Our Approach
We are changing the stars for female tech founders.
Fact: Diverse Founding Teams Deliver Higher ROI
Reviewing a decade of data, venture capital funds report success by women at the helm:
Morgan Stanley noted $4.4 Trillion in missed opportunity by excluding women and minorities from VC funding
Women-led teams receive 16% of first-round VC funding, but gain the same follow-on funding and exits as all-male ones. The Center for American Entrepreneurship
Women return 63% higher ROI, reported by First Round Capital in ‘First Round Ten Year Project”
Founding teams with at least one female earned 78 US cents revenue per dollar invested, while all-male teams earned 31 cents, less than half says Boston Consulting Group
At least 30% female leadership boosts profitability 15% says Peterson Institute for International Economics
Companies with women at the helm perform three times better than the S&P. Fortune
McKinsey reports that diverse teams are returning higher ROI than homogeneous teams.
Shark Tank’s Kevin O’Leary "not some of my returns, all of my returns, have come from the ones run by women
Diversity on corporate leadership teams is a proxy for the willingness and ability to listen to and act on diverse ideas, making companies more resilient and better able to acquire new markets more quickly and efficiently. They are more capital efficient, they hold tighter reins on good corporate culture, they build diverse teams and sustain best-in-class talent.
Our Investment Thesis
Find Unicorns in Uncrowded Fields
We participate in deals with high prospects with teams that have at least one woman in a position of strategic and operational control. This is our first and foremost requirement.
More than 97% of funding at the Seed, Series A and stages beyond is controlled by – and funds – all-male, largely Caucasian, teams. Fifty-one percent of these funded teams graduate from Stanford and Harvard. That makes funding of all-male founders from these schools a very crowded space.
The most valuable deals are often funded in ‘closed door’ private deals between colleagues at existing VC firms, which means other investors rarely gain access to ‘A’ grade deals. At the same time, ‘A’ grade deals are being overlooked in underserved locations, founding teams, and market sectors, providing an opportunity for higher ROI.
Gender Lens Investing Informs Our Process
We use gender lens investing to bring additional, valuable information to the investment decision. Gender lens investing is the deliberate integration of gender analysis into investment analysis and decision making. Such intentional investing is not only about funding women, but about looking at deals with an understanding of gender bias in ideas and processes. When we are aware of our bias, we make better investment decisions.
Taking Companies to the Next Level of Funding
Our expertise lies in B2B and B2C tech companies. We will look at other business models but will invest only if we have advisors willing and capable of bringing the company to an exit or the next stage of capitalization. We may syndicate funding, taking either a lead or follow-on position. When we lead, we take a Board Seat; when we follow, we or the other investors take a Board Seat to represent the interest of the investors.
Reduce the Risk for Next Round Funding
Angels and seed investors put capital into companies without knowing who will fund those companies at the next level and when. To reduce the risk of these early stage investments, we continue to establish and enhance relationships with later stage VCs. There will be companies that VC’s want to fund but that are too early for them which they will send to us with a list specific benchmarks which need to be reached before they are ready to fund, as well as for companies we are considering. For each investment, we look for four to six VC’s to express interest in each portfolio company to reduce the risk that the company will be unable to raise a next round.
Global Deal Flow
The most foolish reason to invest in a company is its address. Everyone laughs when we say this, but far too many investments are made from a very small ‘gene pool’ of companies within a small geographic area. Limiting deal flow to specific zip codes limits our opportunity to find the most valuable companies for the portfolio. By making connections with like-minded venture firms around the world, we share deal flow, due diligence, and syndicate funding with experts on the ground anywhere a brilliant company with high ROI prospects is found.
Better Ways to Get Our Money In and Out
Traditional venture capital does a very good job of funding the software that powers the ‘next big thing.’ Venture capitalists invest in companies that appear to be able to become the next unicorn. This space is overvalued and overinvested. Exits take an average of 11 – 16 years. Most investors can play that game twice in a lifetime. A common complaint of early stage investors is that their capital is tied up for more than a decade with no exit in sight. Even successful exits often return about the same ROI as a REIT. That’s insufficient for the risk of this asset class.
