The Rise of the Gen Z VC

Gen Z has become the target market for many new businesses—and founders and venture firms want to work with them. Hence the rise of Gen Z VCs, an online community where young investors swap knowledge and deal flow. Gen Z VCs has grown to 10k members since launching in November 2020.

“Gen Z is unique in that we’re entrepreneurial, digitally native, values-focused, and we don’t accept the status quo,” said Meagan Loyst, the 24-year-old founder of Gen Z VCs and an early-stage investor at Lerer Hippeau. “When you look at VC, I think it provides a way for us to be all of those things, and that’s why you’re seeing so many Gen Zers getting involved.”

Founders and firms value Gen Z for their unique perspective and awareness of the latest trends. At Lerer Hippeau, Loyst identifies startups and products that will appeal to her generation, which can help founders and investors make inroads in this sought-after market.

“I’m the target customer for many of the businesses we speak to, so my perspective is valuable in those conversations,” said Loyst.

Leveraging Personal Brands

Some Gen Zers, like Jonathan Chang, are earning access to deals off their social media influence.

Chang, 23, decided to start talking about venture capital on TikTok during the pandemic and quickly saw his views and follower count rise. Since then he’s launched his own syndicate and scout program, and now he works as an associate at Global Silicon Valley.

“More so than previous generations, Gen Zers are really great at building their brand, and that’s something that’s helped me a lot personally,” said Chang. “The whole pre-seed and seed space is about who you know, and if founders know you because of your brand, it can go a long way towards earning an allocation.”

Paige Finn-Doherty, 22, was offered her first allocation after the founders read a children’s book she wrote that explains the world of VC. She’s since parlayed that early success into Behind Genius Ventures, a seed-stage firm she co-founded that invests in growth companies. The firm has made a dozen investments since launching in March and counts Tribe Capital and Bonfire Ventures as LPs.

“I think we owe some of our success to the fact that more founders are coming from Gen Z, and they don’t often get to speak to someone who’s their peer during the fundraising process,” said Doherty. “Founders want people their own age on the cap table because we share a similar worldview.”

Lowered Barriers to Entry

Young investors like Loyst, Chang, and Doherty have benefitted from new technologies and financial tools that make it easier to launch startups and funds, as well as a greater democratization of investing knowledge brought on by the internet.

Another big positive development for Gen Z VCs has been new SEC rules adopted last year that increase access to private investments. The rule changes allow more investors to participate in private offerings by adding new categories of individuals who may qualify as accredited investors based on their professional knowledge, experience, or certifications.

Gen Zers have utilized these rules to spin up their own funds and invest in their friends’ businesses and funds. Ryan Li, an angel investor and junior at Stanford University, said his classmates are taking the Series 65 exam to earn accredited investor status. Some have also used their crypto fortunes to meet the wealth requirements.

Li spun up his own AngelList syndicate, Deep Ventures, while taking a pandemic gap year from school. He says the prospect of “forging his own career path” is what motivates him and his friends.

“We’re young in our careers and we have the opportunity to be bold and take some risks,” said Li.

Left to right: Paige Finn-Doherty, Ryan Li, Meagan Loyst, and Jonathan Chang

VCs on Campus

Organizations like Dorm Room Fund are stoking Gen Z’s enthusiasm in VC while they’re still on campus. Backed by First Round Capital, Dorm Room Fund enlists current students to serve as scouts to identify investment-worthy businesses founded by their fellow classmates. Students accepted into the scout program perform due diligence on companies, prepare deal memos, and make investment decisions.

Since launching in 2012, Dorm Room Fund has invested in over 300 companies and worked with 250 student scouts—76% of whom have gone on to found their own company or work in VC.

“The great thing about working with Gen Z students is that, unlike more seasoned investors, they’re not stuck in pattern-matching habits,” said Molly Fowler, CEO of Dorm Room Fund. “They don’t have ironclad rules around what a founder looks like or what a great company looks like. This has put us in a position to make some riskier bets than traditional investors which have really paid off.”

The oldest Gen Zers are still only 25. But as more transition into the professional world, they plan to remake VC (and entrepreneurship) in their own image.

Loyst points to the creator economy, edtech, social gaming, and digital health as some sectors Gen Z VCs are bullish on. She also expects Gen Z VCs to place an emphasis on investing in female and minority founders.

“Gen Z VCs are about changing the narrative that you have to look or be a certain way to start a company or be a venture capital investor,” said Loyst. “The barriers to entrepreneurship and investing have never been lower, and our generation is very aware of the opportunity we have.”