Catalyzing Financial Inclusion With Venture Capital

Lisa Calhoun, general partner and founder of Valor Ventures at Startup Runway

Lisa Calhoun, general partner and founder of Valor Ventures at Startup Runway

Valor Ventures

The number of female-founded venture funds is growing. Between 2017 and 2018, the number of firms with a gender lens grew by 50%, according to Project Sage 2.0 by Wharton Social Impact. First-time fund founders, such as Lisa Calhoun, general partner and founder of Valor Ventures, are now launching their second funds. Calhoun's team includes co-founders Robin Bienfait, former Chief Innovation Officer of Samsung and former CIO of Blackberry, and Sarah O'Brien, former GE manager, and Carestream Dental CFO.

Based on lessons from the first fund, Valor has narrowed its focus from investing in any hyper-growth software companies to those focused on financial inclusion. Women, Latinx, and Blacks needs for affordable and useful financial services are not being met. The highest-performing companies from Fund 1 fell in this category.

The Census projects that the US will become a majority-minority population in 2045, "The country is undergoing a huge demographic transformation," explained Calhoun. Valor is on the lookout for startups that are meeting the needs of this emerging market.

It is also targeting startups with underrepresented founders — women, Latinx, and Blacks. These founders understand the needs of this market because they are the market. That insight gives them an edge when developing products that better meet their needs. The best entrepreneurs scratch their own itch. Because there is less competition for startups in overlooked markets, they are priced more competitively and deliver a better ROI.

Valor's investment philosophy is attractive to a wide array of limited partners (the investors in a venture capital fund), including fintech leaders Kelly Loeffler, CEO at Bakkt; Kathryn Petralia, co-founder and President at Kabbage and Drum; and Lynne Laube, co-founder and COO at Cardlytics. Other LPs include foundations and family offices (ultra-high-net-worth individuals who use private wealth management advisory firms to manage their wealth) such as Tim Crow, former Executive Vice President HR at Home Depot; David Cummings, serial entrepreneur and founder at Atlanta Tech Village; and Michael Mansfield, CEO at Mansfield Oil.

Valor plans to lead 25-30 seed-stage investments — startups that are gaining initial traction in the market — over its four-year investment period. Since no single investment is a guaranteed winner, venture capital funds take a diversified portfolio approach to mitigate risk by making numerous investments with the goal to find more winners than losers to deliver an overall high ROI for the portfolio. To date, Valor has raised just over one-third of its $25 million target for Fund 2.

Fund 2's first investment is Capway, an Atlanta-based digital banking and financial literacy platform. It serves the one in five Americans who are under-banked and overcharged by traditional banking systems. Its founder, Sheena Allen, is a serial entrepreneur who, having grown up in Mississippi, saw firsthand how people in her community were falling victim to predatory lending practices. "Those in inner cities and rural areas have not always had the same access and convenience as others," she said in an interview with Forbes contributor Jessica Santana. "Instead of their community being filled with banks, they are usually filled with predatory financial services." Co-investors in Capway include:

  • Initialized, best known because one of its managing partners is Alexis Ohanian, co-founder of Reddit, who is married to Serena Williams.
  • Maveron is best known because one of its founders is Howard Schultz, former CEO, president, and chairman of Starbucks.

Fund 2's second investment is Physician 360, which provides at-home strep throat, flu, urinary tract infection (UTI), and anemia telemedicine kits with an online physician consult. The company was founded in Dallas by emergency room doctors Angela Fusaro, MD, MBA, and Rob Lapporte, MD. The service is available in 37 states. "It allows more people to get a better standard of care and at an affordable price," said Calhoun. "This is especially important in rural areas where there may not be a doctor nearby."

In addition to providing capital through its funds, Valor supports founders in other ways, which also feeds its pipeline:

  • Startup Runway is a pitch event for under-represented founders and part of Valor's sourcing system.
  • Atlanta Tech Park is Valor's 45,000 square feet headquarters. Over 70 events were held there last year. Portfolio companies can hold user conferences and sales meetings there. Or, they can just hang out and get advice from Valor's team, VCs, corporate leaders, and successful founders. VCs also make use of the space when they're in town.
  • Valor's Innovation Council is a group of over 50 corporate leaders who provide insights to startups.

"Our best guess is that under-represented founders account for 40% of startups," said Calhoun. To ensure that Valor has a pipeline of under-represented founders, it tracks the gender, race, and ethnicity of the founders in its CRM system. If there is an imbalance in the percentages, Valor adjusts the types of events it hosts and attends to attract more or less of a specific group.

How will you take advantage of this new wave of investors who are focused on underrepresented founders?

