Sarah Kunst's New Venture Capital Fund Invests in Female Entrepreneurship

Cleo Capital puts the power of investing in women's hands.

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Anyone who's ever tried to launch their own business understands that the startup world can be a tough space. But if you're a woman, specifically a woman of color, looking to invest in a business, the industry often proves to be even harder; nonprofit organization All Raise reports that only 11 percent of venture capitalists are women, and just a small percent of that number is black women.

As of today, though, those numbers are bound to go up.

This morning, Sarah Kunst announced that her venture capital fund, Cleo Capital, is going public. Kunst filed to raise $10 million for the fund in August 2018 and has worked tirelessly since then to make sure that her goal—which will simultaneously help other female entrepreneurs accomplish theirs—would become a reality.

Kunst's origin story is a unique one within the VC landscape. After graduating from Michigan State University with a degree in advertising, she began her career working for companies such as Apple, Red Bull, and Chanel. Eventually, she moved away from marketing and stepped into the world of venture capital, and in 2018, Kunst, also a Marie Claire contributing editor, joined Sequoia Capital as a scout. Since its founding in 1972, Sequoia Capital, a major player in the industry, has funded almost 300 different companies (Google and Apple are just some of the firm's notable investments). As a scout for Sequoia, Kunst's job was to search out entrepreneurs looking to invest in other companies and provide them with the funding to do so.

But Kunst quickly took notice of a particularly troubling reality: There weren't nearly enough women involved in the scout program. The underrepresentation of female VCs, in turn, was contributing to the already dismal number of female-run startups. "In a lot of ways, the lack of women being able to raise capital ends up being largely tied to the lack of women who are out there deploying capital," explains Kunst. "One of the biggest indicators of anyone potentially getting funded is whether or not the investors that they're talking to look like them in a literal sense." The fewer women involved in writing checks on one end, the fewer women-led companies receiving funding on the other.

But where others might have only seen a deficiency, Kunst saw an opportunity to bring parity: "I realized that instead of just wanting to change things, I was actually in the unique position to actually make that happen."

And make it happen she did. Last year, Kunst meticulously began laying the groundwork for her own venture capital fund, Cleo Capital. Like Sequoia, Kunst's fund also seeks out scouts who then use the funding to make their own investments in promising companies, but the fundamental difference is that the majority of Cleo Capital's scouts are women. This, says Kunst, is a strategic move that is far less sentimental than it is pragmatic; as an untapped demographic within the VC landscape, female entrepreneurs have expansive networks and a wealth of creative business ideas that often fly under the radar. Cleo Capital leans into this opening by providing these women with the funding to then invest in other startups at their discretion. "There's a lot of data that shows that when women invest, you make more money," Kunst points out. "So I'm going to go out and focus on women who have access to really interesting investments but don't have money to fund them themselves."

"One of the biggest indicators of anyone potentially getting funded is whether or not the investors that they're talking to look like them in a literal sense."

Though it's only been a year since the fund's inception, Cleo Capital has already successfully secured a number of scouts with the millions that Kunst has raised, many of whom you're probably familiar with. Mollie Chen, co-founder of beauty discovery subscription service Birchbox, is among those names; she used her Cleo funding to invest in Neha Govindraj and Rachel Liverman's business plan for a fast-facial startup. That investment manifested in the form of the popular New York City full-service skincare boutique, Glowbar.

CEO and co-founder of beauty appointment booking platform StyleSeat, Melody McCloskey, is another entrepreneur looking for new investments as a Cleo Capital scout. McCloskey shares Kunst's passion for propping up female-run startups because she knows firsthand what it's like to be on the other side of the investment. Pitching StyleSeat to investors in 2011 proved difficult. There was a lack of interest in the beauty services market, despite the fact that the market brings in billions of dollars annually. And because StyleSeat's audience base is mostly women of color, VCs were hesitant to invest in the company. Despite those perceived roadblocks, McCloskey was able to raise the funds to launch the business on her own, and it's been a success ever since. The small businesses operating through the platform have generated more than $5 billion in revenue, and StyleSeat businesses can be found across 80 percent of the United States.

The undeniable accomplishment of StyleSeat has attracted firms who want to invest in the beauty business, but McCloskey has admittedly been very selective about who she works with—anyone interested in StyleSeat from an investor's position has to also be all about empowering and elevating the diverse business owners on the platform. So when she was approached by Kunst to be a scout for Cleo Capital, McCloskey jumped at the opportunity. "Sarah came to me and said, 'I think the investing community needs to be more diverse,'" the StyleSeat CEO recalls. "She believes that female founders have exposure to companies that have tremendous financial opportunities that don't normally get exposure to investors. I think that that mindset is really smart, and I was thrilled to work with her."

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Success stories like StyleSeat's underscore the necessity of a fund like Cleo Capital, raising money with the specific intention of investing in the fledgling businesses of women. "Women are doing a great job after facing the challenges to get in the door of keeping the door open," says McCloskey. "And sending the elevator back down for other women and clearing a space in the room for them to be there."

Cleo Capital is the third largest venture capital fund to be started by a black woman in America, and that didn't just magically happen. Kunst has had a plethora of opportunities to learn about the industry and expand her network in order to make Cleo Capital the success that it is today, but to her, opportunities mean nothing if they're not met with a strong work ethic. Her advice to women in the startup industry (and women in any workplace): Show up and do the work. "Everyone who's successful in the world had to spend time building towards their success and learning and building the skill set for what they eventually wanted to do," says Kunst. "I'm not the person who says, oh, I can't believe I had to suffer the indignity of working at these places—those experiences were some of the best things to happen to my career because that's where I learned so much of what I know now."

"There's a lot of data that shows that when women invest, you make more money."

Kunst remains acutely aware of the struggle that she and other women are up against as they try to diversify the venture capital field, but she's up for the challenge. She's going to keep working hard and making money—and she's going to make sure that other female entrepreneurs have the resources and networks to do the same.


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