In business, diversity wins. That’s the word from a 2020 report published by the global management consulting firm McKinsey & Company and that’s what the founders of Commune Angels, a newly-formed, Detroit-based angel investment group have long known. Diversity and community—as indicated by the name—are two of Commune’s primary values. The group is wearing those values proudly and aiming to influence the world of angel investing as a result.
Founded in August 2020 by five entrepreneurs connected to one another through Michigan’s business ecosystem, Commune Angels is an angel group that leverages diversity and inclusion to expand access to angel investing and capital. The group focuses on pre-seed and seed stage investments in scalable consumer, enterprise and life science companies.
Pre-seed and seed investments, as the terms imply, are made at the earliest stages of a company’s existence, when it is much more than an idea but needs capital to get business operations up and running. When a company is pre-seed or seed, “it’s typically a company trying to find product market fit or it may have gone a little bit past that. Some have revenue but some may not,” explained Dawn Batts, one of Commune’s co-founders.
Like her four partners, Terrence J.L. Reeves, Jeff Ponders II, Marlo Rencher and Darren R. Riley, Batts brings a wealth of knowledge, relationships and business experience to the group. Highly trained, Batts holds an MBA and doctorate of cultural anthropology from the University of Michigan and Wayne State University respectively. She is also capital strategist at TechTown, a Detroit business incubator and accelerator. (Editor’s note: TechTown is Detour’s fiscal sponsor.)
“Commune is, to me,” said Batts, “one part of understanding the entrepreneurial journey.” That journey includes navigating what Batts calls the “continuum of capital” in which a lot of entrepreneurs need support.
“We do a lot of great training at TechTown,” she said. “And once [entrepreneurs] left us, we found them coming back asking, ‘What are the next steps?’ A lot of times, they were trying to navigate the whole capital world, which can get a little overwhelming and is not always transparent.”
Those questions from business owners prompted TechTown to develop capital programs for entrepreneurs led by capital strategists like Batts herself. It also helped to spotlight something that Batts and her co-founders understood when forming Commune Angels: The gap in finding capital for entrepreneurs is especially steep for entrepreneurs in the Detroit ecosystem, women entrepreneurs and entrepreneurs of color.
Commune seeks to not only invest in companies that appreciate the value of diversity and inclusion, but to expand the pool of existing angel investors by cultivating a diverse and inclusive angel community within Commune itself.
“Angel investing is not new per se, but who’s at the table and who’s investing has been skewed toward a certain profile,” Batts said.
A 2017 report on angel investing commissioned by the Angel Capital Association and conducted by researchers at the University of Pennsylvania and Harvard University showed that just 22% of angel investors are women and fewer than 13% are non-white.
Commune Angels opens greater opportunity for diversity in its membership by making membership more accessible than many other angel groups and by ensuring its members are well educated on the high-risk nature of angel investing (about 90% of startups fail) and the asset class the group seeks to reach.
In addition to helping investors understand and access an asset class that may not have been open to a broader group, Batts said that Commune offers founders an opportunity to pitch to an angel group that can better understand the problem they’re trying to solve with their new business, largely because of the diversity among Commune’s members.
“When we say diversity, we mean diversity,” said Batts. “We mean that it is really important to have different people, not just in race and gender, but in ethnicity, age, expertise and experiences in order to make sure that we’re making great decisions around an investment.”
This expansive idea of diversity carries through to Commune’s investment in founders as well.
Batts said, “When we say diverse founders, we’re looking at everything, even geographic diversity—not just one particular place. For instance, when there is talk about tech founders, it’s usually in reference to the west coast, specifically Silicon Valley. We look at what I call both sides of it—the supply and demand sides—in order to address what we think is a gap in a particular asset class.”
According to Batts, the membership fee for Commune Angels is less than most other angel groups. Further, most angel groups have a minimum annual investment requirement that is about $25,000. Commune does not have that annual requirement. Instead, it requires a minimum amount that must be invested in a particular company, if a member chooses to invest.
Commune Angels does not publicly post their membership fee, opting instead to require that anyone interested in membership apply to become a member and attend an informational meeting about what membership entails.
“I think most people find that our amount is not offensive at all,” Batts said. “But we’re careful about not publishing a fee without painting a whole picture because then people are only thinking about putting up money without considering who Commune is. But Commune is really about the community and we don’t want anyone to look at our group as something that they can buy. If you don’t understand the community, then you’re not a good fit.”
Seven months in, Commune Angels is excited about its growing angel community and equally optimistic about its first investment, which is yet to be announced. Batts did share a few details: Commune’s first investment is in a woman-owned company based in New York.
“This company is addressing a gap in diversity at a national level for corporations,” Batts said. Can you imagine? “It is particularly exciting for us.”