">

The number of female-founded venture funds is growing. Between 2017 and 2018, the number of firms with a gender lens grew by 50%, according to Project Sage 2.0 by Wharton Social Impact. First-time fund founders, such as Lisa Calhoun, general partner and founder of Valor Ventures, are now launching their second funds. Calhoun's team includes co-founders Robin Bienfait, former Chief Innovation Officer of Samsung and former CIO of Blackberry, and Sarah O'Brien, former GE manager, and Carestream Dental CFO.

Based on lessons from the first fund, Valor has narrowed its focus from investing in any hyper-growth software companies to those focused on financial inclusion. Women, Latinx, and Blacks needs for affordable and useful financial services are not being met. The highest-performing companies from Fund 1 fell in this category.

The Census projects that the US will become a majority-minority population in 2045, "The country is undergoing a huge demographic transformation," explained Calhoun. Valor is on the lookout for startups that are meeting the needs of this emerging market.

It is also targeting startups with underrepresented founders — women, Latinx, and Blacks. These founders understand the needs of this market because they are the market. That insight gives them an edge when developing products that better meet their needs. The best entrepreneurs scratch their own itch. Because there is less competition for startups in overlooked markets, they are priced more competitively and deliver a better ROI.

Valor's investment philosophy is attractive to a wide array of limited partners (the investors in a venture capital fund), including fintech leaders Kelly Loeffler, CEO at Bakkt; Kathryn Petralia, co-founder and President at Kabbage and Drum; and Lynne Laube, co-founder and COO at Cardlytics. Other LPs include foundations and family offices (ultra-high-net-worth individuals who use private wealth management advisory firms to manage their wealth) such as Tim Crow, former Executive Vice President HR at Home Depot; David Cummings, serial entrepreneur and founder at Atlanta Tech Village; and Michael Mansfield, CEO at Mansfield Oil.

Valor plans to lead 25-30 seed-stage investments — startups that are gaining initial traction in the market — over its four-year investment period. Since no single investment is a guaranteed winner, venture capital funds take a diversified portfolio approach to mitigate risk by making numerous investments with the goal to find more winners than losers to deliver an overall high ROI for the portfolio. To date, Valor has raised just over one-third of its $25 million target for Fund 2.

Fund 2's first investment is Capway, an Atlanta-based digital banking and financial literacy platform. It serves the one in five Americans who are under-banked and overcharged by traditional banking systems. Its founder, Sheena Allen, is a serial entrepreneur who, having grown up in Mississippi, saw firsthand how people in her community were falling victim to predatory lending practices. "Those in inner cities and rural areas have not always had the same access and convenience as others," she said in an interview with Forbes contributor Jessica Santana. "Instead of their community being filled with banks, they are usually filled with predatory financial services." Co-investors in Capway include:

  • Initialized, best known because one of its managing partners is Alexis Ohanian, co-founder of Reddit, who is married to Serena Williams.
  • Maveron is best known because one of its founders is Howard Schultz, former CEO, president, and chairman of Starbucks.

Fund 2's second investment is Physician 360, which provides at-home strep throat, flu, urinary tract infection (UTI), and anemia telemedicine kits with an online physician consult. The company was founded in Dallas by emergency room doctors Angela Fusaro, MD, MBA, and Rob Lapporte, MD. The service is available in 37 states. "It allows more people to get a better standard of care and at an affordable price," said Calhoun. "This is especially important in rural areas where there may not be a doctor nearby."

In addition to providing capital through its funds, Valor supports founders in other ways, which also feeds its pipeline:

  • Startup Runway is a pitch event for under-represented founders and part of Valor's sourcing system.
  • Atlanta Tech Park is Valor's 45,000 square feet headquarters. Over 70 events were held there last year. Portfolio companies can hold user conferences and sales meetings there. Or, they can just hang out and get advice from Valor's team, VCs, corporate leaders, and successful founders. VCs also make use of the space when they're in town.
  • Valor's Innovation Council is a group of over 50 corporate leaders who provide insights to startups.

"Our best guess is that under-represented founders account for 40% of startups," said Calhoun. To ensure that Valor has a pipeline of under-represented founders, it tracks the gender, race, and ethnicity of the founders in its CRM system. If there is an imbalance in the percentages, Valor adjusts the types of events it hosts and attends to attract more or less of a specific group.

How will you take advantage of this new wave of investors who are focused on underrepresented founders?

Follow me on Twitter or LinkedIn. Check out my website.

I am president of Ventureneer, a digital media and market research company that helps corporations reach small businesses through thought leadership. My book, Forget the...