Veteran-owned businesses employ nearly 6 million Americans and bring in a revenue of $1.14 trillion annually. But access to financial capital continues to be the biggest hurdle in veteran entrepreneurs’ success.
In a 2019 Syracuse University study, for example, only 1% of respondents said they used equity investment in starting their business. 84% said they used their personal savings. This is especially a challenge for female veterans and veterans of color; female entrepreneurs, in general, receive just 2% of all capital investment in the U.S., and African Americans receive just 1%.
This is one of the reasons why Naval Academy alumnus Sherman Williams and West Point alumna Emily McMahan founded the Academy Investor Network (AIN), a pre-Seed through Series A stage venture fund that champions the best-in-class veteran and civilian-led startups.
AIN backs two types of startups:
- Top-notch veteran-led startups (officers & enlisted), in which a veteran owns greater than 10% equity.
- Non-veteran-led startups in “dual-use” technology (technologies that can be used for both government and private sector purposes – like disaster, defense, civic and climate tech.
Williams and McMahan are investment professionals, experienced venture investors, venture advisors and entrepreneurs. After years of military service and multiple deployments, both earned their MBAs (Williams at Chicago’s Booth School and McMahan at University of Virginia’s Darden School of Business) and went on to work in incubators, venture investments and more. Then, they had an idea.
“Forty percent of all technology startups that are started by veterans are led by Academy Graduates. They’re vetted, they’re educated, and they’re especially among the best in the world in STEM,” said Williams. “We wanted to leverage the power of the Service Academy community to invest in all veterans (officer and enlisted) and help grow these businesses.”
AIN leverages the service academy community by creating an investment syndicate made up of graduates from the five U.S. military service academies that co-invest alongside AIN Ventures, and these graduates help to provide post-investment support to startups that fit within AIN’s thesis.
One of these businesses is AM Money, a student loan company founded by Daniel Rogers, an African American Army veteran. AM Money’s mission is to ensure that financial challenges don’t prevent students from completing college and pursuing their careers. Many low-income students struggle to find a co-signer for their student loans, so they end up with higher interest rates, sometimes above 20%. Rogers found that if a student has a certain percentage of college completed and a GPA above a certain threshold, he or she has a high likelihood of repaying their loans. AM Money now offers merit-based student loans to students at a fixed rate of 7.08% currently.
“We want to become the go-to fund for underestimated minorities, like Daniel, who fit our portfolio. We believe in profit with a purpose,” said Williams. “We invest in companies that we think will be impactful to overall humanity and that are scalable. We find companies that have the potential to be billion-dollar companies, and we help them get there.”
To receive investment, a company needs to be a standalone entity that can build, support, and defend its customer base on an on-going basis. The company must demonstrate the ability to build a sustainable company with a product line sufficient enough to grow to $100M in revenue or return 10 times AIN’s investment in a seven-year timeline.
Another AIN investment is Polco, an online community polling platform that enables communication between community leaders and their constituents through polls and surveys. Polco was started by former Air Force officers Nick Mastronardi and Alex Pedersen. Hundreds of organizations nationwide now use Polco for strategic planning, budgeting, and empowering resident voices.
AIN also has a keen interest in investing in the Space Technology industry. As new industries like space tourism, manufacturing, and mining emerge, AIN’s latest investment, Orbit Fab, is working to establish the first Gas Stations in Space for satellite refueling. Orbit Fab’s now has space heritage, with one of its refueling tugs being launched into space in June of this year.
AIN Ventures is a $50 million company, and in June announced the close of its anchor investor, USAA. “We’re helping support the next generation of entrepreneurs,” said Williams. “AIN Ventures enables us to exercise our civilian passion of early-stage technology investing while continuing the life of service that began in the military.”
Read more from Sandboxx News:
- 4 tips from veteran entrepreneurs that you need to hear
- Veteran women entrepreneurs are the future of American business
- 6 ways to support our veteran-owned businesses
- Alternative funding options for veterans that isn’t venture capital
- Why Veterans are uniquely equipped to be great entrepreneurs
Feature image: U.S. Army photo by Eric S. Bartelt