Flybridge Capital launches woman-only VC fund
Wading into one of the most contentious issues in the tech industry, Boston-based Flybridge Capital Partners is launching a new fund that will invest only in startups led by women.
Though the fund has been in the works since February, Flybridge’s announcement comes as the venture capital industry is on the defensive over allegations of improper treatment of women, while the tech industry has long struggled to get more female executives into its upper ranks.
Flybridge will use an all-woman team of outside entrepreneurs to advise it on investment choices. One of those, Anna Palmer, said in an interview that female founders face a unique challenge because they are often pitching their ideas exclusively to men.
“It is tough to not have women on the other side of the table, even if it’s not the sexual harassment stories that you hear in the media now,” Palmer said. “On more than one occasion I actually pitched an investor’s wife on speaker phone to get her reaction to see if it was a good idea before the meeting.”
The new fund, called XFactor Ventures, closed this week. Small by VC standards at $3 million, it will provide early-stage support for 30 startups that have at least one woman founder.
Flybridge expects the $100,000 it can offer to each startup will be only a part of the money founders will raise; the hope is the commitment from the XFactor fund will persuade other investors to back the startup, or put founders over the top on their fund-raising goals.
Palmer predicted the XFactor money will end up being a “quit your job check.” The fund will focus on mentoring the founders, then connecting them with later-stage investors as their companies grow.
The announcement comes as the venture capital business is in a period of soul searching following a recent series of allegations of sexual improprieties by investors in Silicon Valley.
In a blog post announcing the fund, Flybridge cited statistics from PitchBook and TechCrunch that show that 80 percent of venture funding goes to male-only founding teams, and only 7 percent of partners in leading venture firms are women.
“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 continues and it needs breaking,” Chip Hazard, a Flybridge general partner and investment partner at XFactor, wrote in the post.
Flybridge’s investment amounts to 20 percent of the fund, with the rest largely coming from high-net-worth individuals; each of the women on the investment team is an investor in the fund.
Those advisers will gain experience funding startups. But they will also help Flybridge address a problem that’s bedeviled the VC and tech industries: diversifying the male-dominated networks that provide contacts and candidates for startups.
“Each one of these investment partners has a very strong, deep network with each of their communities, and they’ve already been providing guidance and mentoring to female founders,” said Kate Castle, a Flybridge executive involved in the XFactor fund.
Other firms have turned to women-focused funds as a way to even the playing field and take advantage of business opportunities that the male-dominated field has been missing.
Lakshmi Balachandra, an assistant professor of entrepreneurship at Babson College, said woman-focused investing is one tool to fix the gender imbalance in technology. But she warned it is not a substitute for rethinking why venture capital as a whole is not reaching women entrepreneurs.
“There needs to be a systemic solution across all of these funds, not just coming up with a new fund.” said Balachandra, who was an investment associate at the former Axxon Capital, once the nation’s largest woman-owned, woman-focused venture fund.
Hazard said the creation of XFactor had a profound effect on how he does business. Over the past six months, he said his sourcing meetings, including pitches, have shifted from being 90 percent male, to 55 percent men, 45 percent women.
Part of that has been building his network, and part has been his increasing awareness of the problem.
“There’s tremendous talent out there, and it’s really just a question of starting to look and putting in a concerted effort,” he said.