As part of our Network Investing Program, we invest in the funds of top early-stage investors to identify and back exceptional founders. We launched the program in July 2017, and currently have 35 active angel fund managers who have a combined portfolio of 850+ companies.
In this Q&A with Todd Goldberg, one of the investors in the program, he shares the inside scoop on his journey to become the angel fund manager he his today, how he feels the investment landscape is changing, and the trends he and his fund co-manager, Rahul Vohra, are most excited about pursuing.
What got you into investing? How long have you been doing it?
First and foremost, I’m a builder. I’ve founded two companies, and have designed and launched over a dozen products. I love creating something from nothing, and I’ve found that investing in startups is an effective way to help others do it too.
There’s something special about helping founders build their product and company in the earliest days. I’ve been lucky enough to learn early on that this is where I enjoy spending my time. And if I focus my time on the right companies, I believe great returns will follow.
I made my first angel investment in 2014 into Partender, an inventory solution for bars. Since then, I’ve slowly ramped up my investing and have now backed over thirty startups.
I’m still learning every day, but one thing is clear: early-stage investing is more art than science. It’s nearly impossible to consistently tell what will be big when you’re investing this early. There are simply too many variables in play.
You have a partnership with Rahul Vohra from Superhuman. How do you split the duties of fund management?
Yup. We actually met through Partender because we both invested. Not long after meeting, Rahul pitched me Superhuman during their seed round in 2015. I ended up investing as he can be quite convincing!
Since then, we’ve gotten to know each other a lot better. Over time, we started co-investing together more as we found we had complementary interests and often evaluated startups through a similar lens. For us, that means digging deep into the product, founders, and execution.
With the angel fund, we’re doing the same thing, but on a larger scale. Given that Rahul is largely focused on Superhuman, he spends most of his fund associated time helping our portfolio companies as needed. While the majority of my time is split between meeting new companies and helping the ones we invested in.
It’s an effective combo. On the sourcing side, we combine networks to help us find the best founders. Once invested, we jointly support a company in a variety of ways around product, go-to-market, follow-on fundraising, etc. It’s a lot of fun.
It sounds like a smart combination — and fits squarely within the new wave of operator-angels raising small funds to scale up their seed investing. What do you think are some of the macro implications from this trend?
I think an overarching theme is that founders want to raise from other founders and operators. In 2020, capital is abundant and commoditized. Founders have a lot of leverage right now, and they’re often choosing to raise from their peers over traditional firms for their earliest capital.
What do you think has spurred this change? Haven’t angels always been active in Silicon Valley?
Yes, but I think what’s changed today is both the number of angels and general access to them.
It feels like everyone is an “angel” investor to some degree these days. Some use personal capital while others have side funds or syndicates. It’s less about the capital source and more around what the angel offers — skills, network, distribution, experience, etc.
It’s also not just current and prior founders who are investing. Many are top notch operators coming from alumni networks of successful startups (i.e. Uber, Lyft, Airbnb). These operators are often easier to approach than most VCs, especially if you’re a first-time founder from one of those alumni networks.
How do you see this trend impacting institutional seed funds?
The smart institutional seed firms see this playing out. They’re responding by building deeper, mutually-beneficial relationships with operator-angels.
One potential implication is we will continue to see a growing number of early rounds that are primarily made up of just angels. Some might call this a party round, but I think if the round is comprised of the right people, it can be highly advantageous for distribution, follow-on funding, and more.
Similarly, we have seen a proliferation of seed fund manager programs in Silicon Valley in recent months. Why do you think this has become a crucial piece of the early-stage investing toolkit for multi-stage funds? What value do these seed fund managers bring that firms cannot do themselves in-house?
Seed fund manager programs, (or Scout programs), effectively increase the network size for firms. Scouts are often well-networked and can provide access to a more niche network that the firm may not have as much exposure to.
A new flavor of these programs is multi-stage funds backing operator-angel funds. From a fund perspective, this may give them access to angels who typically wouldn’t have considered an exclusive scouting relationship.
It’s fascinating to see the early-stage landscape evolve so quickly before our eyes! Let’s switch gears slightly to talk about your fund — what sectors do you focus on? Are there any interesting investments you can talk about?
We invest broadly across B2B and consumer, but we’re particularly excited about Viral SaaS (aka bottom-up SaaS). These tools can be vertical-specific, but often they’re quite horizontal.
We like Viral SaaS tools because they’re extremely well designed, spread virally with no additional customer acquisition costs, and are products that people inherently love to use. They also tend to monetize well because if you build something that many people in an organization love, the upsell to a team or enterprise plan is much easier.
One of our recent investments here is Scratchpad, a startup building the fastest way for sales teams to update Salesforce. Their main users, typically account executives, love the product as it’s saving them hours each week. As a product, Scratchpad is fast, well designed, and easy to set up. Between these benefits and the parallels we saw to Superhuman, we got excited enough to invest.