Announcing XFactor Ventures 2: Female Founders investing in the next generation of female founders

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Earlier today we launched XFactor Ventures 2, a pre-seed and seed stage venture fund.  The fund, with just under $9M in commitments including a portion from Flybridge, will invest $150K each in 50+ pre-seed and seed stage companies with female founders targeting billion-dollar opportunities.  

When Anna Palmer, the rest of the Flybridge team, and I had the idea for XFactor Ventures two years ago our thesis was a simple one: putting checkbooks in the hands of existing female founders would not only help more new female founders launch and build their companies but also give the investment partners the opportunity to translate their deep networks and expertise into strong investment returns.  Despite launching with a lot of confidence, we had no idea that it would succeed to the extent it has.  As a result, we are pleased to scale up the effort – more investment partners, more companies, and more capital per company – with XFactor Ventures 2!

Kristen Watson ©
Obligatory co-founder photo in an alley

XFactor was formed out of a combination of frustration and belief.  Frustration that less than 20% of the companies receiving venture capital funding have female founders and a belief that companies with diverse founding teams will outperform in the market.  We also had a hypothesis that our unique investment team, which is comprised entirely of existing female founders of venture-backed companies would be in a preferred position to identify new high-potential, early-stage, companies with female founders and to provide not just capital, but also mentorship, guidance, and connections to help our portfolio companies succeed.

In keeping with our entrepreneurial spirit, the first fund was a true MVP that we stood up fast, learned from, iterated on quickly, and succeeded with, resulting in investments behind 28 companies, all with passionate, persistent, and talented female founders.  We thought that there was a gender gap in the venture industry, but the level of interest and the quality of investment opportunities blew us away.  This portfolio was selected from the nearly 1,500 new companies we have been introduced to and is diverse across sectors (54% B2B, 25% B2C, and the rest health-tech and FinTech) and geographies (36% Bay Area, 32% NYC, the rest are based in 9 other cities).

As we formed XFactor 2 to build on this success, we had three goals.  We wanted to:

  1. Expand our investment team to address sectors and geographies in which we see significant opportunities
  2. Support more companies
  3. Invest more capital behind each new company.   

The investment team for XFactor 2 will have 23 investing and operating partners, up from 10 in XFactor 1.  All the investment partners, other than me, are existing female-founders of venture-backed companies.  Immodestly, the team is impressive and I am regularly wowed by the depth of their expertise, their passion for our mission, and the breadth of their network. Our portfolio companies, as a result, benefit not only from the skills and mentorship of their specific sponsoring partner but also from the collective talents and experiences of the team.  The full investment team is listed below and linked here, but the high-level details include:

  • The partners have founded 28 companies that employ thousands of people and have raised over $550 million in venture capital.  The new team includes 5 YC grads, 5 Fortune 30 under 30s, 9 MBAs, 2 JDs, 2 published authors, 1 PhD, and 1 Emmy award-winning producer.
  • We added an entirely new team in Los Angeles, a vibrant and female-founder friendly market, and a partner in Seattle, Amy Nelson, who is also, excitingly, the founder of an XFactor 1 portfolio company.  As a result, we now have a strong nationwide presence in the Bay Area, Boston, Denver, Los Angeles, New York, and Seattle.
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Hello LA! XFactor team members Amy Nelson, Trina Spear, Nanxi Liu, Heather Hasson, Jilliene Helman (not pictured LA partner Joanna McFarland)
  • We added expertise in the healthcare, FinTech, AgTech and frontier tech sectors.  
  • Finally, all of the partners in XFactor 1 are returning to XFactor 2.

Our investment model in XFactor 2 will remain the same.  We seek to back the most promising female-founded companies pursuing billion-dollar opportunities. We invest early, like to be the “first-check”, and will make a one-time investment of $150K, up from $100K in XFactor 1, in each company.  We do not make follow-on investments as we have found this allows us to be the “first-call”, forming open, honest, and trusting relationships with our founders. With committed capital of $8.6M, XFactor 2 will invest in 53 companies, up from 29 in XFactor 1.  

Despite these changes and growth, what remains are the frustrations and core beliefs.  Female founders are still woefully underrepresented in the ranks of companies receiving venture capital funding.  In 2018 17% of venture dollars globally went to companies with female founders, and at the seed stage, for the last five quarters, just under 20% of total funding went to companies with female founders. Depressingly, this is largely unchanged since we launched in 2017.

