Venture capital partnerships such as ours are small and hire new partners infrequently.  As a tight-knit, cohesive partnership that very much works together as a team, getting this right is especially important. A year ago, as we were early in investing out of our 2019 fund and looked forward to launching a new Flybridge fund 12-24 months from now, we decided to add a new General Partner to our team. We knew it would be the most important decision we would make this year.  

We cast a wide net, hired a recruiter, reviewed 100s of candidates, and met with dozens.  Our criteria were simple: we were looking for someone that was wildly curious, with tremendous investment judgment, who approached venture investing with innate founder empathy, brought with them a deep appreciation for the power of community and the connections to back that up. Importantly, we wanted someone who would fit seamlessly into our team – valuing our long history of working together while challenging us to lead in new directions.  

With today’s announcement that Anna Palmer is joining the Flybridge team as a General Partner, we (immodestly) crushed this decision. Jeff, Jesse, and I are beyond thrilled to welcome Anna to the Flybridge Family.  

I first met Anna in late 2012 when she launched her first company, FashionProject, out of the TechStars community.  Immediately struck by her raw intelligence, creativity, and passion for making a difference through entrepreneurship, we stayed in touch as she built FashionProject into the industry leader in online designer clothing donation, building a community of tens of thousands of members and non-profits across 36 countries. But it was not until after the election in 2016 that we began to work together as collaborators and partners.

Anna identified a significant unmet investment opportunity in companies founded by women and wanted to partner with the Flybridge team to form a venture fund focused on investing in female-founded companies pursuing billion-dollar opportunities. Aligned with her vision and inspired by her ability to galvanize change, we jumped at the chance and formed XFactor Ventures.

Anna created XFactor’s unique model: we are a team of women, other than me, that are all current founders of venture-backed companies that are investing at the earliest of stages behind the next generation of founders seeking to build transformative companies.  As active founders ourselves, we know first-hand the ups and downs of building a company and seek to support our portfolio founders with capital and the connections and mentorship to navigate the company building journey.  We launched XFactor in July of 2017 and have since grown our community into an investment team of 22 founders in 6 cities and nearly 60 portfolio companies across two funds with over 80 amazing women founders and co-founders.   

As we worked together over the last four years, in addition to seeing her drive in creating and building XFactor, we saw her instincts as an investor as she personally led seven investments for XFactor — including in Chief, Zubale, and MixLab — that are all performing incredibly well.  Anna is extremely curious, can see connections from one industry that apply to another, has an excellent feel for important trends in the marketplace, and a natural sense for what companies will drive outsized value in the future.  Not to mention she did all of this part-time while also launching, with a co-founder and our investment capital, her second company, Dough, from our offices.  

Fast forward to September of this year.  Driven by Anna and the investment team’s talents, the breadth of their networks, and the depths of their insights, XFactor’s success proved yet again that in early-stage venture investing, relationships and expertise are all that matter.  XFactor’s network and expertise are very complementary to ours and there was clearly an opportunity to align our investment efforts more closely while still preserving the power of XFactor’s unique model. Thus, we leaped at the chance to add Anna to our team when she decided to become a full-time investor after Dough had reached a level of maturity such that she could hand over the CEO reins to her talented co-founder, Vanessa Bruce. Starting work 24 hours after saying yes, Anna joined to help us kick off our annual Founder’s Week, and in partnering together full-time over the last two months, it is like we have been working together for years…which, of course, we have been.

Anna will focus on the full range of B2C and B2B opportunities with a specific interest in community-driven companies, commerce 3.0 (logistics, discovery, payments, social commerce, small business solutions), marketplaces, and the everyday economy while also continuing to drive XFactor Ventures forward.  You can read more on her Medium post here and follow her on Twitter here, but on behalf of the entire Flybridge community, please join me in congratulating Anna and welcoming her into our team!

This month, Crunchbase released 2018 funding stats for companies with female founders under the encouraging headline; “2018 Sets All-Time High For Investment Dollars Into Female-Founded Startups”.  While that statement is factually accurate — $38.9 billion was invested in companies with a female founder in 2018, up from $19.8 billion in 2017, which represents a 3 point increase in the percent of total dollars invested from 14% to 17% —  a deeper look is less encouraging.

If you remove the $14 billion Ant Financial financing, just one investment, the dollars decline to $25 billion and the percent of total dollars declines to 13%, which is down year over year. Similarly, by the total number of investments, there was a decline from 15% to 14%. The data from Pitchbook, by way of Fortune, tells a similar story of limited progress.   

