Through the Looking Glass: Kelly Hoey

Kelly is a speaker, strategist, and investor with a focus on creating opportunities through networking solutions. She has worked with leading companies, professionals, and organizations to help them understand, leverage, and unleash the potential of their formal and informal social networks. Kelly is the author of the book “Build Your Dream Network: Forging Powerful Relationships In A Hyper-Connected World”. You can follow her on Twitter @jkhoey.

I’d love to start with a little bit about how you got involved with working and investing in the tech and startup world.

All because of networks. I left the legal industry and became the first president of the global business network 85 Broads (after the founder Janet Hansen offered me the job of a lifetime). In that role, I encountered such a diverse range of professional and career-focused women, in terms of the businesses and the ventures that they were either in or moving into, and that exposure really expanded my network. 

There was a bunch of women at 85 Broads who were entrepreneurial and involved in the NYC startup community. Two of them had an idea for a startup accelerator. As they socialized the idea within the startup community, people would say to them, “You need to talk to Kelly.” They talked to me. I came on as a co-founder. