In life, dating can often be an investment – an investment of time, money, mental capacity, you name it. Inversely, in the finance realm, what if investing could mirror dating?
Much like being single and having zero luck in a city like Los Angeles with nearly 4 million people, founders and angel investors are faced with knowing that there must be tons of opportunities out there, but can be lost in where to find them.
To bridge this gap, Angeline Vuong and Jaclyn Johnson founded Cherub, a matching platform designed to look like a dating app for angel investors looking for deals and founders looking to fundraise.
“The number one question founders have is, ‘where are all the angels?’ and the angels are like, ‘where are all the good deals?’ Everyone’s missing each other, so we wanted to create that connection,” Johnson, Cherub’s chief executive, said.
In deciding what characteristics would add the most value to the platform, Vuong – chief product officer for the Silver Lake-based company – wanted to create something where potential investors could get to know companies in a more inviting, visually stimulating capacity.
“It feels more akin to ecommerce than just transactional ‘fund and done’ angel investing,” Vuong said. “…Our hot take or contrarian approach is to treat it more as a discovery, immersive brand experience… so that the everyday, average consumer investor can be inspired to deploy capital into these businesses.”
The experience
Designed like a dating app, Cherub’s platform strives to form quality matches between founders and investors by evaluating alignment on a number of factors.
On the investor side, this means determining what types of companies they are interested in investing in, both in terms of industry, but also “a characteristic perspective,” Vuong said. Characteristics can be more technical, such as a company’s revenue, or they can be value-based such as whether a startup has diverse leadership.
Steven Mednick, a professor of clinical entrepreneurship at USC, said an important part of this process would be “understanding the motivation of the angel.”
“First of all, who is he or she? Why are they investing? What is their expectation?” Mednick said. “… Then the angel needs to understand where the company is. What does their burn rate or their cash flow look like? What are they going to use the money for? Have they ever had an investment before? Do they know how to use the money? Do they know how to prioritize the important aspects of growing a business?”
A founder cannot request an intro with an investor unless they have overlapping characteristics – a choice intended to better set up founders for successful partnerships.
To better match an investor’s skill sets with the needs of a founder, Cherub also asks angel investors what their strategic value is – for example, a strong background in public relations, experience with acquisitions, etc.
“These types of attributes really make it so that both the investor and the startups are providing value to each other in ways that are beyond monetary,” Vuong said.
For investors, membership on Cherub’s platform is free but they must be accredited angel investors.
Founders have a couple different options: a free account with a one-time $3 identity verification charge where they can build out a data room, accept investor requests and be listed in Cherub’s directory; and a paid, $79 per month account where in addition to the perks of a free account, founders can request intros with investors, see profile views and receive access to workshops and events designed to further amplify connections between investors and founders.
Cherub members are also able to take advantage of write ups, data pages, quarterly reports and other data-driven resources made by analyzing Cherub’s in-house data.
For example, Vuong constructed a white page report looking at the elements of a good intro request once a founder gets a match.
This data is also used internally to better the platform. After noticing a decline in the rate at which investors were accepting founders’ requests for introductions, Cherub’s team altered the request process. Before, it was as simple as pressing “request intro,” whereas now a founder is required to add a personalized message along with the request.
After implementing this change, the percentage of accepted requests increased by 33 points.
Results and initiatives
After its official launch in March 2023, Cherub ran an alpha phase, testing the waters of the platform’s effectiveness and also the interest level it received. This involved monitoring 40 startups on Cherub for three months.
Of the featured startups, 100% received investor deck views, 50% received interest from investors, and 20% secured funding for a combined total of more than $1 million deployed in that time.
Additionally, 40% of the people writing checks were first- or second-time angel investors – a target group Johnson and Vuong were hoping to see traction with. Both Johnson and Vuong found that existing investment platforms are typically structured for those investors who already have significant experience in the space, leaving little room for those wanting to get involved and learn more about the process.
“Simplifying the process and democratizing access to these deals can be very meaningful,” Johnson said.
Mednick finds that first-time angel investors have good intentions but don’t always have what it takes to step up to a mentorship role, which he finds to be the most valuable thing an investor can provide for an early-stage founder. Additionally, having investors with the ability to properly evaluate founders is key.
“The challenge for (first time angels) is going to be if they don’t have the background of understanding what it takes to select – and it’s really a selection of the jockey and not the horse,” Mednick said. “You’re betting on the people, and you’re betting on them long term.”
To combat this potential drawback, Cherub has made education a priority for its platform.
“We are really trying to provide the tools, tips and tricks for funders to be able to write their first check with confidence and for founders to pitch and feel really good about what they’re doing,” Johnson said.
Founders raise anywhere from $50,000 to $500,000 through Cherub, with $10,000 being the “sweet spot” for an individual check from an investor, Johnson said.
Since March 2024, when Cherub launched its beta experience, there have been 2,455 requests for intros. Of the people requesting intros, 58.8% get approved. Additionally, the platform has a week one retention rate of 54%, said Vuong. Comparatively, a “good” week one retention rate for a social app is 40% and a “great” rate is 50%, according to venture capital firm, Andreessen Horowitz.
A newer development for Cherub has been the launch of its special purpose vehicle (SPV) program. An SPV allows founders to form an LLC designed to hold funds from a pool of investors. Cherub’s program has two offerings: one where the platform leads the SPV for founders and promotes it through the Cherub network and the other which helps founders with the operations, paperwork and marketing to set up an SPV to their audience.
The founders benefit from this in that they only need to list one name on their capitalization tables rather than say, 50 small dollar investors. On the investor side, it allows angels to get in on some companies that may typically seek investments with higher minimums than they are willing to pay.
“An SPV allows you to fractionalize an angel investment,” Vuong said.
So far, the SPVs Cherub has facilitated see an average of 22 angel investors each.
Overall, the platform has fostered more than $3 million in funding as of November and has connected 121 companies with investors.
Notable investors on Cherub include Alli Webb, founder of Drybar; Arian Simone, chief executive of the Fearless Fund; and Candace Nelson, founder of Sprinkles Cupcakes and Pizzana.
Underserved founders and markets
For a platform like Cherub, narrowing in on a focus will be prove wise, Mednick said.
“(Cherub) will need to, like everybody else, refine the business and really try to understand where the unmet need is,” Mednick said. “And there may be an industry sector out there that is underserved with respect to funding, and those people that want to fund it. It may be a niche, but that’s a good thing.”
Women-owned consumer focused startups and female angels may be that niche.
The angel investment landscape is evening out in terms of gender distribution in recent years, with 46.7% of angels being women in 2023 compared to 33.6% in 2021, according to the Center for Venture Research. The percentage of female founders increased from 28.6% in 2021 to 46.3% in 2023.
“Women, by nature of who they are, tend to found more consumer focused companies,” Vuong said. “… and angels love consumer products because they know the products.”
In Cherub’s alpha phase, every founder who received funding through the platform was either a woman or a part of an underrepresented group. Meanwhile, female-founded startups received less than 3% of venture capital funding worldwide in 2023, according to research from the Venture Capital Journal.
“It’s literally pennies on the dollar. It’s nothing,” Johnson said. “And there’s a reason for that. At the end of the day… it’s about who you know. Unless you went to Wharton, unless you worked in Silicon Valley, unless all these things kind of magically aligned, it is very hard to get the attention of a VC.”
Moving forward, Johnson and Vuong are focused on growing Cherub’s reach and continuing to improve the user experience while also “building community alongside a tech platform” for those who are new to this domain, Johnson said.