Bet On Product Launches, Not Companies
With a debt instrument based on a revenue-share agreement, we can invest in companies that do not intend to sell or go public. Typical revenue-share investments return 2x – 4x in 3-5 years. Our risk is limited to the ability of the company to make sufficient sale such that our investment is repaid at a reasonable multiple from an agreed upon percentage of gross sales revenue, rather than betting on the long-term capability of a team to scale the company and waiting for the company to have a liquidity event i.e., M&A or IPO to re-deploy our capital.
Funding For the Best Interests of Both Investors and Founders.
- Redeemable Convertible Note: Founders redeem Mastersfund’s rights to convert our investment to equity and retain ownership of their company.
- Conventional Venture: Equity funding for those companies which demonstrate a clear path to exit.
Founders benefit from a clean CAP table.
More Female Funders, More Women Funded
We are committed to help financially qualified women to become experts at investing in this asset class. To that end, we have obtained commitments from venture capital firms to host our investors for a review session in their offices. You will see what questions are asked and how investment decisions are made by later stage venture capitalists. Once you know what is required at the next stage of funding by a variety of VCs, you will be prepared to review your own portfolio of investments with confidence. We welcome corporate, institutional, Private Family Offices, and individual Qualified Purchaser investors. Please contact us to learn more.
Frequently Asked Questions
What is mastersfund?
A gender lens Venture Capital Fund chartered to support, fund, and champion high-potential technology-driven businesses with at least one woman on the founding team in a position of strategic and operational control.
Can male founders apply?
Yes, so long as there is one woman in a position of strategic and operational control, appropriately titled and compensated.
What about ethnic, racial, age, or ability diversity?
We encourage diversity across all sectors, as increasing volumes of evidence demonstrate that it promotes resiliency and improved financial success. We have elected to focus on gender diversity, but we collaborate with, support, and syndicate funding with other Funds focused on many elements of human diversity, inclusion, and belonging in technology and entrepreneurship.
What is the business argument for gender diversity?
Numerous studies confirm that companies with diversity in the senior management team prove stronger and more sustainable in the market. First Round Capital’s Ten-Year Study reported that women led companies returned an average of 63% higher ROI to their portfolio. An increasing number of studies reports increased gross margins, reduced customer churn, improved corporate governance, less fraud and other legal entanglements, all of which results in improved investor returns in both private and public sectors.
Why buck the traditional Venture Capital model?
The traditional Venture focuses on funding the software that will power the ‘next big thing.’ Today, the lion’s share of Venture Capital is being invested in IoT, blockchain, Augmented and Virtual Reality, and Artificial Intelligence. The process entails a large number of investments with the expectation that one or two successful exits will return outsized returns, covering the losses for twenty to forty or more unprofitable or inadequately profitable liquidity events. 80% – 90% of venture funding in the United States still goes to male, Caucasian founders, most of whom have attended Harvard or Stanford.
With such a strong focus on such a small sub-group of founders and technologies, we believe the sector is over-invested with inflated valuations. The deal sourcing, investment premise, and funding process remain largely unchanged in venture capital for 25+ years.
Mastersfund addresses these critical issues. In addition to funding potential ‘Unicorns’ in the technology sector, we invest in companies that demonstrate the ability to provide investors with shorter term 2 – 7x exits. We utilize equity, debt, revenue-sharing, and hybrid model investment instruments designed to meet the more complex business building opportunities and return higher ROI to our investors.
What’s your investment rubric and engagement process?
Our intentional deal sourcing, stringent due diligence process, relevant funding vehicles, and strict tracking and reporting requirements increase success for both investors and founders.
- We optimize investor returns by seeking high quality deal flow in underinvested sectors and teams.
- We structure investments for optimal value to both investors and entrepreneurs, providing short term smaller exits that power longer term ‘big win’ exits.
- We partner with later stage VCs during our due diligence process and keep interested VCs informed at every benchmark. This establishes strong paths to Series B funding for our portfolio companies that require it.
Who can invest?
Qualified individuals, wealth managers, and corporations.