This angel investor's insights on picking startups that soar

In VC, they talk about sitting on powder. So a lot of these VCs have a bunch of money that they can't invest right now, but I think because we don't know what's gonna happen with legislation, I think a lot of VCs are putting less money into startups right now and kind of waiting to see what's going to happen. Welcome to Living Not So Fabulously. Husband. Yes? Today's an exciting day. Why is that? Because we get to meet an angel. Oh, you mean Heidi Klum? No, not that kind of angel, but the kind of angel we need to see more of these days. Oh, you mean Elliot Tomaino, today's guest, who is the founder of Asterix PR and a bonafide wizard in the startup world. With 18 years of PR expertise in stints from cities like San Francisco to Paris, Elliot has shaped the narrative of, get this, over 1,000 brands, including Groupon, Lemonade, and Squarespace. A regular on Business Insider's Top 50 PR Pros list and an Adweek 30 Under 30 alum, he's the go-to for turning startups into household names and an angel investor. Consider Elliot's investor perspective and what he looks for in the startups that he chooses to work with. Elliot's tips are gold if you're a startup who's seeking an angel investor. So let's dig into some of that gold. Welcome, Elliot, to the show. Thanks so much. Thanks for having me, guys. Of course, of course. So, similar to Heidi Klum, you are also an angel, but a different kind of angel. Can you tell us about that? Totally. Well, I got started in PR in technology in 2008 in San Francisco, so this is kind of like the height of Facebook, of Enbright Groupon, and I was lucky enough to work at some of those companies at the time. So I got my start really early in tech, which I think gave me a leg up when it comes to angel investing and meeting the right people that I needed to meet to be able to make those investments and get into those deals. So I started angel investing about five years ago, but before that, I became an LP first in Female Founders Fund in 2013, and then Mac Venture Capital about three years ago. For me, I really focus on underrepresented startups. So this is BIPOC startups, female-founded startups, LGBTQ plus-founded startups, AAPI-founded startups. So that's kind of my first level of what I'm looking for. And then from there, it's really the founder and the idea. Is this in an industry that I have a little bit of knowledge around? Working in PR and working with so many tech startups, I do have a lot of industry knowledge, but not every industry. So when it comes to B2B banking, maybe not my strongest spot, but when it comes to consumer apps or fintech, I do have a little bit more experience. For our listeners who aren't familiar with what makes an angel investor? What makes a good angel investor? It's so hard to say, and it really is industry-specific, but I would say somebody who could see talent, somebody who could spot talent, because at that stage, you don't really have that much of a company yet. You maybe have a couple of years of experience. You maybe have some good ARR to show, but you're not really at a point yet where you're raising a Series A, and you're able to do that kind of level of diligence. So you're really betting on the founder at that point. You're betting on the idea at that point. Usually a mix of both, but I'd say a lot of angel investors say that they bet a lot on the founder. So for an angel investor, you're getting started much earlier, and at probably a smaller level than VC? Definitely. So usually you're coming in in a friends and family round or a pre-seed round, which is usually less than $2 million. For later, for companies that have a lot more to produce, maybe it's going to be up to $5 million, but usually it's $500,000 to $2 million round total, and you come in for a smaller part of that. But the upside is higher. Gotcha. So what's the biggest takeaway you've seen from startups that you've invested in, as well as those you've worked with through your company, Asterix PR? The biggest takeaway would be that being bold and being willing to say something a little bit left of center, if you really believe it, can really get you very far. I think coming from a PR perspective into angel investing, I saw that some of our clients that did the best were those that weren't afraid to take risks, weren't afraid to say something that maybe was slightly unpopular, but it was something that was really true to the core of their business and what they believed in. And so that kind of authenticity at the early stage and the ability to maybe not be afraid to make some enemies, I think is something that really stands out as something that makes people successful or makes companies successful. When I first got involved in investing in a female founders fund, that was an LP relationship, so didn't really have a choice of who I was investing in, but I really trusted the general partner, Anu Dugal, to make the right kind of investments. And that has been probably one of my most successful investments to date. Yeah, so you're suggesting that folks maybe take somewhat of a polarizing position, but in this kind of environment, it's kind of scary to do that, right? Especially for LGBT people, because we're so desperate to be liked. How do you find the courage and how do you know what polarizing message is really gonna land? I often talk to our clients and say, what is your most left of center opinion on a topic that's popular in the media right now? So we'll identify a couple