Military Academies vs. Stanford & Harvard in Venture Capital

The Underrepresented Potential of Veteran Entrepreneurs in Silicon Valley

Despite Silicon Valley’s historical ties to Cold War-era defense funding, entrepreneurship among veterans remains surprisingly uncommon. The inherent resilience and determination cultivated through military service – whether on the battlefield or navigating bureaucratic processes – would logically translate well to the challenges faced by startup founders. However, the transition from soldier to CEO often proves lengthy and demanding.

Organizations Supporting Veteran Founders

Over the years, several organizations have emerged to facilitate this transition. Patriot Boot Camp, for example, provides early-stage veteran founders with crucial skills in company building and fundraising, as highlighted in a 2018 profile. Nevertheless, a persistent gap exists in networking opportunities and funding specifically tailored to this demographic of entrepreneurs.

Academy Investor Network: A New Approach

Recognizing this unmet need, Emily McMahan and Sherman Williams, the managing partners of Academy Investor Network, focused on their network of peers from the five U.S. service academies. The firm is currently aiming to secure a $50 million first fund and has recently announced a $2.5 million investment from USAA, an insurance and financial services provider, as its anchor investor. Scout Ventures, a frontier tech-focused firm where McMahan serves as a venture partner, made the initial investment in the fund.

Founders' Backgrounds and Motivations

Emily McMahan’s journey began with her 2001 graduation from West Point, coinciding with the onset of the War on Terror. She described her immediate involvement in the conflict following the events of 9/11. Subsequently, she transitioned to a startup focused on the federal market, and later established Capitol Post, an organization dedicated to fostering entrepreneurial skills among veterans and their spouses. Capitol Post, which also operated a co-working space in northern Virginia, eventually merged with Bunker Labs in 2019.

“My professional life has consistently centered on community building, supporting entrepreneurs, and leveraging the dynamism of the veteran entrepreneurial community,” McMahan stated. She is currently based in Washington, D.C., and also holds a position on the board of Patriot Boot Camp.

Sherman Williams, a graduate of the Naval Academy (2003), completed four deployments during the Iraq War, which commenced shortly after his graduation. He pursued further education at the University of Chicago’s Booth School of Business, specializing in finance and transitioning into investment banking with a focus on mergers and acquisitions. “I understood the necessity of acquiring extensive knowledge,” he explained. “I began investing in and advising startups while working as a banker, ultimately leading me to collaborate with Emily in launching AIN Ventures.” He is located in New York City.

Building a Network and Investment Syndicate

The firm initially established an investment syndicate comprising alumni from the five service academies in June 2020. “Our network includes astronauts and Navy SEALs,” McMahan noted. “We believe our collective experience, gained through active duty and continued service, uniquely positions us.” This syndicate has already invested in companies like Polco, a platform for online community engagement for local governments, and ID.Me, an online identity verification service.

“Service academy graduates are eager to contribute their expertise to help these companies expand, recruit talent, and achieve their goals,” McMahan added. “We aim to rival institutions like Harvard and Stanford, which also maintain similar syndicates.”

Fundraising and Investment Strategy

Williams explained that the syndicate served as a testing ground for the firm’s investment processes before transitioning to a traditional venture capital fund model. Fundraising efforts began in January.

The fund’s investment strategy focuses on two key areas: supporting veteran entrepreneurs across various industries and investing in startups developing “dual-use” technologies applicable to both the private sector and government agencies. “Examples include civic technology, disaster preparedness solutions – such as those used by FEMA – defense technology, intelligence applications, and space technology, as well as climate-related innovations impacting governments and citizens,” Williams clarified. “Our goal is for portfolio companies to generate the majority of their revenue outside of government contracts upon reaching maturity.”

Investment Stage and Diversity Initiatives

The firm primarily invests in companies that have already achieved product-market fit. However, recognizing the challenges faced by veteran founders, Williams indicated a willingness to selectively invest at the pre-seed stage.

Furthermore, the firm is committed to increasing diversity within the venture capital landscape and among founders. “As a female and Sherman being an African American, we represent a unique team even within the military,” McMahan stated. “We believe this allows us to connect with a broader range of underrepresented minorities, women, and diverse groups, making us an attractive investment partner.”

USAA’s Investment and Future Outlook

USAA’s anchor investment aligns with its commitment to supporting active service members and veterans. The company has previously invested in and sponsored veteran entrepreneurship initiatives, including Patriot Boot Camp, and has also made direct investments in startups like PrecisionHawk and Coinbase.