Our conviction for the investment opportunity has only increased over the past 2 years.  We are constantly wowed by the tenacity, resilience, and talents of the female founders we see starting companies and, of course, particularly love the 28 founding teams we have supported with our first fund.  The opportunities being pursued by female founders are diverse and don’t conform to stereotypes. We have in our portfolio AI companies, FinTech companies, SaaS companies, Healthcare and medical companies, Future of Work platforms, Consumer apps, and E-commerce brands, and all are seeking to build businesses of significant scale.  We are excited and thrilled to have the opportunity to back an additional 50+ such inspirational teams from XFactor 2 in the coming years.

Are you a female founder with the XFactor looking for funding? If so — we want to talk to you! Please find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures.  As we believe in diversity and inclusion of all people, of all genders, races, ethnicities, sexual orientations, educational backgrounds, religions, abilities, socioeconomic backgrounds, immigration statuses, and more, we will review and consider all opportunities that meet our investment criteria.

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Front (L to R): Nicole Sanchez, Amanda Bradford, Allison Kopf, Anna Palmer, Danielle Morrill, Aihiui Ong. Back (L to R): Jules Pieri, Jessica Mah, Mada Seghete, Joanna McFarland, Aubrie Pagano, Natalya Bailey

The investing and operating partners in XFactor Ventures 2 are:

Bay Area

  • Erica Brescia, Co-Founder & COO, Bitnami (B2B tech expertise) 

  • Ooshma Garg, Co-Founder & CEO, Gobble (B2C expertise)
  • Aihui Ong, Founder & CEO, EdgiLife (B2B2C and CPG expertise)
  • Mada Seghete, Co-Founder & CMO, Branch.io (B2B and mobile expertise)
  • Amanda Bradford, Founder & CEO, The League (B2C and mobile expertise)
  • Liz Whitman, Co-Founder & CEO, Manicube, President Red Door (B2C expertise)

Boston

  • Anna Palmer, Co-Founder & CEO, Dough and Fashion Project (B2C expertise)
  • Chip Hazard, Co-Founder & General Partner, Flybridge Capital  (B2B expertise)
  • Jules Pieri, Co-Founder & CEO, The Grommet (B2C expertise)
  • Natalya Bailey, Co-Founder & CEO, Accion Systems (Deep tech expertise)

Denver

  • Danielle Morrill, Co-Founder & CEO, Mattermark; GM, Meltano at GitLab Inc. (B2B expertise)

Los Angeles

  • Jilliene Helman, Co-Founder & CEO, Realty Mogul (FinTech expertise)
  • Joanna McFarland, Co-Founder & CEO, HopSkipDrive (B2G and B2C expertise)
  • Nanxi Liu, Founder & CEO, Enplug (Deep tech expertise)
  • Trina Spear & Heather Hasson, Co-Founders & Co-CEOs, FIGS (B2C and Healthcare expertise)
  • Jessica Mah, Co-Founder & CEO, InDinero (B2B and Fintech expertise)

New York

  • Allison Kopf, Founder & CEO, Artemis (AgTech expertise)
  • Aubrie Pagano, Co-Founder & CEO, Bow and Drape (B2C expertise) 

  • Kate Ryder, Founder & CEO, Maven (Healthcare expertise)
  • Nicole Sanchez, Founder & CEO, CreditHero (FinTech expertise)
  • Kathryn Minshew, Co-Founder & CEO, The Muse (B2C and B2B expertise) 


Seattle

  • Amy Nelson, Founder & CEO, The Riveter (B2C and B2B expertise)

Female founders: Digging into the 2018 investment numbers

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.Slide1.jpg
  • 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.

A Fortnight of Female Founders

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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.

Announcing XFactor Ventures: Female Founders Investing in Female Founders

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Today, we are pleased to announce and launch XFactor Ventures, a pre-seed and seed stage venture fund that will invest in 30 new companies with female founders targeting billion dollar opportunities in the coming year or two.  