of topics. Okay, what is the most left of center opinion you have here? Okay, is that opinion going to piss off your customers, your stakeholders, potential acquirers in the future? If all these are nos, then we get to, okay, is this just gonna make you a little bit uncomfortable to say this? Are you ready for the backlash? Are you ready to have maybe random people on the internet come and say thanks to you? And if all those answers are yes, then you should move forward and share that left of center opinion, because nobody wants to hear the same thing that everybody else is saying out there in the media. If you don't have something unique to say, maybe don't say anything at all. What's some of the biggest mistakes that you have seen, folks, that you have either invested in or maybe have decided not to invest in that you can share with the folks who are listening? You know, I think I got really excited about a couple of founders three years ago that were starting a company in the skincare space and they didn't have much experience in skincare, but they did have a lot of experience in other businesses. They had done really well. And so I made a bet on these founders, but I think what I underestimated was how hard it really is to break into an industry that you haven't been in before and how many hurdles there are for somebody who has never even stepped foot in a room with somebody else who works in the skincare industry. So I think that was a learning for me where I really wanna make sure I'm betting on people that have that domain expertise. I think I went a little too hard on the founder at that point. It's kind of interesting when you say that because I have heard this over and over again from individuals say that if you want to start a business, go work in a business like that for a little while. Like if you wanna start a coffee shop, you probably should be a barista for a little while. Understanding not only what it's like to be behind the counter, but maybe even further behind in actually running the business. I totally agree. And I think that's something that I look for even more now. But it's hard to say if there's a through line when it comes to the successes. I think there is a little bit of a, if you're going to be an angel investor, you have to know that there's gonna be as many losses or more losses as there are wins. Early on when I started Asterisk, I was taking half equity and half cash for our services. And one of those startups ended up selling to Etsy within the first nine months of us working with them. And that cash into our business was a big, it was a big check for us at the time. And that allowed us to invest in an office, put down the security deposit, bring on a real payroll provider at the time. I was still writing checks out of my personal checkbook. And so that was a really big moment that really helped lay the foundation for the future of the growth of the business. But after that I had four fails in terms of equity deals that I had done. So I was doing angel investing through this kind of sweat equity. And through that I learned, maybe don't take sweat equity in every startup. That that was maybe a really great fluke that happened early on. Obviously I was making a bet on the business and I thought it was a great business, but to kind of spread out those investments and make sure that you weren't doing too many or taking too much equity in lieu of cash. I do appreciate the point that you made that at this stage you should kind of get used to this idea of not hitting a home run or winning every single time. I think with a lot of investors, we're trained with investing in the stock market or mutual funds or ETFs, that we're always going to win to a certain degree. But we also see that individuals who have a higher level of capital to invest, oftentimes do want some losses or appreciate those losses because they do train them to make the bigger bets that end up really transacting to something much bigger. A hundred percent. I mean, a lot of VCs say, you want that 1,000 X exit. So you want them there to be that 1,000 X exit, but a lot of them go to zero. So if you have one that goes to a thousand and the other nine out of 10 go to zero, you still have a really great return. If all of them go to zero, then there's a little bit of a problem. So I think when talking about angel investing, I do want to caution anybody who's thinking about it who does have disposable income. There are safer ways to grow your money. There are ETFs that you know you're going to get a return on. You can become an LP in a later stage fund. Usually you can become an LP between 50,000 to 100,000 if you know someone there. And again, I was listening to your podcast earlier. We were talking a lot about the network effect. And I think you guys had mentioned a term. It was friends that you like to do business with, but you also like to have fun with. And those kind of people that I found allowed me to get into some of their funds for a little bit of a lower buy-in than a traditional LP would. So there are safer ways to do investing and there's safer ways to do impact investing outside of angel, which I think is important to bring up. So for our listeners who might want to get into angel investing, it sounds like you have a lot of experience and a lot of knowledge from that experience. Did you refer to any resources, books, educational materials to help you get more information or knowledge? I wish. I probably should have. I think it was really like learning on the