teams and help others become more inclusive.

MS: How much progress do you think the venture community has made in recent years around diversity, equity, and inclusion?

LT: Things can obviously always be better, but the positive outlook is that this is now an issue the entire venture community is taking seriously.

It’s a difficult systemic challenge we all face: there are more women in VC partnerships than in the past, but their percentage is still far below that of their male counterparts. BIPOC partners are also underrepresented, as are LGBT+ individuals. More funds exist that focus on underrepresented founders. But there's so much more that can be done in addressing more inclusive representation, from all groups, at all levels of leadership. I think our growth is a sign that things continue to move in the right direction. In 2018 our members invested $5M. This year they’re projected to invest over $300M.

There’s a newfound interest in promoting DEI, but people are often uncertain of what they can and should do to have real impact. We’ve built a reputation of supporting companies that embrace LGBT+ leadership. Because of this, our founders tell other founders about us, and co-investors embrace us. In turn, we see more access to deals from teams that want to bring about diversity. It’s a virtuous circle.

MS: What does a future look like where the companies in Gaingels’ portfolio realize their potential?

LT: As a society, we need to get to the point where most people no longer say venture has a diversity problem. If our portfolio companies grow up to be successful, it’ll go a long way towards elevating opportunities for leaders who are diverse and inclusive. That will feed into our shared understanding of whether we do have true diversity.

If change needs to be enabled from the top, the venture ecosystem ought to enable more diverse players to enter the pipeline and get to the top. That’s why support of diverse founders and inclusion and access for diverse investors is so important.

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To learn more about Gaingels, visit their website.