These industry-wide stats are in contrast to the investment opportunities I saw in 2018:

• 125 of the 260 companies I met in 2018 for a focused “new investment pitch”, were with a company with at least one female founder. That’s 48%. Not quite parity, but very close.
• 100% of the 16 new investments made by XFactor Ventures in 2018 were in female-founded companies.  XFactor Ventures was created in July 2017 in conjunction with an amazing team of women who are currently leading successful venture-backed businesses. It is our collective goal to invest in early-stage female founders pursuing billion-dollar opportunities.  Of these 16 companies, 9 have all-female founding teams and in 13 of the 16 companies, the female founder is the CEO. If this data was included in the Crunchbase article linked above, XFactor would fall as the second most active venture investor in female-founded startups — below NEA but above Founders Fund, Social Capital, and Sequoia.
• 40% of the new investments Flybridge has made in the last 18 months (since the launch of XFactor), have had a female founder — an increase of 13% from the preceding 18 months.

While the available data shows it was not the case for the industry as a whole, for me, it’s clear that 2018 was a strong year for female founders. For new investments, venture capital has always been a network, relationship, and focus business but since the launch of XFactor, we’ve noticed a shift — our networks have expanded, driving a significant increase in the volume and diversity of the investment opportunities we’ve seen. In 2019 we expect this momentum to continue and even pick up speed.  Also, stay tuned for more from XFactor as we are actively expanding the investment team and will announce a second, larger fund in the early coming months.

Last Wednesday marked the two-week point since the launch of XFactor Ventures.  We are grateful for, and a bit overwhelmed by, the support and feedback.  We thought there was an unmet market need for female founders investing in female founders, but you amazed us with the volume, quality, and breadth of opportunities that have come into XFactor.  

Over our first two weeks, we received 200 female-founded companies to review.  Obviously, there is a huge pool of talented and creative female founders!  Equally obviously, not all of these investment opportunities are going to fit with our expertise, passion or capacity, and we know that will mean we will end up missing out on some fabulous opportunities.  Given we can’t do it alone, we want to make sure amazing female founders have access to as many resources as possible.  As a result, we are developing an Allies list with whom we can make introductions.  If you’re an angel interested in backing seed stage founders or a fund that is committed to backing women and mixed gender teams, drop us a note to hello@xfactor.ventures letting us know what areas (however you define it) are most of interest to you!

In reviewing these opportunities we are struck by the fact that, apart from the high-quality level, there is no such thing as a normative female founded company.  While the stereotypical beauty/fashion company is a segment within our deal flow, it is nowhere near the most common. The companies we are seeing are diverse, broadly reflective of the venture industry, tech-driven and blow away the myth that female founders only start female-focused companies.  Specifically, 50% are deep tech companies (Software, AI, VR/AR, Networking, IoT, Robotics, Wearables, Other hardware), 20% are e-commerce (mostly B2C, some B2B, in the pet, clothing, beauty, food and home furnishings markets among others), 12% are Biotech (even though it’s not an area of focus or expertise for us at this time) and the remaining 18% are scattered across a variety of categories including fin-tech, ed-tech, marketplaces, content and tech-enabled services.

Nor do female founders always have a female co-founder.  Of the companies with co-founders, 68% have mixed gender founding teams.  This reinforces our belief that diverse founding teams will have a better perspective on market opportunities,  how to define and market products for the widest possible audience,  will make better decisions, and be more successful in attracting and retaining talent.  Interestingly, almost half of the companies have a solo-founder, and while this has always struck me as a harder path, some of the best female-founded companies (StitchFix, LearnVest and The Real Real are three examples that come immediately to mind) have followed this path, so it’s clearly not a determining factor one way or another.

On the XFactor front, since our launch we have closed 3 investments and committed to 2 others. We are extremely impressed with the quality of the first 5 female founders we are fortunate enough to support.  We will follow up with details in future posts, once these companies announce their financings and plans, but the companies are in the AI (2x), Data, Cloud Platforms and Content/Community fields and we look forward to working with these teams as they take on their respective billion dollar market opportunities.

Thank you all again for the support and introductions and for all the female founders we have met for your talent, perseverance, and grit.  As always, if you are interested in speaking with our team, please email us at hello@xfactor.ventures.