job because so many of our clients came from venture capitalists. They were direct referrals from a VC and I really built my VC network in New York when I first moved here in 2012. I knew a lot about investing in startups through those friends who were in VC. I also got into some of those deals because they had already vetted them. So it was almost like I had a friend who did the due diligence that said, hey, do you want to come into this round? We've already vetted it. You're going to be a value add investor here so you can come in for a lower check size. So I'm bringing them value, but I'm also getting it vetted by a friend to put in more cash. So I think that there was a way for me to kind of mitigate losses or mitigate risk by having a friend who knew a little bit more. But I think you kind of do learn by doing. And I think one of the best ways that I learned was by making mistakes. I'm definitely a hand burner learner and those mistakes that I made, I think, taught me so much for those future investments that I ended up doing really well. We had Arlen Hamilton on our other podcast, The Globetrotting Podcast. And she kind of talked about the way that she got into venture capital was actually by learning from people that she was on the road as a roadie with when she was working for these musicians and she learned VC this way. And so it is kind of that whole idea of having your power tribe when you talked about the combination of the overlap of your friends group and the people that you do business with where that overlap is, that's what she was doing as well was building this power tribe to get that knowledge. There are lots of different sources of knowledge than just opening up a book or listening to a podcast. And I would say that those sources of knowledge, the power tribe sources of knowledge are much more impactful. I think you learn more. Went to school for communications. I don't think I really learned anything about PR in school. And I think it would probably be the same way for angel investing. If I had studied, I probably would have learned a lot more on the job. Hopefully your professors aren't watching this. Yeah. Elliot, hold that thought. We'll be right back after this break. Thanks for sticking with us at Living Not So Fabulously. So Elliot, what are some of the biggest headwinds that you're seeing for startups in 2025? You know, in VC, they talk about, you know, sitting on powder. So a lot of these VCs have a bunch of money that they can invest right now. But I think because we don't know what's going to happen with legislation, I think a lot of VCs are putting less money into startups right now and kind of waiting to see what's going to happen. You know, with the anti-LGBTQ plus legislation that's already been put in place and kind of what Trump has already said that he wants to do or, you know, hinting towards, I think there may be more investors that are a little bit nervous to put into LGBTQ plus startups, especially those that are in the media space. I think those are going to be the ones that are going to be the most affected. But I do think we'll start to see people deploy capital again at a higher degree. When it comes to angel investors, I think they often follow VC. So if VC is holding back on investing, I think we may see angel investors do the same. Rounds won't close at the same rate, but I'm hopeful that it doesn't have too much of an impact. So what's the state of funding NVC dollars for LGBTQ plus businesses based off what you just said? I think there's some really great examples of founders and CEOs that are gay now, and there's more visibility than ever. So I think there's going to be more dollars flowing towards LGBTQ plus founded startups, just because it's not as much of a taboo anymore. That being said, there may be some VCs and angels that are reticent to put money into an LGBTQ plus founded startup until they see how legislation pans out. And hopefully there won't be too many major changes, but I think if you are a media company, if you're an LGBTQ plus founder at a media company or a media tech company, those are the areas in which I feel like VC dollars and angel dollars might flow a little more slowly right now. So for those LGBTQ plus startups that want to succeed in any environment, what suggestions do you have them to navigate those negative headwinds? Be prepared and be as moderate as you can. It's hard to say because some of these- How do you define that? Maybe don't be, if you don't have to be political, don't be right now. And if your startup is really politically focused, obviously continue to go down that path. I think we do need a lot of LGBTQ plus founders out there championing and making sure that we don't see some of this legislation go through. But I do think if you're in a space that doesn't have anything to do with politics, maybe stay out of politics for the moment. I don't want that to be disempowering in any way, but if the question is, how do we make sure we were successful? Maybe not courting any controversy at this time would maybe be a recommendation of mine. Depends on the startup, of course. Absolutely. So what sectors do you have your eye on right now? What parts of the market? I always love FinTech. I love PropTech. We work with a lot of direct to consumer businesses. So these are products. Really into anything that's around sustainability or waste. We work with a company called Marty right now. We've worked with Misfits Market in the past. I think there's a lot of interesting work being done