The W Fund: Using Rolling Funds to Close the 48% Gap

For the past 15 years, Kate Brodock and Allyson Kapin have worked to elevate women in tech while starting and running their own companies. Now they are combining forces to put money directly in women founders’ hands with a new Rolling Fund.

“Women founders, founders of color, immigrants, the LGBTQ community, people over 50 — they’ve been ignored for far too long,” said Kapin, who is also the founder of Women Who Tech and the Rad Campaign. “We are here to find them and fund them, and for them to scale and then exit.”

Kapin and Brodock recently launched The W Fund to help fund founders who have been overlooked and underfunded in an overwhelmingly male and white tech ecosystem. They set a target of $48M — representing the percent of funding (48%) that would need to shift from male-led founders to female-led founders to achieve gender parity in VC funding.

The duo began raising money last year following a traditional VC model and shifted to a Rolling Fund once they learned about the new offering and flexibility it offered. They said their LPs particularly like the ability to close deals fast — while building momentum for future deals — and the flexibility in commitment periods they are able to offer LPs.

“We want to break things,” said Brodock, who’s also the CEO of Women 2.0. “This industry has been inaccessible to people like us and a lot of other emerging fund managers out there, so we have to rewrite rules. There are new models out there — Rolling Funds being one of them — that offer a way to do it.”

In this interview with AngelList Venture’s Seif Salama, they discuss:

• Their work to elevate women in tech;
• Why there are so few female fund managers;
• Their plans to fund — and support — diverse founders;
• How Rolling Funds fits into their strategy.

Seif: Tell me about your backgrounds and how the fund came about.

Kate: Over the past 15 years I’ve been a founder, mentor, advisor, and speaker, always with a strong focus on gender and representation in this space. I ran a large global nonprofit focused on women in entrepreneurship and tech, with over 60 chapters focused on representation in their startup ecosystems. Raising a fund felt like a natural progression of that work. It was more of a when, not if, situation.

Allyson: I started a tech firm over a decade ago and quickly realized how few women were represented at tech conferences. I launched Women Who Tech to address that lack of representation. About five years ago, we started to focus on funding for women founders.

About 2.7% of VC funding goes to women-led startups. That stat hasn’t changed much over the years. Sometimes it’s 2.9%.; sometimes it’s 2.8.%. Now it’s 2.7%, so it’s going down, which is disturbing. The stats are far more dismal for women of color: About 0.0006% of funding has gone to black women founders over the years.

We launched the Women’s Startup Challenge, which essentially is a virtual accelerator that supports women founders. We backed a dozen startups over the past five years, and they are doing phenomenally: 84% of the startups that have gone through the accelerator are still in business, and over 80% have raised funding.

Our program shows that when women are invested in, they will absolutely thrive.

Seif: How did you end up on AngelList and how did that impact your investment evolution over time?

Allyson: I was part of Arlan Hamilton’s first syndicate on AngelList when she launched Backstage Capital. I also worked with Shelly Kapoor Collins to launch Shatter Syndicates, funding women founders.

When I spoke with (AngelList partner) Sunil Pai about the fund we planned to launch, he told us about Rolling Funds. We thought it was a great fit both for AngelList and for The W Fund.

Kate: Rolling Funds is positioned very well for emerging fund managers. Two things were really appealing to us.

One was the ability to close very quickly. With Rolling Funds we can have $100k in commitments and close a deal. That allows us to build off the momentum of early deals. We’ve already done our first deal, which has been a significant benefit for us, rather than waiting until we raised 20% of the fund to do any investing.

The second thing that appealed to us, especially since COVID, was the flexible LP commitment schedule. That has been very advantageous in a world that has an entirely different risk profile than before.

Seif: Did you run a traditional fund before this?

Kate: Before we signed up for the Rolling Fund, we were fundraising using the traditional VC model. We got virtually everybody over the hump from the traditional model to the Rolling Fund fund model. The people who are familiar with traditional VC pick it up very quickly. For people less familiar with how VC works, it’s essentially the same amount of education. So it’s been pretty smooth sailing.

Seif: Do you think the Rolling Fund model can play a role in achieving your goals for the industry?

Allyson: For emerging fund managers who are focused on addressing the lack of VC funding toward women, people of color, immigrants, people over age 50, the LGBTQ community — which is another huge opportunity — Rolling Funds can be really helpful.

The reality is, if VCs are not intentional about diversifying their portfolios, then we’re going to continue having this conversation. The problem won’t be solved until investors and VCs and LPs intentionally go out and write the checks.

Seif: What does your LP base expect when you make an investment?

Kate: Many of our LPs are professional women who have done well in their careers and want two things: They want returns, and they want to invest that money towards a mission. Often, that’s investing in other women.

Allyson: Some of the biggest funds out there don’t have the pipeline that we do because they never focused on building it. Our LPs, which also include allies, are excited that we have access to that pipeline and as LPs are able to expand their investment portfolio.

Seif: What are your plans for the fund?

Kate: We have a target fund size of $48M. The number 48 is meaningful because it’s the percentage of capital in the VC space that would need to shift to women-led companies in order to get to a 50/50 ratio.

We’ll look to make two to three investments per quarter when we’re fully up and running. When we’re not the lead, our average check size will be $400k- $500k. We’re also excited to lead rounds for the right founders, because we know women and other underrepresented groups often have a very difficult time finding a lead. Those would be larger checks, in the range of $750k to $1M.

Seif: What should founders expect to get from you?

Kate: All of the work that Allyson and I have done in the community gives our fund a considerable advantage. We built a robust platform over the past 10 to 15 years that enables founders to get exposure for themselves and their products, develop a user base, find future funding, hire talent — you name it.

Allyson: We’re excited about leveraging the strengths of our LPs to help our portfolio companies. For example, one of our LPs has an incredible background in HR tech, having exited her own startup and built another. Early stage startups are trying to figure out how to build a culture — and then, as they scale, they’re thinking about retention — while they’re thinking about fundraising and their product. Being able to pull our LPs in as advisors based on their skill sets is exciting for our fund and for our portfolio.

Seif: What advice do you have for emerging fund managers?

Allyson: Women have faced a lot of biases and challenges raising a fund compared to men. Women have also been pigeonholed as being risk-averse. Thankfully more women in VC are starting to break down some of these barriers. My advice is if you want to start investing or launch a fund, then do the research, build up your network, learn as much as you can, and don’t let that mindset stop you.

There’s so much out there for VC to do to honestly address these systemic issues we’ve been talking about — and the media has been writing about — for years. People coming into this space for the first time should be looking at these different models and coming in to shake things up.

Kate: We want to break things. This industry has been inaccessible to people like us and a lot of other emerging fund managers out there, so we have to rewrite rules. There are new models out there — Rolling Funds being one of them — that offer a way to do it.