Jenny Abramson and Heidi Patel have signed up investors including Melinda French Gates and UBS for their third Rethink Impact fund, bringing assets under management to more than half a billion.
by Maggie McGrathForbes staff
JEnny Abramson was a sophomore at Stanford in 1997 when her mother, Patty, launched the Women’s Growth Capital Fund. Back then, the daughter recalls, she was surrounded by “a million amazing women” at school and didn’t really understand why female founders might need their own dedicated venture capital firm.
Twenty-seven years later, Jenny Abramson has not only succeeded, but has just raised another $250 million for Rethink Impact, cementing its status as the largest venture capital firm dedicated to funding female CEOs. It’s the third and largest fund Abramson and fellow managing partner Heidi Patel have raised since 2017 and nearly doubles their assets under management.
It’s not just the size and the participants in this round – which closed today and is reported here first – that stands out. The successful round comes at a time when venture fundraising is on track for its worst year in a decade, according to Pitchbook, and when efforts to promote diversity, equity and inclusion are under attack in both the courts and in corporate America.
While the average time for venture firms to close new funds has stretched to 15 months in recent quarters, Abramson and Patel raised their Fund III in just one summer. Among the limited partners: Melinda French Gates’ investment firm, Pivotal Ventures and a number of institutional investors. “Getting to this size meant we really had to cross the chasm into institutional LPs, and that’s what we did,” says Patel. “We have more than ten university endowments, and foundations; we have limited partners from major financial institutions such as UBS and Cambridge Associates.”
The dream of the late Patty Abramson was interrupted by the 2000 tech crisis: she ended up returning money to investors with no loss or gain. Still, his daughter never planned to take up the cause. After Stanford, Jenny Abramson was a Fulbright Scholar at the London School of Economics, earned an MBA from Harvard, and spent eight years as an executive at the Washington Post. But it was when he became CEO of a tech startup in 2013 that he saw firsthand what his mother was trying to change. Female founders received only 2% of total venture capital dollars, as they still do now. “Especially as someone who has two daughters, now teenagers, it felt like we needed to change this once and for all,” Abramson says.
After starting Rethink in 2015, Abramson sought a partner with experience in impact investing. Through her Stanford network, she connected with Patel (a pioneer in impact investing who now teaches a class on it at Stanford). After closing their first $112 million fund in 2017, the duo took stakes in Sallie Krawcheck’s robo-advisor Ellevest; Rachel Romer’s software company Guild Education; and April Koh’s Spring Health. They were smart calls. Spring Health, which provides mental health care through employer-sponsored plans, hit a $3.3 billion valuation earlier this summer. Guild Education, which provides a career training platform to employers, has been valued at $4.4 billion by 2022. Ellevest now manages $2 billion.
This track record paved the way for an oversubscribed fund II in 2020 (the duo sought to raise $150 million but closed on $182 million of their LPs). Now, just four years later, Abramson, 47, and Patel, 48, have added a quarter billion in dry powder. Erin Harkless Moore, managing director of investments at Pivotal, which is an LP in Rethink’s Fund II as well as its new one, attributes its recent rapid fundraising success “to the drive, the determination that Jenny and Heidi have had, how they’ve been creating relationships.” But she adds, “I think they wouldn’t do it without the strength of their records … and I think that belief, at least for us at Pivotal, in their thesis, is a point of differentiation that allows them to generate value for us.”
“I think some people thought investing in women was a passing trend in the wake of #MeToo,” says Abramson. “But this moment makes it clear that investing in women and making an impact [funds] it’s a good deal.”
Not everyone, however, is convinced of the wisdom – or legality – of such a targeted fund. In June, the U.S. Court of Appeals for the 11th Circuit issued a preliminary injunction to stop the Fearless Fund from awarding grants exclusively to black women entrepreneurs, its entire mission. The case, now back in district court, was brought by The American Alliance for Equal Rights, led by Edward Blum, the conservative activist who filed the lawsuits that led the Supreme Court last year to ban racial preferences in college admissions. Blum argues that focusing only on women (or women of color) is a form of reverse discrimination and not the way to remedy past discrimination.
