Can the military academies compete with Stanford and Harvard in venture? Two veterans are raising $50M to find out
Soldier-entrepreneurs are unfortunately still a rare breed in Silicon Valley, despite the region's origins in Cold War defense spending. While the courage and perseverance required to fight in an overseas battlefield (or the office bureaucracy on base) would seem a perfect fit for the travails of the founder, the reality is that the journey from solider to CEO is a long and arduous transition.
A couple of organizations have popped up over the years to make the leap easier. For instance, Patriot Boot Camp, which I profiled back in 2018, works in the earliest days of the startup journey to help veteran founders learn the key skills of building a company and fundraising. Yet, there still remains a lack of networking and funding that particularly targeted this group of entrepreneurs.
That's the opportunity that Emily McMahan and Sherman Williams, the two managing partners of Academy Investor Network, saw when looking at their peers at the five U.S. service academies. The firm is targeting a final first fund of $50 million, and today announced the close of its anchor investor, insurance and financial services provider USAA, which will invest $2.5 million. Prior to USAA, the fund's first investor was Scout Ventures, which focuses on frontier tech and where McMahan is a venture partner.
McMahan graduated from West Point in 2001 right as the War on Terror began. I went really straight into the action post 9/11," she said. From there, she pivoted into a startup targeting the federal market, before founding Capitol Post, which taught entrepreneurial skills to veterans and their spouses and also had a co-working space in northern Virginia before folding into Bunker Labs in 2019.
My career has always been focused around community, working with entrepreneurs, and really kind of harnessing the energy of the veteran entrepreneur community," she said. She is based in DC, and also sits on the board of Patriot Boot Camp.
The Pentagon, headquarters of the Department of Defense. Image Credits: Jeremy Christensen/Getty Images
Meanwhile, Williams hails from the Naval Academy, graduating in 2003 before going on four deployments in the midst of the war in Iraq, which started just weeks before his graduation. He ultimately ended up at Chicago's Booth School, where he studied finance and pivoted his career into investment banking focused on M&A. I knew I needed to learn a lot," he said. I started investing and advising startups while as a banker, and then made made the flip to work with Emily to start AIN Ventures." He's based in New York City.
The firm's first foray into venture was building an investment syndicate composed of alums of the five service academies, which was launched in June 2020. We've got astronauts, we've got Navy SEALs," McMahan said. We really think that we're very well positioned as a group, because we've all lived it on active duty, and now we continue to see it and continue to serve." The syndicate has invested in a handful of deals since launching, including into Polco, an online community engagement platform for local governments, and online identity service ID.Me.
This is also where a lot of our service academy grads are excited to have a seat at that table and help these companies scale, connect, hire, all of those things," McMahan said. So we're really excited to be on par with some of these other institutions - the Harvards, the Stanfords - who also have these types of syndicates.
Williams said the goal with the syndicate was to work out the investment processes for the firm before turning toward a more traditional VC fund model. They kicked off fundraising in January.
The new fund has a two-track thesis of investing in veterans across industries while also selecting startups building dual-use" technologies that are useful to the private sector and governments. Civic technology, disaster tech - think FEMA - defense tech, obviously the military, intelligence agencies, and space tech. Things in and around climate that will affect constituents and governments," Williams said as examples where he sees the firm investing. We want the company, when it achieves maturity, to achieve the majority of the revenue outside the government."
The firm centers its investing around the stage right after product-market fit, although since the veterans pipeline can be a real gauntlet, Williams said the firm will selectively invest at the pre-seed stage there.
The firm is also seeking to diversify the ranks of both venture capitalists and founders. McMahan said, I'm a female, Sherman's an African American, you know, even in the military, we're sort of a unique team, and so we think we are also able to reach out to a much broader audience of underrepresented minorities, women, and groups, and we feel like we're pretty attractive in terms of that as a team.
USAA's anchor investment is perhaps not surprising given the financial services company's focus on active service members and veterans. It has made other investments and sponsorships around veteran entrepreneurship, including into Patriot Boot Camp. The company has also invested directly in startups such as PrecisionHawk and Coinbase.