Last year, the investing savant Tracy Killoren Chadwell launched a tech-oriented, women-focused venture capital fund in Greenwich and gave it a cryptic name: 1843 Capital. What does the name signify? To find out, we must travel to nineteenth century London and peek in at the marriage of Annabella Milbanke, a wealthy, devout woman of supreme intellect, and Lord Byron, the great Romantic poet and incorrigible playboy who a paramour described as “mad, bad, and dangerous to know.”
The union was predictably turbulent. The straightlaced Annabella excelled at math, which, according to one biographer, served as “a reliable refuge from emotion.” Lord Byron was emotion incarnate. Also, he really was bad and drawn to women who could be pretty bad themselves. Before long, Annabella seems to have confirmed the most salacious rumor about her husband: He was sleeping with his half-sister. Annabella’s dreadful discovery occurred around the time she and Byron conceived their only child together, a daughter they would name Ada.
Five weeks after Ada was born, mother and child fled to her family’s country estate up in Yorkshire. Though Byron clearly loved Ada—“sole daughter of my house and of my heart”—he left England under a cloud of scandal, and never saw Ada again during the remaining eight years of his life. (He died of sepsis in Greece in 1824.) Even with Byron out of the picture, though, Annabella worried that his influence—his “wild” Byronic blood—would prove stronger than her own, and so steered Ada resolutely away from all things romantic and poetic.
“She only allowed her to study the STEM technologies, science and math,” Chadwell says during a break at her office, in a mansard-roofed Victorian on Mason Street. “And Ada found the beauty in numbers.” Indeed, she proved more adept at math than her mother; so adept, in fact, that she could project numbers into the realm of theory, of far-reaching vision—a realm she called, in spite of her mother, “poetical science.”
Today we know Ada Lovelace (her married name) for a treatise called Notes, in which she interprets an invention by her friend the renowned scientist Charles Babbage. Babbage had designed—but not built—what he called the “Analytical Engine,” a jumble of spools, sprockets and gears that would have performed remarkably advanced computations. While Babbage himself viewed the machine as merely a mechanical computer—important enough, given the enormous labor-saving potential—Ada saw a world of applications beyond numbers. She observed that because the engine would be programmed with punch cards in the manner of the Jacquard loom, which enabled the mechanical production of tapestries, the Analytical Engine’s potential was virtually limitless: “It can do whatever we know how to order it to perform.” She observed that “the engine might compose elaborate and scientific pieces of music of any degree of complexity.”
That is, Ada Lovelace envisioned the computer about a century before it came to exist in even rudimentary form. What’s more, in the final section of Notes, she composed an algorithm that would enable the Analytical Engine to generate an intricate pattern of numbers—an algorithm widely considered the first published computer program.
“Ada wrote her treatise in 1843,” Chadwell says. “Which is why we named our firm 1843—as a nod to the fact that women have been in technology for a really long time.”
BY THE NUMBERS
Tracy Chadwell might remind one a little of Ada Lovelace. Chadwell’s general partner at 1843 Capital, Alison Andrews Reyes, notes that while Chadwell possesses the sunny, outgoing nature one would want in a business leader, it’s only part of the story: “Underneath all of that is a really strong, intense and driven analytical mind. I find her to be remarkably astute.”
As a child, Chadwell too had a natural affinity for numbers, and learned to code BASIC at the age of twelve. Growing up in Rockford, Illinois, a small city northwest of Chicago, she was her family’s intuitive engineer, its fixer of broken things. “I wanted to go to MIT, but my mom said, ‘You can’t go to MIT because you won’t find anybody to marry there—there are no cute boys.’” She lets out a not altogether unembarrassed laugh. “I was fifteen years old! I didn’t know better.”
Investing? When Chadwell was growing up in the seventies and eighties, investing was still very much the wing-tipped domain of white males. A notable exception, Geraldine Weiss, was careful to sign her influential newsletter “G. Weiss” to obscure her gender. Another exception was the late Muriel Siebert, the first woman to buy a seat on the New York Stock Exchange, whose drive and toughness are Wall Street legend: “I fought like a son-of-a-bitch to get ahead,” she’d say. “I’m still fighting like a son-of-a-bitch.” But in the then-new field of venture capital, which focuses on getting innovative companies off the ground, there were no women role models at all.
Tracy’s parents, Lesley and Thomas Killoren, despite throwing a damper on MIT, did encourage her professional ambitions. Lesley herself was a teacher and then an interior decorator, and Tom had a decades-long law practice specializing in trusts and estates. Both parents envisioned their bright, attractive, warmly approachable daughter following in Tom’s footsteps, perhaps even joining him at the firm in Rockford.
“I was the dutiful daughter and attended law school at my parents’ behest,” Chadwell says now. “But I don’t think law was meant for me.” She went to Trinity College—her introduction to Connecticut—then to Loyola Chicago School of Law, where she gravitated to the business-y courses: “International tax was my favorite class. And business finance.”
