(Photo courtesy of Jon Gosier)
The angel investment world felt insular to Jon Gosier.
He wasn’t alone. At the Goldman Sachs 10,000 Small Businesses program, Gosier, who runs data science startup D8A, met a group of Philadelphia business people who also wanted to get into angel investing but didn’t know where to start.
So they started their own fund.
Third Cohort, so named because the fund’s partners all met in the third cohort of the 10,000 Small Businesses program, invests between $10,000 to $25,000 in very early stage tech startups. They’ve already made two investments: one in New York City-based, pre-launch dream-remembrance app Shadow and another in Washington, D.C.-based “Bloomberg for Africa” startup Market Atlas. These deals have come through the partners’ networks, he said, as the fund hasn’t really started any outreach efforts yet.
Aside from investing in tech startups, the fund will also provide low-interest loans to early-stage brick-and-mortar businesses that don’t traditionally get funded by angel investors. The group wants to help “these small businesses that make up most of the economy” who may not be able to get a loan from a bank yet, Gosier said.
"Part of this experiment is to see if there's a new way to construct a fund and take risks that some other funds won't."
Each of the 10 partners, which all live in the Philadelphia area, contributes about $10,000-$25,000 per year, and a five-member board decides which companies to invest in. Third Cohort plans to invest in about six startups per year.
Many of the partners are first time angels, Gosier said. Gosier himself has invested in companies outside of the country but not domestically. He said he and his partners started the fund so they didn’t have to “wait for anyone’s permission” to join the investment world.
Gosier said he asked himself, “How can we become entrepreneurial about becoming investors?”
You’ll notice that Third Cohort’s partner make-up looks different from that of traditional angel investing groups, which skew older, white and male. At Third Cohort, at least three partners are women and two are people of color. Not everyone comes from the tech scene: one owns an auto and truck repair facility, another runs a nanny staffing agency. From the tech scene, David Stewart, CEO of data company Tembo, is a partner.
Not all of its partners are accredited investors (meaning they make at least $200,000 every year or have a net worth of $1 million), which is legal for very early stage deals, where the entrepreneur decides whose money she wants to take. In the past, the accredited investor rule may have held people back from angel investing, but, as Gosier put it: “We’re trying to grow the fund in a way thats more inclusive than that.” (He added that he understands that it’s important to have the status of “accredited investor” so that people aren’t taking risks they can’t afford.)
He added: “Part of this experiment is to see if there’s a new way to construct a fund and take risks that some other funds won’t.”