Clara Brenner is, with Julie Lein, a managing partner of Urban Innovation Fund. I first met Julie and Clara when they were running Tumml, an accelerator program for city focused startups. Since then, they launched a venture capital (VC) firm called the Urban Innovation Fund in 2016. I had the privilege of catching up with Clara earlier this week, and it felt like a fitting way to round out our Women’s History Month coverage — diving into what’s still one of the most underrepresented sectors of our economy, but one where Julie and Clara are demonstrating just how impactful and successful women can be. One of my favorite things about the Urban Innovation Fund, probably because it’s aligned with how Cityfi thinks about things, is that they publish an annual outcomes report. It’s a great glimpse into both the industry and what Urban Innovation Fund is working on, and how they’re delivering impact.
STORY: How has your work shifted over the past decade since I first met you and Julie?
CLARA: I think we first met in 2014! We hadn’t launched the Urban Innovation Fund yet. We’ve since evolved what we were doing (from Tumml) and are now focused on venture investing. We launched Urban Innovation Fund in 2016 as a $25 million fund. We’ve had a very similar kind of mandate throughout our time working together, in terms of the types of companies we’re looking to support — startups shaping the future of cities. We define this as companies touching issues of livability, sustainability, and economic vitality in communities. All of our investing is really early stage, at the pre-seed and seed level. And we just try to be helpful and hands on with these companies. And we put a special emphasis on regulatory and political issues, because it tends to come up a lot over companies in our portfolio, although it’s not a requirement to be in the portfolio. So Fund I was 2016, and then we launched a $44 million Fund II in 2019, and then we raised $121 million for Urban Innovation Fund III in 2022, which is the fund that we’re actively investing out of now.
STORY: How does being a woman in VC influence and inform your decision making process?
CLARA: Being a 100% woman owned venture capital firm is very rare. And we don’t have a mandate to invest in diverse founders in any capacity — we are a traditional market-rate firm. But about 70% of our companies have a woman or person of color on the founding team — which is also very unusual. And I think that just speaks to some of the positive externalities that come from having different types of investors, different kinds of people, around the table. It’s something we’re really proud of but, again, we don’t actively select for it. But this level of diversity has been consistent since the beginning of the fund.
STORY: Do you think you listen differently? What is it that you see that others don’t? I mean, clearly this is not representative of where VC investment is going more broadly.
CLARA: The numbers for the broader industry are terrible. I don’t know why. And I don’t know why we have been able to buck this trend. But it’s definitely very authentic to us in terms of the top of the funnel, all the way down. We have interrogated the entire pipeline, and we are seeing this diversity across the top of the funnel all the way down into what we ultimately invested in.
STORY: Do you feel like over the last eight years that it feels different to be a woman in this space or no?
CLARA: No, unfortunately, the space has not evolved very much. And the data really bears that out. I mean, there’s some movement, but it’s small. Unfortunately.
STORY: Do you have advice for female founders or women looking to get into the VC space?
CLARA: I would just say do it. The sooner, the better. There’s never a good time, and it just gets harder as you get older. And differentiating yourself is key. This is advice I would give to anyone, woman or not. It’s very hard to break into VC, especially in the current market environment. So having a very differentiated thesis that is truly yours is important to stand out. It’s something that Julie and I were able to build starting with research we were doing as grad students, and I think it made a huge difference. And then also just starting to do deals. It’s the only thing that will make you stand out and get you a job over everybody else. Even if you have a few thousand dollars that you can put into three or four early stage startups. Of course, it’s a lucky position to even have that kind of discretionary money. But, in the grand scheme of things, that’s how venture works. Demonstrating that you can find the next unicorn and convince them to take your money — that’s the key. This is the only real, tried-and-true way to stand out. So, to the extent that this is an option available to you, start putting your money where your mouth is.
STORY: Do you have a couple of investments that you’re particularly excited about, as you think about their trajectories over the course of the next couple of years?
CLARA: That’s like picking your favorite kid. But one notable company in our portfolio is called Electriphi. They help large fleets transition to electric vehicles. We backed that company in early 2019. At the time, there was a lot less enthusiasm about electrification in the venture space. Now, every time you open your eyes, another investor pops up who’s investing in climate tech — and that’s wonderful. But, at the time, it was a pretty lonely space. But our passion for the space really grew out of the regulatory tailwinds that we were seeing coming from states like California and places like the EU, and it very much informed our decision to invest. Ultimately, they were acquired by Ford about a year and a half after we made our investment, and this nearly returned our fund. They are just an outstanding company — and they now serve as the backbone of Ford’s fleet electrification efforts, which is really cool. So that’s a company I think speaks in many ways to the types of companies. A more recent investment we are excited about is a company called Stell, which helps with the engineering compliance and documentation necessary for large scale and complex hardware manufacturing — which is really relevant to sectors like automotive, aerospace, etc.
We feel that now there’s just so many amazing new entrepreneurs popping up who have the fortitude to start a company in this market environment. It’s a very different founder profile than a couple years ago. So we’ve been really excited about a lot of new companies. We’ve done three deals so far this quarter and did five deals last quarter.
STORY: How are you managing the different risk profiles that go along with various regulatory frameworks, and maybe completely shifting regulatory frameworks depending on the politics of different places?
CLARA: It starts with sourcing. That’s been a bigger and bigger part of our work — actually spending time to identify regulatory trends and figuring out how they could inform some of our investing work — like that Electriphi deal, or with Stell, where we’re seeing a lot of regulatory and political movement to level up American manufacturing.
Once a company is in the portfolio, we tailor our support to what they needs. Sometimes they’re looking for help at the federal level, state level, local level. Sometimes, they don’t need any regulatory support at all. We have a company in the solar space, for example, where we helped them network into the Department of Energy to learn more about their solar loan program. But sometimes a company could benefit from the help of a lobbyist, or the advice of a successful founder in their sector. Whatever it is, we just try to help make that connection.
We try to encourage our founders to be thinking about these issues, to be proactive about these issues and, to the extent we can help them, we will. We’re not lobbyists, but we try to be attuned enough and well-networked enough that, if you need something, we will help you find it.
STORY: Okay, last specific question for you. Over the last 8 years, has there been a pivot point or something that you’ve really shifted?
CLARA: I don’t think we’ve shifted at all. We’ve done our best to try to set a clear vision and triangulate towards that vision. In terms of evolution, the one thing we’ve gotten much more focused on is taking larger ownership stakes in companies. Especially in the current market environment, where valuations are going down and where a lot of venture investors are on the sidelines for a variety of reasons, we’ve tried to be bold and step in and take larger stakes. It’s had a big, positive influence on our fund performance.
STORY: I love it being about going all in instead of just dabbling around the edges. It’s great to see the outcomes that you and Julie are driving. Thank you!