Emerging into a weak economy in 1992, Tracy found herself unable to catch on with a law firm. But she did find work at a new merchant banking firm in Chicago—as a receptionist. Always a scrappy dealmaker, she proposed doing the receptionist job for six months, at the end of which the bank would let her in on the dealmaking. “It was a way in the door,” she says. Herein lies a lesson Chadwell hopes young people will heed: Get yourself into your desired field by any means you can; even do the work for free, if you can afford to, in order to prove your worth. It paid off for Tracy. After a couple of years, she was helping buy office buildings for Chicago billionaire Samuel Zell. Soon after that, she was in the thick of venture capital, first in San Francisco, then in New York.
But in 2003, at the age of thirty-seven, Tracy bowed out of the game. She was at Baker Capital, a billion-dollar growth fund that invested in digital tech and communications firms; and she was one of only about five women partners in New York-based funds of similar size. Even so, it seemed like a good time to leave, with the markets again in turmoil and two very young boys to raise and enjoy. (Chadwell lives in Belle Haven with her husband, Philip, who is also in finance, and their now-teenage sons, Philip Jr. and John.) But the urge to invest could not be laid away. “I was loving my life with my family, but looking for maybe a little bit more as I was driving the kids back and forth to school and signing them up for camps. I like to say I failed retirement. So I started to do what I loved again.”
Eventually, with her own money, Chadwell made investments in ten companies, and today those investments are running a superb 40 percent internal rate of return. Two of them, the anti-toxin cosmetics company Beautycounter and the circuit board innovator Tempo Automation, proved to be “home runs” in VC parlance, or investments in companies whose value rises steeply over a brief period. Both companies had female founders (Gregg Renfrew of Beautycounter) or cofounders (Katherine Scott of Tempo), adding to their appeal for Chadwell. “I thought, ‘You know what? There’s really something here.’”
The most successful investors, she says, find and exploit “inefficient markets,” or markets whose potential is undervalued. What were female entrepreneurs if not an inefficient market? The research supported her to a startling degree: Companies with a female founder returned 63 percent more capital than companies led by males only, a typical study showed. Why should this be the case? One reason is that females broaden the pool of knowledge and experience (as does diversity in general). Women, for example, are the more practiced consumers: “Eighty-five percent of all consumer decisions are made by women, so if you don’t have a woman sitting at the table…” Chadwell says, not needing to complete the thought. (Another reason, more theoretical, is that women tend to be better at collaboration.)
And yet female founders receive less than 3 percent of total venture capital dollars. Even a resounding success like Beautycounter had trouble securing VC dollars until it reached the absurdly high bar of twenty million in revenue—a hapless reality of operating in a largely male VC ecosystem. “So,” Chadwell says, “I started to focus my investing on trying to find some of the best women founders that I could.”
LET’S MAKE A DEAL
Chadwell formed 1843 Capital to make the most of her new strategy—to play in a bigger league than she could on her own, using only her own money. “In this business, it’s tougher to have a voice if you don’t have more capital at the table,” she explains. Alison Andrews Reyes, who has five tech startups under her belt (and an engineering degree from Dartmouth), soon joined 1843 as general partner. Reyes notes that female-founded companies tend to have lower investment “entry points”—that is, to be undervalued. “As a [company] founder, that would have struck me as being really aggravating—but as an investor, it spells an opportunity.”
1843 then took on a CFO, Gwen Weiss, a seasoned pro formerly of Bedford Funding and Oak Investment Partners. Weiss had been looking to be part of an 1843-style mission: “When I left my last firm, it was my intention to help support women-owned businesses, because I noticed they often lacked the access to expertise and capital available to ‘traditional’ venture-backed companies,” she says. Providentially, she ran across a brief interview with Chadwell in this magazine and decided to introduce herself. Now, Weiss says, “I could not be more excited to be a part of a firm that gives a historically underserved segment of founders access to capital to support the growth of their companies.”
As a solo investor, Chadwell had done seed-stage investing—early, modest funding that helps get a business idea off the ground. 1843 Capital took her to Series A–stage investing—larger investments in startups that have gained traction and are developing a solid revenue base. (Series B and C entail yet larger investments as successful companies seek to expand or go public.) She could still do seed-stage if she wanted. “But seed-stage deals, 90 percent of them fail,” Chadwell says. “We like to step in when companies have about $2 million in recurring revenue.” For 1843, Series A represents an investing sweet spot: They’ve eliminated much of the risk but gotten in ahead of the bigger fish, which would rather see $8 or $10 million in recurring revenue.
1843 Capital focuses on technology—chiefly in the areas of enterprise software, cyber security and “silvertech,” or advances for the aging population. But Chadwell and Reyes are extraordinarily picky. “Last year I looked at over six hundred opportunities to invest, and we made four investments on behalf of the fund,” she says. “You can’t find a needle in a haystack unless you go through the haystack.”