in that space around sustainability and food waste. And Trashy.com is a really cool company. They send you a trash, a bag that you can fill up with 15 pounds of clothing and then they donate it to the right places. Companies like this that are really taking a unique way and making it easier for consumers to feel better about the choices they make, whether that's food waste or clothing waste. I think especially Gen Z and millennials want to do more but don't necessarily have the time to do it. So anything that can make it a little bit more convenient. So David and I are getting concerned with just how big some of these monopolies like Facebook and Meta and Google, Apple. What role do startups have in the market and do they even really matter, especially if they're an LGBTQ plus startup? Yeah, I mean, you have cause to be concerned. We all should be. But I work mostly with early stage startups. So we're not really dealing with startups that have that kind of impact on the government or that kind of impact on everyone's daily lives. But I think when it comes to LGBTQ plus startups, the more representation that we see, the more startup founders that we see. When I was first in tech, I was 21 working with companies like Facebook, Eventbrite and Groupon. And I was in San Francisco, very gay city, but I was often the only gay guy in the room. So I think representation really does matter. I had to kind of, I wasn't trying to pass, but I wasn't trying to be out in every room as well. There was kind of this, use it to my advantage in some ways and then obfuscate it in other ways. And I think the more, if I had seen more representation, if Tim Cook had been a CEO of a big tech startup at the time or a big tech company at the time, I don't think I would have felt like I needed to hide a part of me. And I think if I wasn't hiding a part of me, I think maybe I would have been able to accelerate my career even faster. Yeah, absolutely. So you've given us a little bit of indication, but give us the elevator pitch for Asterix PR and how are you using it to give back to the LGBTQ plus community? Thanks. I started Asterix 14 years ago now. I was 27 when I started it. I guess you can reverse engineer my age now. We are a PR firm really built for startups. We work with consumer facing startups, B2B startups, but now we've expanded outside of that. We even have represented cupcake companies. We have a hotel in Costa Rica. Really, we're working with companies that are rebellious at their core, that are doing something different within their industry or a challenger brand, a brand that is completely innovating on an existing problem. We really like to say that we work with rebellious companies so those that aren't afraid to say something a little bit left of center, as we talked about earlier today. We help them, full service PR firm, we help them with everything from their media relations to media training, to getting on podcasts such as this. Also with awards and conferences, then now influencers and creators are a big part of what we do as well. So we're a 20 person team. We're in Tribeca and we are boutique for a reason. We really want to choose the clients that we work with. And I think part of that is because I really want to continue to love what I do every day. I want to continue to love the people I work with and the companies that I represent. So we had this no vice clause when we first started, where it was like, no alcohol, no marijuana. We kind of changed that to no asshole clause. And really working with companies that not only are good to us and our staff, but also don't make the world a worse place at the very least. All I heard was Costa Rica and cupcakes. That was a great answer. Right, both Cs. So how has having your own business helped you become a better angel investor? You know, making some of the mistakes I made early on with Astros, I think really helped me understand the pressure that founders are under and how so many people are just trying to build the plane while they're flying it. One of the phrases that was really thrown around a lot in the early startup days was, or my early startup days was, move fast and break things. And I don't hear it as much anymore, but that move fast and break things mentality was something that I really took to my core. And I think really helped me grow Astros, even though I didn't have the right payroll provider in place or didn't really know what I was doing on the business side of things. But I think now that I kind of have that experience and had the experience of kind of making those mistakes, I can look at those other founders and say, okay, this person's gonna do great with these challenges that are ahead of them. I don't know exactly what those challenges are, but if that person can solve a problem, stays cool under pressure, and is a really creative problem solver, that usually tells me that they're gonna be great under pressure. You mentioned mistakes, mistakes that you've made. I heard you mention one earlier. I don't know if folks caught that, but would you share maybe one or two of the mistakes that you made at the beginning of your entrepreneurial journey that the rest of us who are at the beginning of our entrepreneurial journeys don't make? Totally. I think paying people out of my own personal checking account was one. That's the one. I got hit. We only had three employees at the time, so it wasn't a huge tax bill, but it was a tax bill I wasn't expecting. So that was important. And then we ended up working with