Angel Investor & Founder: Carmi Medoff on Investing as a Community

We had the most incredible chat with angel investor and founder - Carmi Medoff. Her journey into angel investing is so different to what you would imagine as the typical path of an angel investor, and her story truly conveys the power of investing with a community and how rewarding that can be.

Alongside investing, Carmi also recently founded her own company last year, Onsite Kids, which is busy developing and operating on-site child care centers for frontline essential employees and employee benefits.

Highlights:

• Carmi invests in startups with her siblings about twice a year, mostly in people and companies they meet through their connections
• She believes angel investing is best when done with a community and people you admire and trust, rather than solo angel investing
• Carmi’s first deal was a Wendy's franchise
• Carmi is part of Modern Angels and loves the community

How did you get into angel investing?

My path to angel investing started in high school. I am the fifth of six kids, and my oldest two siblings were going through business school around the same time.

They felt like they were learning so much and so they thought that a very cool way to bring the six of us together would be to pool some money and have a sibling conference call every Sunday, where we would learn about how to invest. We would run diligence on deals that they were finding at school and in their networks, and then the six of us would invest together.

I think our first deal was in Wendy's restaurant franchises. So not totally a classic startup but that was our first deal. Our first more traditional startup deal was in a company called St. Frank, which does interior design and consumer goods mostly made by women in developing communities.

Do you do any outbound?

We are still a very small angel group and our cadence is also quite conservative. We probably make two investments a year.

We invest in people. Our thesis is that there are six of us with really strong networks in a vast spectrum of industries and we've realized through trial and error that the thing that we are best at is picking people.

It is only first degree connections that we bring to the diligence table. Even with our strong networks; college, business school, et cetera, those deals are hard to come by for people that we really think are top notch.

Do you have an area of expertise that you offer to help founders with?

When you do look at the skills that the six of us collectively bring to a deal, you're packing a pretty big punch. I'm a startup operator and can build an operator stack from Seed to Series in my sleep, versus my oldest siblings.

One is the CEO of a nationwide healthcare company, another one is a senior executive at a bank but with a background in culture and the arts. We've got physicians and social workers, and media and entertainment execs. So we're a wild card. But at the end of the day, our founders are actually able to ask us for our relationships and for expertise that I don't think they find when they go into the general Silicon Valley investor pool.

We can give our time and we can be quite personable with our founders and really help them think through who they should meet. Some of us live in New York but we're from the Southeast and so we can also bring them to new regions and introduce them to broader networks than they may be aware of.

Some of the biggest returns that VCs made were during the last cycle. What is your take on that? Are you guys still investing now?

We are definitely still investing. We actually decided to make two investments in the last week alone (so there goes our two investments a year average). We definitely are still trying to invest at our size and speed. The market forces aren't really relevant because our checks are small and few.

The only thing I would say that's true for our group is several of us are taking big career risks of our own at the moment. I started my own company this year. If anything, the thing that's slowing us down a little is that we're betting on ourselves and taking big bets, and we don't necessarily have tons of extra liquidity to throw into other companies.

How do you pick your deals? Do you tend to invest in particular industries or are you more of a generalist?

I think it's preferable, but not required for us. I don't think you can filter on every category. And if we filter so strongly on our relationships, then we need to stay a bit more open to industries.

I think one thing we pride ourselves on is the six of us are all like mega-nerd students, so we can do our homework to understand an industry fairly well, fairly quickly. That being said, we definitely all bring deals from industries that we're most comfortable with.

For example, we recently invested in a company called Canary, which is in the social impact employee benefits space, and that's a world that I used to occupy while working at Even.

My brother’s company is now one of their pilot customers, so when there is a deal that multiple of us can personally identify with or really understand, it definitely helps get the deal done.

What red flags do you look out for when investing in a founder and their startup?

Don't be stubborn at the beginning if we ask for half an hour of your time to answer our questions. And if you can't make the time for it that's totally fine, but we want to build a relationship with you. So I think a little bit of generosity upfront from the founder and patience with us as we consider their deal is essential.

There's also some industries that we just can't wrap our heads around and we have to skip on those because we can’t properly vet a business.

Any unusual way you get deal flow?

Our most common deal flow source, which I don't think is super common, is that my brother was a searcher. He bought his business through his search fund, and he is a yearly speaker at multiple business schools on how to be a searcher. His name is mentioned in a search fund book. New searchers constantly come to him for advice as they're launching their careers, and that ends up being a really fertile pool for us. He offers his expertise, and we get an opportunity to invest.

3 recent angel investments you’re proud of?

One that I actually did independently that I'm very proud of is called Hey Jane. They offer male contraceptives, and is run by classmates of mine from business school. I actually found out about that deal through the Modern Angels group.

Even though I know them, I didn't know they were raising. Luckily I was able to jump in their 48 hours sprint raise and throw in a small check. Showing my support for their mission, and also for my friends, is what I'm super proud of. I love being part of their journey.

Another one that I would say I'm proud of is Canary. It feels really on point for us. It's kind of a perfect investment that we're excited about.

We are also invested in one right now that is really complicated, called Craftsman, where they build the machines that cut cardboard boxes for Amazon. Sometimes we have investments that are smooth sailing and we don't learn a lot from, and some that we really get in the weeds as they figure out bridge rounds, remodelings, and pivots. That one has been very interesting and complicated for us.

One that we did recently that we're super proud of is a pre-seed investment in a behavioral healthcare company for seniors. With that one, we felt totally in our wheelhouse with our physicians in the group and my brother who is an executive at a home health care company for seniors. I believe that they're blowing up and really making such powerful moves in the right direction. So I'm very proud to know a lot of the leadership team there.

Is there any company you regret not investing in?

Yes, we passed on an opportunity to invest in a company called Convex. The founder is a grad school classmate of my brother's. But the company is in the HVAC space and at the time we didn't know what we were doing in that diligence process, so I think we didn't fully grasp the size of the opportunity. But Charlie, the CEO, is crushing it now!

Any angel that you look up to?

There are many. I really like Ed Zimmerman. He talked in business school and the conversation stuck and got me interested in investing.

The investor that I'm learning the most from right now is Courtney Leimkuhler. She is one of the three partners at Springbank Collective. She is extremely sharp, very focused on the care economy and really creating the care economy as far as investor interest goes. She's super generous with her time and advice.

Any advice for aspiring angel investors?

Don't be afraid to start with what you know and who you know. You don't have to dive in on the deep end. Follow the people that you see building and take every opportunity to throw in little checks or ask little questions until the opportunity presents itself for you to make bigger and bigger bets.

I think a lot of people think that angel investing is a singular concept. But it’s really educational and rewarding to do this side by side with people that you want to spend time with and learn from. So I'd say when the opportunity presents itself to organize it into little investing groups, take advantage.

If not, then I suggest you look around and organize one yourself instead of going solo or trying to get into a massive angel syndicate with people you don’t know.

In addition to my sibling group, my class from my business school also organized an angel fund with around 90 of us who sat in a classroom together for two years. We also invest in each other.

Basically, I only invest through my sibling group and my classmate group, and both feel like they're supercharging my angel experience.

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