The fund’s first investment was in a company called Artemis, which makes software to improve the yield and labor efficiency of indoor farms. Indoor farming happens to be a hot space, growing at about 23 percent per year. “But Artemis has actually been growing about 1,000 percent year-over-year for the past couple of years.”
One reason for the rapid growth is smart strategy: Artemis, founded in 2015 by twenty-six-year-old Allison Kopf, branched out to cannabis growers just as cannabis-based health products began to explode in popularity. This, in turn, prompted Chadwell to start looking into CBD products, since they tie in neatly with her silvertech premise. Great claims are now being made for CBD’s ability to ease everything from joint pain to insomnia, and to slow the progression of Parkinson’s Disease, though here the evidence is more anecdotal than scientific. “I’ve identified a company” to invest in, says Chadwell, having done her usual exhaustive research. “I’m just waiting for them to open.”
1843 Capital also invested in the promising banking tech firm Finn AI, founded by Jake Tyler and Natalie Cartwright. Finn AI offers a virtual banking assistant, a so-called “banker in your pocket.” You simply ask it what you want to know and it tells you the answer. Finn AI has added two client banks since 1843 first invested last October, with more on the way, and Tyler credits Chadwell’s active participation. “She’s going to muck in with you straightaway and focus on solving problems. From day one she’s been helping us make connections and think about our strategy.”
1843’s other two investments are in IOTAS, which brings smart technology to apartments, and Bishop Fox, which provides cyber security services to Fortune 500 companies. Eventually, Chadwell hopes to invest in caregiving for the elderly, perhaps in software that aids in training caregivers. Caregivers will prove ever more valuable as our population ages: Between 2010 and 2050, the number of seniors in the United States will have doubled.
“We like to invest in inevitabilities,” Chadwell says. “You won’t see us investing in something that is a ‘nice to have,’ or something that is sort of a gimmick. We like to invest in ‘have to haves.’” Aging, of course, is the big one. “Another inevitability, we feel, is cybersecurity, which my partner Alison focuses on. Either a company that you do business with will be hacked, or you will be hacked. So putting preventative and diagnostic measures in place is of critical importance.”
Even “have to haves” get short shrift if Chadwell doesn’t believe in the team behind them. She tells of a young male entrepreneur planning to launch a new incontinence pad—a product that could fit well within her investment compass. (1843 might invest in a male-led team if they deem the prospect ideal.) But she found the marketing materials childish and soon discovered the entrepreneur had not tested them on a target audience, especially older women. Why, she wondered, did he start the company in the first place? Well, he’d heard that Dollar Shave had been sold to Unilever for $1 billion, and he wanted to make a similar killing. Chadwell, not shy about her distaste for mercenary investing, said, “I don’t think this is for us.” (There are potentially good investments that 1843 steers clear of: Those that require a massive investment in machinery or infrastructure to reach viability, and technologies that are beyond 1843’s range of expertise, like medical drugs and devices. “You could be curing cancer, but I wouldn’t know it,” says Chadwell.)
Investors in 1843 Capital not only like its philosophy—gender equity for better returns—but they also have great confidence in Chadwell herself. “We have known and admired Tracy for over fifteen years,” says Greenwich resident Susan Bevan, an early investor with her husband, Tony Daddino. “She is smart, thoughtful and careful. We knew she would be a good steward of our money, and we have already seen a generous increase in our investment.”
Another early supporter, well-known energy investor John A. Hill of Greenwich, is impressed with Chadwell’s investing history and her winning aura. “Tracy has a very good record in doing the types of deals 1843 is going to do, which I did quite a bit of due diligence on,” he says. “And then there’s Tracy herself. She’s got a strong personality, strong energy, as you probably know. And to be honest,” he adds, “I like the notion of supporting a female firm. We don’t have enough of them.”
THE WHAT-IF ENDING
Charles Babbage’s Analytical Engine was never built because he could not secure the necessary funding. Unlike Lovelace, he was notoriously bad at making his case. (Lovelace wisely proposed a business partnership with Babbage, which he unwisely rejected.) Sci-fi novels have posited alternative histories in which the engine was built to world-changing effect, and so we can do the same: In our scenario, Ada Lovelace’s vision is taken seriously against all odds, a Victorian Tracy Chadwell backs Ada and Charles, and the digital age arrives a century ahead of time.
Of course, real life proved stranger and stubborner. Women in technology, to say nothing of women in venture capital, still find themselves battling genteel preconceptions. “Just last week I had a woman say to me, ‘Tracy, you can’t possibly be a venture capitalist. How could you be so tough? You’re just so blonde.” Sometimes the backhands are less complimentary. “I had a guy say to me, ‘You have a small fund, but that’s okay, because you have a rich husband, right?’”
How should one face such headwinds? Chadwell, ever an optimist, blows right through them. She notes that a major female venture capitalist, Annie Lamont (also blonde, also Midwestern), works next door. “If we got hung up on the negative, none of us would be able to function, right?” she says. “I think you just have to keep your head down and focus on what you’re doing. And this is what I’m meant to do.”