This Female-led VC Fund Believes Democratizing Access To Venture Capital Will Drive Top Returns

If you are a serial entrepreneur or experienced investor, all the more so a female one, you probably have heard of January Ventures. Cofounded in 2018 by Maren Bannon and Jennifer Neundorfer, January Ventures has been well known for its forward-thinking approach to diversity, inclusion and, more than anything else, its aim to fully capitalize underrepresented founders from the start.

“There’s a huge mismatch between talent and funding. Anytime there is tremendous talent that doesn’t have the same access to capital, it’s an opportunity to drive returns. Investing in female and underrepresented founders isn’t social impact – it just makes good business sense,” says Maren Bannon, co-founder and General Partner at January Ventures.

Recent research done by Crunchbase has shown that, for the first eight months of 2021, companies with solely female founders raised just 2.2% of all venture funding – lower share than any of the previous five calendar years. 

This comes as no surprise to Neundorfer, cofounder and General Partner at January Ventures, and she explains why. “There is an obvious funding gap at pre-seed for founders who don’t fit the traditional mold. Our 2019 research has also highlighted the funding gap at the early stage: for every $1 male founders raise at the early stage, female founders raise $0.38 and Black female founders raise $0.02. Underrepresented founders are undercapitalized from the start. If you don’t fix the inequity in tech at the earliest stage, it’s nearly impossible to fix later.”

Diversity Is A Culture, Not A Pipeline Problem

But the pipeline problem, so often mentioned as the key reason for lack of female-led startups that get VC funding, doesn’t seem to be the issue for January Ventures’ team – in less than three years, under the leadership of Bannon and Neundorfer, the fund has invested in 45 portfolio companies (full list here): 91% of those companies have female founders, 53% have founders of color, 38% are founded or cofounded by immigrant founders, 33% have a female CTO. It’s very obvious that these two women know where and how to find the best talent to invest in, without compromising on the whole diversity and inclusion premise. 

“We saw firsthand that the nature of entrepreneurship was changing and that traditional venture wasn’t set up to source the founders of the future, which is the main reason we decided to found January in 2018,” adds Bannon, co-founder and General Partner at January Ventures. 

Maren, who studied engineering and then spent her career on the operating side, first working in marketing and sales roles at big tech companies including Applied Materials and Genentech, then led marketing at a couple of startups and cofounded her own called LittleLane, all in the Bay Area, saw firsthand how if you have a certain pedigree, network, and geography, you have much easier access to capital. This felt like a big inefficiency in the way the venture is set up and a problem she wanted to solve.

Venture capital is incredibly network-driven. If you have a certain pedigree, network, and geography, you have much easier access to capital. It’s not finding the best founders, it’s finding a certain subset that fits the traditional mold. 

“We believe the returns of the future will be driven by a much more diverse set of founders  – we believe they will be more female, more racially and ethnically diverse, from a broader set of backgrounds, and more geographically distributed. The traditional venture model isn’t set up to source and support these founders, and we believe that leaves real value creation on the table,” adds Neundorfer. 

The fund’s initial checks range from $200,000 – $750,000, and according to both founders, they  aim to be the easiest fund to pitch. Other firms make founders pass “the test” of finding a warm intro. Instead, January Ventures welcomes cold pitches via a form on their website, with no pitch deck or revenue necessary. They publish the questions they will ask ahead of time in an effort to remove barriers and make their process as transparent and founder friendly as possible. 

“Getting in front of VCs shouldn’t require a backdoor connection or an ivy league network. Our aim is to remove friction and level the playing field,” says Bannon.

Some of the notable investments in the fund’s portfolio include Planet FWD – software enabling brands to bring sustainable and carbon-neutral products to market, founded by Julia Collins, the first Black woman to co-found a unicorn startup (Zume Pizza); Kinside: modern childcare benefit for employers and their employees, founded by Shadiah Sigala – a first-generation Mexican-American who is a repeat founder and a mother, which was critical to understanding how broke the childcare system is in the U.S.; Oula: a full-stack tech-enabled OB clinic that is using technology, community, and doulas to make the experience better for expecting mothers and improve patient outcomes; founded by two women, who both gave birth to babies this past spring (and then raised Series A a couple of months after); Ntropy whose API seamlessly translates raw banking transactions into rich, structured data powering fintechs and financial institutions and Sonantic, a company that has created a Photoshop-like platform for creating emotionally expressive artificial voices, with the gaming and entertainment industries as go-to markets. 