Are you a female founder with the XFactor looking for funding?  If so – we want to talk to you!  Please find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures

XFactor is led by a fantastic investment team of female founders –

  • Bay Area: Danielle Morrill of Mattermark, Erica Brescia of Bitnami, Jessica Mah of inDinero, and Ooshma Garg of Gobble
  • New York: Aubrie Pagano of Bow & Drape, Kathryn Minshew of The Muse, and Liz Whitman of Manicube
  • Boston: Anna Palmer of WonderMile, who while also working on launching her second start-up, was instrumental in co-founding XFactor with me and my amazing partner at Flybridge, Kate Castle.

This team has delivered hundreds of investor pitches, raised well over $100M in venture capital across multiple rounds, hired thousands of employees and generated significant value as they have built and grown the almost dozen companies they have founded.  

XFactor’s goal is threefold:

  1. Supporting and enabling the next generation of female-led businesses.  We invest in companies with at least one female founder – the “X Factor” – who have the insight and drive to build the next billion dollar company. Our investment team are all talented and successful female founder operators that have ridden the company-building roller coaster themselves and will provide connections and “in the trenches” advice and mentorship to our portfolio companies.  Regardless of gender, a team of successful founder and leaders investing in the next-generation of founders is unique and their collective insights will be valuable to the companies in which we invest.
  2. Providing our investment team a platform and mentorship to become successful investors. We hope that, over time, this effort will increase the ranks of female investors in the venture and angel investing community.
  3. Finally, and most importantly, XFactor is focused on generating attractive investment returns by identifying massive market opportunities and backing the most talented ambitious founders (who happen to be female) based on our conviction that diverse teams will outperform in the market.  Said another way, XFactoris not an affirmative action fund with all the negative connotations that implies.  There are few things worse for a female founder than being referred to a female-focused fund with the insinuation that you are not ready for the big leagues of male dominated funds. That’s not us. We are big league entrepreneurs and investors that will hold founders to high standards and support them in building game-changing companies.

I have been a venture capitalist for almost my entire professional career, first as a General Partner at Greylock and more recently as a co-founder of Flybridge.  On a personal level, I have always been surrounded by strong women and recognize the unique value women can bring to the table.  Over the years, when I realized that my male-dominated deal flow and investment activity did not reflect those values, I told myself that it simply reflected the demographics of the B2B tech space in which I invest.  Further, when I heard stories about VCs who would ask female founders what they would do if they got pregnant, or comment inappropriately on their appearance, or get their wife on the phone to help assess an idea that was being pitched to them or, as has become so apparent in the last weeks, inappropriately turn pitch meetings into a dating opportunity, or even more deplorable, an opportunity to leverage their power to sexually harass female founders, I comforted myself by saying that was not me or my partners. Those jerks are the minority of venture investors and not the ones I work with.

But last Fall, it became apparent that being a bystander was no longer acceptable.  I was appalled that the public discourse in the country suddenly turned openly misogynistic.  And when I received a specific comment from my oldest daughter, a tech-focused junior in college, I realized I had to do something to change the venture industry. “Dad,” she groaned, “I am so tired of looking at websites of startups and seeing only men on the management team” Thus, teaming with Kate, the inspirational XFactor investment team, and all of my partners at Flybridge, we set about forming XFactor Ventures.

The venture industry needs to dramatically change.  80% of the companies that receive venture funding have male only founding teams, and only 7% of partners in leading venture firms are women.  The two are related.  Female partners are more likely to back female founders and yet venture firms pull new venture partners from the ranks of successful founders, so the cycle perpetuates.  While the funding statistics are objectively not right, they are, equally importantly, not smart.  Diverse founding teams will have a better perspective on market opportunities, how to define and market products for the widest possible audience. They will make better decisions and be more successful in attracting and retaining talent.  All of which will lead to superior investment returns.

Finally, as no post from me would be complete without a chart, I have been astounded by the change in the gender composition of my “sourcing meetings” since I started working on XFactor, and this is in the last six months while we were quietly working on this initiative.  As shown below, it turns out to find female founders; you just need to look for them.

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The entire team at Flybridge is thrilled to support XFactor and, on a personal level, I am looking forward to working with our phenomenal and unique investment team as we back and support 30 companies started by fantastic female founders with the XFactor!  

Are you a female founder with the XFactor?  Find us online at XFactor.ventures, follow us on Twitter or reach out via email to hello@xfactor.ventures.