In the investing world, the last decade has been characterized by a notable shift from an individualistic, self-interested approach to investing to a more communal one. New generations of investors have embraced the impact of investing alongside a community, driven by a shared purpose, camaraderie, sustainability, and trust – all of which have a demonstrated positive impact on financial returns. Since 2020, the term  “investing community” has become part of the shared lexicon as investors realize that they thrive within social ecosystems. Financial decision-making and investing rhetoric are more commonly occurring in open, inclusive spaces rather than behind closed doors. 

Several key dynamics have contributed to this shift: 

1. Digital Transformation of Investment Committees: The adoption of digital communication for investment decision-making, especially at the highest levels, has become more widespread since the onset of COVID, allowing for remote collaboration.

2. Increased competition in venture capital: The VC asset class has surged in popularity, prompting firms and individuals to look for new ways to create value and competitive advantages. 

3. Investment tooling has improved:  It used to cost $20,000 in legal fees to get a deal done. Today, both the cost and complexity of investing legal processes have significantly decreased, with new software emerging that has made it much easier to share financial upside and ultimately encourage collaboration.

   
   

What does community actually look like in an investing context?

An investing community can broadly be defined as an interconnected network of stakeholders who share a vested interest in the success of an investment or fund or the group itself. Community members can include founders, investors, employees, advisors, and even customers.  Communities focus less on ad hoc transactions and more on creating collective value. A community is meant to win and grow together. 

As communities grow, they generate a power that becomes more than the sum of its parts. Alex Pattis, GP of Riverside Ventures, believes:

“Communities create the best flywheels which can create access to the right people or companies for all sorts of business opportunities.”

In the VC ecosystem, community takes on many forms: 

Syndicates: A syndicate is a formal or informal group of investors who pool capital, resources, and insight to invest in a startup together. While some operate collectively, most are led by one or a few individuals who act as primary decision-makers. Digital platforms (like Sydecar) have also made it easier to form and manage syndicates with multiple stakeholders and shared incentives.

Zachary Ginsburg, GP of Calm Ventures, says:

“Community can take a long time to build – but, once you have it, you can move a lot quicker. At Calm, we’ve seen this momentum within our syndicate. From the outside, it may seem like it’s just me running everything – but, in reality, our community of syndicate members, including angels, VCs, operators, founders, and scouts, is the engine that allows us to invest in over 100 startups annually.” 

Founder Networks: Founder networks offer platforms for knowledge exchange, resource sharing, and potential customer leads amongst startup founders. These groups are typically formed and supported by VC firms and have become a powerful source of deal flow. They also provide an opportunity for founders to invest together in other startups. Notably, alumni networks from major tech companies like Airbnb, Google, and Coinbase have transformed into active founder networks, investing in startups launched by former employees.

Alex Pattis loves these communities:

“I’ve seen the Airbnb, Uber, Lyft, and Google alumni syndicates deploy meaningful capital into their ex-employees’ new companies. Startups love having these communities on their cap table given the relevant operating backgrounds and unique access of the members. It’s a true win-win.”

Online Forums & Social Media: Increasingly, investors and founders are taking conversations to Twitter, LinkedIn, and specialized forums to source deals, discuss strategies, and gain insights. Some of these groups are rallied together by a syndicate lead or fund, but others form more naturally to later join forces as a syndicate or fund. 

Hustle Fund’s Angel Squad is a great example. Zachary Ginburg notes:

“Angel Squad has done a great job of establishing a large group of accredited investors with shared goals. I’ve seen others try to build national angel groups in the past, but Hustle Fund seems to have succeeded by putting the community first and continually engaging them via education, networking, and deal flow access.”

Brian Nichols, Co-Founder of Angel Squad, notes:

“The best part of our approach is that the community extends outside of just the angel members to our portfolio companies as well. Angels have an opportunity to get in the weeds with portfolio companies in meaningful ways. As an example, one of our angels who works at Nike connected a portfolio company that they invested into the right team at Nike, which became that startup's biggest contract in company history.”

Incubators/Accelerators: These groups serve as vibrant mini-ecosystems, offering startups not only capital but also a supportive community of fellow entrepreneurs, mentors, and alumni. Y Combinator stands out as a prime example, fostering an active and interconnected network of founders. 

Community is a Competitive Advantage 

The value of community in VC cannot be overstated. In a competitive and rapidly evolving landscape, an authentic community can differentiate and strengthen an investment strategy and provide a network ripe for support and collaboration.

However, establishing a community isn’t as simple as bringing together a group of individuals with shared interests or goals. The term community is often used to describe a large social following or group of newsletter subscribers. In reality, these groups are more likely audiences. Importantly, a community involves two-way interactions and mutual engagement, whereas an audience typically engages in a one-directional manner with the leader. For example, a newsletter would be considered an audience because the subscribers cannot communicate with each other. A founder network hosted in Slack would be considered a community because the members are able to (and encouraged) to communicate with each other.

Zach Ginsburg has experience with both. In reflecting on the process of building up the following for his newsletter, Last Money In, Zach notes:

"Part of building an audience is delivering consistent value and transparency. The shift from audience to community comes from engagement, which could come from real-life events or Slack groups. Creating opportunities for two-way interactions is key in transforming an audience into a community.”

The line between audience and community is often blurred, with many groups embodying elements of both. Newsletters often extend their reach by creating Slack groups for subscribers to connect. Similarly, venture capital firms may lead founder networks, periodically engaging members through updates and newsletters. The key distinction lies in the nature of interaction: communities foster mutual engagement among all members, while audiences primarily interact with the leader.

An audience, if well taken care of, can become a community. And a community, if neglected, may slip back into an audience.

Brad Jenkins, Co-Founder and CEO of Seed Round Capital agrees:

“The difference between a community and an email list is consistent two-way engagement. If community members don’t have a way to interact with you or their fellow members, it’s not going to be as rewarding.”

Communities, inherently more complex and powerful, have the potential to become self-sustaining, growing organically through member interaction. Conversely, the vibrancy of an audience depends solely on the leader's activities. However, an audience, particularly in the form of an extensive email list or social media following, can still offer substantial benefits, especially to investors.

Julie Weber, GP of The Helm, notes:

“Investing alongside a community can also feel more impactful; where one small check may not feel like it moves the needle when capital is pooled, a little can turn into a lot very quickly. It’s exciting to feel part of something bigger and to know that you’re investing alongside others whose values are aligned with your own. Additionally, depending on the round dynamics, many founders won’t take small angel checks, so investing as part of a community provides access to sought-after investment opportunities that wouldn’t otherwise exist for angels.”

How do investors effectively foster community?

For investors aiming to cultivate a sense of community, the journey begins with fostering interconnectedness and encouraging active participation. A syndicate, initially a list of individual investors receiving deal memos, can evolve into a community through events, forums, and facilitated connections. No single step can make an audience a community, but a consistent effort to encourage interconnectedness will push things in the right direction.

As Jason Burke, Co-Founder of All Stage, explains:

“Successful communities are about give and take. Like any relationship, the communities are ones in which the value exchange is bi-directional. Encourage everyone in the community to contribute and engage.”