The Importance Of A Support Network

In its last report – 2021 Early Stage Founder Sentiment Report – the fund surveyed 450 early-stage founders across the U.S. and Europe in summer 2021. They found that, during the pandemic, the support system for female founders fell off a cliff. In past years, roughly half of female founders felt supported by the entrepreneurial ecosystem around them, while this year it dropped to just 36% feeling supported. Finding a startup community is harder for founders who don’t fit the traditional mold. While 51% of Bay Area founders felt supported, only 36% of female founders, 31% of Black founders, and 25% of founders over age 50 felt supported. 

Both Bannon and Neundorfer agree that this points to the need for new communities and networks to be built to better support female founders, and as one of the biggest challenges in raising capital for surveyed founders they highlighted “finding warm intros to lead investors”. 

The summer 2021 survey also had some interesting takeaways about how company building has changed post-pandemic: 

• 91% of founders said they will build their companies in a fully or partially distributed way. In fact, they are finding a competitive advantage in building remotely – it’s allowing them to more efficiently attract talent. 
• Founders are less tethered to big tech hubs. Only 21% said it’s important to be located in a top tech hub, while half said location doesn’t matter at all.
• Given the hybrid and remote nature of company building, founders need new types of community and networks to support them.

In order to build January Ventures as the next-gen venture network to source and support the top founders of the future, Bannon and Neundorfer have a three-tiered approach with the main focus on their portfolio companies, it’s Operator Network and LPs they work with. 

The fund’s network starts with their portfolio company founders – who they look for, where they find them, and the values with which they treat them. This last part is particularly important – founder vs. investor relationship is a business marriage and both sides need to treat each other with respect and trust.  

The fund’s Operator Network includes over 100 leaders at tech companies across the U.S. and Europe, who supercharge connections with frictionless customer intros. Unlike most VC networks, 80% are women. 

VC firms these days are realizing more and more that diverse scouts and operators can dramatically expand diversity of their portfolios, by also giving the opportunity to those who might want to enter the VC arena to see how the world of investment looks first hand. 

“Being proactive in how we structure our LP base to build an investor base as diverse as the companies we’re backing is also hugely important to us. When we’re wildly successful we want to help build the next generation of LPs,” adds Neundorfer. Post investment, the network then helps to remove friction and plug our founders into potential customers, hires, advisors, media, and follow on funding. 

“We’ve deliberately grown our operator network to include executives who are ready to offer their expertise to and open their networks for our portfolio companies. This type of access is the biggest accelerant for early stage startups – we’ve seen how our operators help our portfolio companies build momentum, ” adds Neundorfer. 

A Rock-Solid Partnership Is Critical To Starting Anything

“Starting a venture capital firm from scratch is not for the faint of heart – there are other easier ways to get into venture,” shares Bannon smilingly. 

“But the most difficult things are often the most worth fighting for. If you truly believe in the mission, you’ll be motivated to keep fighting for it every day.”

Neundorfer agrees that, when you start a fund, you’re in it for the long term and it’s important to do the work early to pressure test the partnership. Having a great partnership unlocks so many benefits and is really the foundation for success in the future. She speaks with knowledge and experience – as one of the few Latinx GPs in Venture Capital and someone who has spent the first half of her career as an operator in the digital media world, launching the first ad products at YouTube and developing the initial monetization strategy before building digital businesses like MySpace and Hulu at 21st Century Fox, she is no stranger to the fact that finding a good partner – in a cofounder, investor or a portfolio company – can and should be your top priority.  

When asked about some advice they would give to female founders, both agree that pitching the biggest version of your vision – the version that assumes you raise all the capital you need, hire the best talent, and land top customers, is always the best approach. 

“Share this vision in every pitch. Investors will always haircut your pitch to adjust for the inherent risks of startups, so if you only pitch your base case it will look smaller after that investor adjustment. There is sadly still so much bias out there, and you can nip it in the bud by leading with your vision and ambition,” explains Neundorfer. Also, do your diligence on investors – both founders are firm believers that diligence should be a two-way street. “Investors join your company for the long haul – it is very hard to get rid of an investor who is not a fit. It’s important to know how an investor will show up in both the good times and bad.”

“Find your tribe. Startups are hard, with many ups and downs. This is why we have such a strong focus on community at January Ventures. Find people around you who can support you on your journey, whether it be cofounders, investors, mentors, advisors, other founders,” concludes Bannon.