Trinet. We just switched over to JustWorks. Having a platform like that that really takes all of the legwork away from me and make sure that we're compliant, I think that was, I should have done that earlier. I think one of the other mistakes we made early on was investing in awards and conferences that really didn't have a strong ROI. It was almost like we felt like we needed to be at South by Southwest because our competitors were there. And I think the pandemic had this kind of forced function of, okay, nobody was there. Is there ROI in being at these types of conferences? Yes, perhaps, maybe not at the level that we were doing. We had the Shins perform one year at our house at South by Southwest, and we had five days of programming and brought down 10 of our staff. If we go back to South by, which I think we will, we'll go back in a different way and be a little bit more conservative about our spend and make sure that it's ROI positive, because we did get some really great leads out of that, but I don't think we needed to invest at the level we invested for many years. It's interesting you bring that up, because I think that deep down inside a lot of us, especially those of us who have a queer background, we oftentimes want to show up and be accepted, right? And sometimes the way in which we show up and be accepted is by having the big party, showing up with the biggest whatever it is, right? The best dressed or the top shelf alcohol, whatever, and we oftentimes forget, well, maybe there is a business reason why I need to do this and is this the right time to do this? And I think at the end of the day, the relationships that I built out of South by were the ones in which I had a long, deep conversation with someone. It wasn't, hey, Elliot threw that party, we should go work with him as a PR firm. They were like, oh, Elliot's really smart. He had insights about my industry. He seemed like he'd be great to work with. I think those kinds of things don't come across in a quick party environment. Luckily, some of those people stayed for a long time and stayed after the crowds left and I got to have those conversations with them and I built some of my best VC relationships at South by Southwest. So no, I don't want to say anything bad about South by because it was great for me, but I think I went a little too hard on it and I think I've learned that you don't need to, just because you show up somewhere doesn't mean you need to show up somewhere. I'm arrived. Yeah, exactly. So from a personal finance perspective, what's one thing that the LGBTQ plus community can learn from your experience? You know, I think for me, when I first started Asterisk, I thought I needed to be in this suit and I needed to dress like the VCs that were sending me business. I needed to look bigger than I was, look, I think I was 27 too. I was trying to look older than I was. And so I think once I ditched some of the formalities or ditched some of the things that I thought I was supposed to do and just was me and did the things that I wanted to do, dress the way that I wanted to dress, I think business flowed a lot easier. When it comes to those mistakes, I think it might be more of a challenge for the LGBTQ plus community because we are kind of, maybe there's more comparisons that are happening, especially like gay man to gay man. That person is in this level of shape. This person has this kind of car. I think keeping up with the Joneses, I don't want to generalize, but I would say it probably happens more in the LGBTQ plus community than it does in other communities. And so I think that desire to keep up with the Joneses or desire to look bigger than you are, although it helped me in certain ways, I think you can get wrapped up in it and it doesn't actually benefit your business. It doesn't actually benefit you and it could be a lot of wasted capital that you could invest in other places. Absolutely. Yeah, one of the things that John and I have talked about a lot is the whole idea of fake it until you make it. It doesn't apply to credit cards and spending money on looking good unless you have the money to look good, right? Because then you can get yourself into a pretty difficult spot or maybe into a hole you can't dig yourself out of. Totally. It only goes so far. And some of those phrases people really take to heart, build fast, break things, fake it till you make it. These are great little quotables, but at the end of the day, they do have caveats. Yes, they do. I love it. Well, on that note, thank you so much for joining us. Of course, thank you guys so much for having me. Really appreciate it. Wow, a lot of gems came from that interview with Elliot, but two things really stood out to me. The first was know your one true customer and serve them 100%. It's that kind of clarity that investors are seeking in the startups that they work with. Absolutely. You also want to take into consideration your big, bold statement. Be prepared for the consequences, whether those consequences come from your customers, the general public, through things like social media, or your investors. Thank you for catching another episode of Living Not So Fabulously. Catch future episodes every Wednesday at noon Eastern time at yahoofinance.com, YouTube, or wherever you catch your favorite podcasts. Remember to like, subscribe, set those notifications, and until next time, stay fabulous. This content was not intended to be financial advice and should not be used as a substitute for professional financial services.