Angel investor: Erica Wenger on Making Winning Bets

Published

October 10, 2024

I recently got a chance to chat to the amazing Erica Wenger, and it was one of the most thoughtful conversations I’ve had on angel investing.

Erica has already been both a founder and an investor, and she’s dipped her toes in many different projects. So it’s no surprise she’s formed her own strong views on angel investing and she’s shaped her investment philosophy in a way that aligns with her worldviews and what she stands for.

And so, finally, here is our interview!

Highlights:

Erica invests in startups at the intersection of technology and impact.
Her background is being a founder, being an operator, and working at a fund previously. She has started a few of her own businesses and has been an early employee a couple times.
Erica gets most of her deal flow through her network, she doesn't do any outbound as of now.
She looks for founders that are really impact-driven and she pushes them to think about impact in terms of how their company looks like and how it impacts the world.

How did you get into angel investing?

My background is that of a founder operator. I have started my own businesses and been an early employee a couple times so I’m passionate about early stage startups and the excitement of building something from nothing. I’m particularly obsessed with the zero to one stage.

I got into angel investing by being part of the startup ecosystem, seeing amazing companies and friends raise funds, and wanting to support them. I have a long-held thesis about investing in the intersection of technology and impact.

Because of my background in social entrepreneurship, I am interested in using tech-enabled businesses to create social impact in the world.

Whenever I come across a company that's making a significant impact on the world through software, I get excited and look for ways to support them. This can mean connecting them with other VCs, making angel investments, or even consulting with them.

What was your first angel investment?

I can't remember the exact order, but I believe it was in The Juggernaut. They are a great media company that shares content centered on the South Asian community across a variety of verticals: business, pop culture, food, etc. I was most impressed by their rockstar founder, Snigdha, and I’m excited about the big plans their team has for the future.

Do you do any outbound to get deal flow?

Personally I never do it, but it is a good way of connecting. My deal flow comes from my network and from people that have been building a relationship with for a while.

What are founder deal breakers for you?

Oh man, I'm very selective with investments, so I have many deal breakers. One important factor is that I like the founder and vice versa. I have to really think they have the capacity to build a billion dollar company. This is especially vital as an angel investor. But managing a fund has different considerations, such as being strict with valuations and portfolio construction. Investing is a team decision. As an early-stage investor, I focus on investing at seed and just before, so I need to be very careful with my choices.

Being an investor at a fund is very different thing than being an angel. As an angel, it's my check, it's my money, so I can do what I want and can be less sensitive to valuation, and more interested in the founder's fit for the market and their ability to solve the problem.

Pre-seed investments are often based on little more than an idea and the team itself. I look for founders who are impact-driven and push them to think big. What does your company look like and how does it impact the world in five to ten years?

If you have any hopes of starting your own fund one day, I would recommend sticking to your thesis as an angel, even if it means turning down amazing products and founders, as was the case with the last call I had earlier today. You need be clear with what your thesis is and make sure you're not straying from that.

Do you have a specific industry you’re passionate about or are you more of a generalist in your investments?

I'm interested in most software that aligns with the UN sustainable development goals. I have 3 key pillars I use to narrow down my focus, but as far as sectors I'm most drawn to health tech, fintech, ed tech, and frontier tech.

I tie every angel investment I make to a UN sustainable development goal. Impact is not just about sectors, but also culture.

It’s about building a diverse team, ensuring fair compensation and equity options for all involved, thinking through wellbeing and professional development of teammates, etc.

As an angel investor with a background in social entrepreneurship, I offer suggestions and introductions to help founders think more broadly about impact. It’s important founders don’t just stay in the private sector bubble, but rather work on partnerships as they scale with nonprofits, government, and media who are often pushing the same mission forward.

I think we need a lot more of this conversation in venture capital.

Are there any angels that inspire you or VCs that you look up to that really impacted your journey in the industry?

Totally. I think there's a lot. I mean, I think the VCs and angels that I really look up to are the ones who have built long lasting firms and really returned capital and been good at their job. There's some women in particular who I really look up to.

I would say Aileen Lee is a big one. People have only great things to say about her and she's been a real advocate for diversity in the venture ecosystem. Not just moving herself forward and creating change with Cowboy, but also trying to make venture more equal along the way.

Something else I’ve learned is that in this industry is that someone’s public profile doesn’t always correlate with how they are in private.

It's like when they say don't meet your idols. I am very mindful to not idolize people I don't know, because in reality, I don’t actually know them and how they treat people. Sometimes they really exceed expectations and sometimes they really don’t. I'm not a big fan of idolizing anyone that I haven't personally met and built a relationship with.

I just work on staying in my own lane, meeting people along the journey, being the best steward of capital I can be, the best angel I can be, but not overly putting anyone on a pedestal, I think that's where you run into danger.

It's not about looking at someone else's path. The best angels and the best VCs create their own path. You're not going to do very well if you copy other people. You’ve got to think about things your own way and just have conviction.

I also try not to call people mentors because I also bring something to the table. I like to think of them as friends that are further in their career and I'm earlier in my career, but I'm really mindful of the power dynamic.

When you call someone a mentor, it may seem like they are doing you a favor by hopping on with you, but in reality, it should be in their best interest to help and get to know you. You have something valuable to bring to the table! And so I consider many of my mentors to be friends who are just further along in their careers.

Any advice you can give to people who want to get into angel investing and how they can get started?

I have two really big pieces of advice.

Build something. The most valuable angels build companies. Be a product designer, marketer, engineer, or any other operator. People will respect you more and want to hear your advice if you've actually built something. So build things that are interesting enough for others to want to make room for you.
Have a personal brand. People will not know what you are interested in or excited about if you don’t tell them. Work on building a personal brand that is authentic to you.

If you're a computer science enthusiast who loves building apps, let people know about you! People should know that about you, so that the coolest apps out there can find you and bring you on their cap table.

The analogy of needing a personal brand/distribution as an angel is similar to the analogy people often make about marketing a product after starting a company. Building a product alone is not enough to attract customers - you need marketing.

The same applies to angel investing. If you want an A+ founder to make room for you on a cap table, they need to know you exist which often requires having some form of a personal brand.

Building a personal brand takes so many forms - it could be through previously working at a tech company in a more senior role with a strong reputation, writing blog posts about what you care about, starting or going on a podcast to talk about what you care about, posting on Twitter, sharing your thoughts in a newsletter, etc.

The best founders often don’t need to take small angel checks, but they make room for people who will be especially helpful!