Jenny Abramson and Heidi Patel signed up investors like Melinda French Gates and UBS for their third Rethink Impact fund, increasing assets under management to over half a billion.
Of Maggie McGrathForbes Staff
JEnny Abramson was a student at Stanford in 1997 when her mother, Patty, launched the Women’s Growth Capital Fund. Back then, her 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 not only gets it, but she just raised another $250 million for Rethink Impact, cementing her 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 participants of this round – which ended today and is reported first here – that stand 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 fire both in the courts and 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 a single summer. Among the limited partners: Melinda French Gates’ investment firm, Pivotal Ventures and a host 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 over ten university endowments and foundations; we have limited partners from major financial institutions such as UBS and Cambridge Associates.”
The late Patty Abramson’s dream was disrupted by the tech crash of 2000 – she ended up returning money to investors with no losses or gains. However, her 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 when she became CEO of a tech startup in 2013, she saw firsthand what her mother had been trying to change. Female founders used to receive only 2% of total VC dollars, as they still are now. “Especially as someone who has two daughters — now teenagers, we felt like we needed to change that once and for all,” Abramson says.
After starting Rethink in 2015, Abramson sought a partner with experience in impact investing. Through her network at Stanford, she connected with Patel (a pioneer in impact investing who now teaches a course on it at Stanford). After closing their first $112 million fund in 2017, the two took stakes in Sallie Krawcheck’s robo-advisor Ellevest; Rachel Romer’s software company Guild Education; and April Koh’s Spring Health. These 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 employers with a career education platform, has been valued at $4.4 billion in 2022. Ellevest now has $2 billion under management.
That track record paved the way for an oversubscribed fund II in 2020 (the duo sought to raise $150 million but closed $182 million of their LPs). Now, just four years later, Abramson, 47, and Patel, 48, have added a quarter of a 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 the new one, attributes its recent rapid fundraising success to “the drive, the grit, the determination that Jenny and Heidi had , how they built relationships.” But she adds, “I think they wouldn’t have done it without the strength of their track record … and I think the belief, at least true for us at Pivotal, in their thesis that this is a point of differentiation that will allow them to it creates value for us.”
“I think some people might have thought that investing in women was a passing trend in the wake of #MeToo,” says Abramson. “But this moment clearly shows that investing in women and 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 blocking the Fearless Fund from awarding grants exclusively to women entrepreneurs of color — 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 brought 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 a 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 made by investing in male-led startups or companies without a mission-oriented lens. “When we talk about limiting an investment to a group of sustainable practices or just women-owned businesses, yes, we are 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 might get some positive externalities.” In other words, there may be an additional benefit to society, but not to the investor.
Abramson and Patel don’t think they’re sacrificing profits — 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 have to pick four or five to invest in, and there’s often less dollars behind those deals,” Abramson says. She points out that most venture funds limit deals as part of their strategy, whether that means backing startups at a certain stage of their development, or in certain industries, or even in a certain geographic area. Focus, she says, “both improve their transaction flow – because people know what to send their way – and is a key differentiator.”
Patel says Rethink’s mission also helps him avoid venture capital bubbles. “The way venture capital bubbles grow is by investors chasing the same deals and the same types of deals, and that’s what drives valuations to skyrocketing numbers that are not sustainable and always burst over time. We play a different game,” she says. “Women start 40 percent of all tech companies, and beyond that, launch 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 it’s not charity, it’s not concessionary,” says Pivotal’s Harkless Moore.
Investors and founders alike discovered that Abramson and Patel bring something to the table beyond their business acumen: a determined network. Harkless Moore’s team has nearly 400 meetings with fund managers each year, but Abramson and Patel stand out, she says, for the hands-on way they help their portfolio founders and limited partners make profitable connections. With Abramson based in Washington DC and Patel in San Francisco, they are almost as much the policy makers as the technology founders of Silicon Valley. For example, after Commerce Secretary Gina Raimondo spoke at Rethink’s annual meeting in DC last year, she had a private meeting with several portfolio executives.
Diana Heldfond, a 2024 Forbes Under 30 and the founder of Parallel Learning (its software connects special education teachers and therapists with more than 100 school districts across the country), she wasn’t actively raising capital for her startup when she first met Abramson in January 2023. But they stayed. 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 the cash when she became an investor in Parallel—is that Jenny is literally the most compelling human being I’ve ever met in my entire life,” says Held fund. . “And by the way, Jenny worked all August,” she adds. “You know the whole ‘oh the VCs left the office in August’ thing? It was the most productive August of my life.”
Laurel Taylor, founder and CEO of Candidly (a 2023 Forbes Fintech 50 member) provides a concrete example of how Abramson’s connections helped her company grow. After racking up nearly $200,000 in student debt herself, 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 round for Candidly, and Abramson joined its board. That year, Taylor says, Abramson introduced her to a Rethink limited partner who put her in touch with Tom Naratil, former head of the Americas for UBS. By 2020, UBS had implemented the Candidly platform both internally, as a benefit for employees within the bank, and externally for its own clients (through Workplace Wealth Solutions). In 2021, UBS led an investment round for Candidly. “As we’ve progressed 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 relationships and new capital,” he says Taylor. .
Congress has also been a help to Candidly. In 2022, it passed the Secure 2.0 Act, which allows employers to treat workers’ student loan payments as 401(k) contributions for employer matching purposes. It has honestly expanded its platform to facilitate these payments.
The business-to-business orientation of many of the 40 companies in Rethink’s portfolio has been helpful – these companies can have high market potential minus the high marketing costs of courting consumers.
In addition to making money for their investors, Abramson and Patel aim to change the tide 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 showing that female-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 an era or two to completely reshape an industry. But I think we are making huge strides. And the fact that we’re now on our third fund, managing half a billion dollars across our three funds, is a huge step in the right direction.”
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