Overlooked Ventures LP, the VC fund betting on a group of female and nonwhite entrepreneurs who are simultaneously underfunded and over-performing, has stopped raising money to focus on growth for its portfolio startups amid a nationwide pullback in venture investing.
The firm has invested in eight startups – and aims for three more by the end of this year – but will not have reserves for the usual practice of joining in a portfolio company's future rounds, said Janine Sickmeyer, the firm's Upper Arlington-based founding partner. When economic conditions improve, she said, Overlooked could launch a second fund.
"The focus on the portfolio companies is my strong suit and where I wanted to spend my time," Sickmeyer said in an interview. "I'm able to work with the founders, mostly on PR, marketing, reviewing their plans and goals. ... It's fun to see them grow in these different ways."
Also, co-founder Brandon Brooks has left operations to focus on his latest Pittsburgh startup, still in stealth mode, a platform aiming to fix a "broken ecosystem" for tech and VC investing, he told Columbus Inno in a written statement. He remains a general partner and advises startups, he and Sickmeyer said.
The fund has not yet invested in a Central Ohio startup, but could in the upcoming final portfolio additions, Sickmeyer said. Unless she raises a second fund in the future, instead of follow-on funding she will make introductions to a network of larger VC funds who have served as advisors.
Overlooked launched in spring 2021, aiming for a $50 million first fund in a soaring year for both new VC funds and VC investments in tech startups.
Sickmeyer had built a software startup for bankruptcy lawyers that was acquired. She and Brooks had first met in tech discussions on social media.
The fund started backing startups as soon as it hit $5 million. Investments range from $100,000 to $500,000. Often the first investor, Overlooked aims for about 10% ownership with pre-seed and seed rounds.
"We invest when they're babies," Sickmeyer said. "We're just trying to help them get to that next raise and get more customers – and that's exciting. Part of what I love to do anyway is all of that early stage stuff."
Bank of America became the only institutional investor for an undisclosed amount in March 2022, bringing the fund to a total $11.5 million at the time. The financial giant has a $350 million nationwide commitment to back underrepresented entrepreneurs.
"They have been an incredible partner," Sickmeyer said. "They have a regional team that helps with all of the Columbus and Ohio and Midwest founders. ... They've been one of the only large companies that is continuing to invest in diversity openly."
In contrast, many corporations have put DEI initiatives publicized in 2021 "on the back burner," she said.
Under the terms of the BofA agreement, Overlooked stopped publicly disclosing its fundraising progress as it had previously. The fund had a regulatory cap of 99 total LPs to start, and the bank added a deadline to complete the fundraising by the end of 2023.
Overlooked had attracted national media attention – Business Insider named Sickmeyer a "rising star" and Forbes profiled her in a "trailblazers" feature. That along with conferences and introductions facilitated by Bank of America led to more meetings with potential investors.
Through the first half of 2022, especially with the Bank of America imprimatur, "everything was going great," Sickmeyer said, until last summer.
"It really just stopped," Sickmeyer said.
National VC pullback impact fund
With soaring interest rates and their tax implications, plus simmering worries of an economic downturn, since mid-2022 LPs and VC funds alike have slowed their investing. At a recent event in Columbus, veteran investor Mark Kvamme called this a "VC winter."
Emerging managers, those who have raised three or fewer VC funds, had secured $2.3 billion in commitments nationwide through June, according to PitchBook. That puts them on pace to book less than $20 billion in a year for the first time since 2016.
"It was just plummeting," Sickmeyer said. "This is very difficult to raise right now, as a woman, as an emerging manager, first-time manager. It doesn't mean there won't be a Fund II."
Her mentors in the industry, some who have raised VC funds for decades, said they were struggling too. And they noted that LPs who in 2021 were excited to invest in emerging managers now were sticking with more experienced VCs. A mentor advised her to close out fundraising early this year, saying LPs would understand.
"He's like, 'I've never seen it like this,'" she said. "Everyone at this point wants to be risk averse."
Brooks in a message told Columbus Inno that Sickmeyer remains a great friend. The fundraising struggle led to the idea for his startup to "solve the problem from every angle." He's also working on policy, testifying before a Congressional committee recently on legislative proposals to reform the IPO process and support entrepreneurs and investors from non-wealthy and non-traditional backgrounds. His nine-page written testimony does not mention the fund but uses the word "overlooked" 21 times.
LPs investing in VC funds and VCs investing in startups aren't necessarily acting out of bias but "homophily," the unconscious tendency to back those of the same gender, race and educational background, said Brooks, who is Black. To increase diversity among startups requires increasing the diversity in the investment world.
"Diverse perspectives and experiences can lead to more innovative ideas, better decision-making, and more effective problem-solving," his testimony said. "By supporting overlooked founders, we can unlock this potential and drive economic growth. ... Venture capitalists can tap into new sources of talent, gain a competitive advantage, and ultimately generate better returns."
Overlooked is not a "diversity fund," Sickmeyer said, in that it does not have formal criteria in its LP agreements to invest in a certain type of founder.
"We're investing in the best people and investing in who we think are going to outperform – and they just so happened to be black women, minorities," she said.
"Everybody wants to say, 'Well, we only want to hire the best, and we only want to find the best,'" she said. "You ask, 'Are there any Black people on your team?' They're like, 'We were looking for the best people.' And what does that say? Yeah, we're gonna turn that around."