Some investors and academics also argue that focusing on a smaller segment of the market means missing out on the returns that can be earned by investing in male-led startups or companies without a mission-oriented lens. “When we talk about limiting an investment to a set of sustainable practices or just women’s businesses, yes, we’re limiting the financial return,” says Jim Wolfe, entrepreneur-in-residence and professor at George Mason University’s Costello College of Business. . “But,” he continues, “we may have some positive externalities.” In other words, there may be an extra profit for society, but not for the investor.
Abramson and Patel don’t think they’re sacrificing returns, especially if they can find promising companies that male-dominated venture capital firms might overlook. Rethink looks at “700 deals a year, and we only need to pick four or five to invest, and there’s often fewer dollars behind those deals,” Abramson says. She notes that most venture funds limit offerings as part of their strategy, whether that means supporting startups at a certain stage of their development, or in certain industries or even a specific geographic area. Having a focus, she says, “both improves your business flow, because people know what to send your way, and it’s a key aspect of your differentiation.”
Patel argues that Rethink’s mission also helps it avoid venture capital bubbles. “The way VC bubbles grow is that investors chase the same businesses and the same types of deals, and that’s what drives valuations to staggering numbers that are unsustainable and always explode over time . We’re playing a different game,” she says. “Women are starting 40% of all tech companies, and beyond that, they’re launching new businesses at twice the rate of men. So we feel the opportunity is huge and completely untapped.”
“They [Abramson and Patel] they’re very clear that this is not charity, it’s not a dealership,” says Pivotal’s Harkless Moore.
Investors and founders alike have discovered that Abramson and Patel bring something beyond their business acumen: a determined network. Harkless Moore’s team takes about 400 meetings with fund managers each year, but Abramson and Patel stand out, she says, for the hands-on way they help founders and limited partners in their portfolio make profitable connections. With Abramson based in Washington DC and Patel in San Francisco, they are close to both Silicon Valley policymakers and tech founders. For example, after Commerce Secretary Gina Raimondo spoke at Rethink’s annual meeting in DC last year, she held a private meeting with a handful of the CEOs in her portfolio.
Diana Heldfond, 2024 Forbes The Under 30 list and founder of Parallel Learning (its software connects special education teachers and therapists with more than 100 school districts across the country), he wasn’t actively raising capital for his company when he met Abramson at January 2023. But they stayed in touch over the next six months and by the end of that summer, Parallel had “opportunistic capital” from Rethink.
“The reason we’re a portfolio company, and we didn’t need money at the time she became an investor in Parallel, is that Jenny is literally the most compelling human being I’ve ever met in my entire life,” Heldfond says. . “And by the way, Jenny worked all August,” he adds. “You know the whole ‘oh, the VCs are out of office in August’ thing? It was the most productive August of my life.”
Laurel Taylor, the founder and CEO of Candidly (a 2023 Forbes Fintech 50 member) offers a concrete example of how Abramson’s connections helped her company grow. After racking up about $200,000 in student debt, Taylor launched Candidly in 2016 with the goal of building a platform to help borrowers pay off their debt faster. In 2019, Rethink led an $11 million Series A for Candidly, and Abramson joined its board. That year, Taylor says, Abramson introduced her to a limited partner at Rethink who put her in touch with Tom Naratil, former head of the Americas at UBS. By 2020, UBS had deployed the Candidly platform both internally, as a benefit to employees within the bank, and externally to its own clients (via its workplace wealth solutions). In 2021, UBS led an investment round for Candidly. “As we move through every stage of the business, there’s a direct line to Jenny: the presentations she’s made, the phone calls she’s made, and our ability to close new business and new capital,” says Taylor. .
Congress was also a help to Candidly. In 2022, he passed the Secure 2.0 Act, which allows employers to treat employee student loan payments as 401(k) contributions for employer matching purposes. It has frankly expanded its platform to facilitate those payments.
The business-to-business orientation of many of the 40 companies in Rethink’s portfolio has served it well: These companies can have great market potential minus the big marketing costs of courting consumers.
In addition to making money for their investors, Abramson and Patel aim to change the direction of funding for female founders and CEOs. “I definitely think we’ll see parity in our lifetime,” Abramson says optimistically. “I think we’re finally at a point where there’s data that shows women-owned companies grow faster, have higher valuation increases, and exit faster — after all, time is money.”
“It’s our life’s work,” adds Patel. “It takes more than one or two vintages to completely reshape an industry. But I think we’re making great strides. And the fact that we’re now at our fund three, managing half a billion dollars between our three funds, is a big step in right direction.”
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