Emily Herrera is a 22-year-old student at Northeastern University but already has a budding career in venture capital. Beyond venture and analyst positions at Contrary Capital and BBG Ventures (the latter of which funded beauty brands Starface and Radswan), Herrera is also a member of several online communities dedicated to students and Gen-Z in venture capital, including Gen-Z VCs and The Wiress, her own recently-launched investment community and syndicate focused on Gen-Z women.
Those communities have become a gathering place for a growing number of Gen-Z venture capitalists and investors pioneering new approaches in the space and translating their personal brand and community-building savvy into investment positions.
“Now, you have the college dropouts, the creative kids, totally different kinds of players,” said Herrera of the landscape for venture capital investors. “There are different ways that now younger people can invest and be more hands-on than ever before.”
These range from communities on Discord, Slack and Twitter connecting young investors with opportunities in venture capital to speciality investment vehicles like syndicates, where accredited investors can co-invest or pool together money to invest in a company, as well as rolling funds, which allow a lead investor to lead funds back-to-back that often provide early-stage funding to brands and founders.
It’s compounded by a surge in individual investors during the pandemic. A survey from Charles Schwab found that 16 percent of new retail investors during the pandemic were Gen-Z, while groups Gen-Z VCs and the Wiress, have exploded in size to thousands of members over the past year. There’s also a push among Gen-Z investors from diverse backgrounds: Charles Schwab found that three times as many Black investors entered the market compared to white investors for the first time in 2020.
The growth of the number of both Gen-Z groups and individual investors over the past year also points to a larger shift in how companies and founders are assessed and receive funding, as well as what groups have access to investment opportunities. For Gen-Z in venture capital, community has become the driving force — from young investors using online hubs as a gathering place to seeing potential in the brands that have leveraged community as a tool for growth.
What Sets Gen-Z VC Apart
A range of trends is fuelling Gen-Z’s interest in investing, including SEC regulatory changes in the US that have allowed more people to become accredited investors. Meanwhile, pandemic relief checks provided young people with an extra influx of cash.
Some are tapping into awards and grants to help create investment communities: Herrera won an internship grant and used savings to help with the syndicate cost.
“There’s a hunger for this to be an even playing field and that’s what it’s turning into,” said Patrick Finnegan, founder of venture capital funds Intuition Capital and formerly of TGZ Capital, the latter of which he launched with social media stars Cameron Dallas and Jake Paul. Finnegan’s investments include toothbrush brand Quip, Starface and retail label Italic.
As the requirements and needs have changed for entry, Gen-Z is now focusing its energy towards companies that align with their own ethics and personal values, ranging from sustainability to mental health.
Jeremy Cai, founder of Italic, whose investors include TGZ Capital, said that this generation of venture capitalists is more “empathetic,” which helps create a more collaborative environment between founder and investor.
“I think there’s an emphasis on sustainability and mission: what does this company stand for and how this is reflected in their values?” said Meagan Loyst, a 24-year-old investor with early-stage fund Lerer Hippeau and founder of the community Gen-Z VCs, which currently has approximately 12,000 members. “Authenticity is everything.”
A common inspiration is the rise of brands founded by digital creators.
“Influencers aren’t going anywhere, in fact, they’re just beginning,” said Finnegan, citing Skims as a holy grail in the space and a sign of where the market is headed. “This idea of talent and good operators building brands across all verticals is is here to stay.”
That’s become especially important as brands increasingly need to carry a cultural relevance or currency with young consumers in order to stand out in a crowded market, creating original content to build and support a strong community of consumers that identify with the brand beyond a product. The Wiress’ Herrera stated that the syndicate is “aggressively focused on any DTC company to prove community retention, attention, and adoration before considering anything else.”
The brands that fundraise quickly are centred around a loyal consumer base, said Nik Sharma, founder and chief executive officer of Sharma Brands, and the founder of Masala Capital. “Other companies will probably produce the same product, but they can’t necessarily replicate the brand and the community.”
Gen-Z investment groups are also prioritising companies led by Gen-Z founders. If investors aren’t able to meet the capital minimum required to invest in a brand, they instead can lend them their public stamp of approval, highlighting brands in Twitter threads or Slack groups in the hopes larger funds and institutions take note.
“It’s becoming increasingly more important to be top of mind for founders, for co-investors and you do that by building your personal brand,” said Loyst.
Brands — particularly those led by members of Gen-Z — are also increasingly seeking out investors from non-traditional backgrounds for seed and early-stage rounds, prioritising unique perspectives over capital. Particularly in retail, said Herrera, brands may previously have “a lot of really big-name investors that are just dudes.” Working with Gen-Z investors, she said, provides “different perspectives.”
“Gen-Z investors are also much more diverse, which also means more diversity of advice,” added Cai. “You’re able to see the many different sides of an approach.”
They also tend to have a more fast-paced and casual approach to communication, with many keeping their direct messages open to connect with founders or other investors more easily. (Many of the Gen-Z investors BoF contacted for this story, for example, replied in a few hours.)
The Advantage
The rise of easy-to-use investment platforms and social media-driven venture capital communities over the past year has already created changes in the landscape.
As funds increasingly look to invest in Gen-Z-founded companies, having young venture capitalists on their teams has become an asset for companies. Loyst found that with many companies she was the target consumer.
“We also have a very unique perspective that’s valuable to any venture firm that’s looking to invest in the next-gen tech businesses or beyond,” said Loyst. “We are the future, we’re seeing these trends firsthand.”
Many young investors are adept at finding digitally-native companies in their early stages, providing pre-seed and seed funding that requires less capital.
“It’s like the equivalent of Wall Street analysts on the street, that is what Gen-Z is today,” added Sharma.
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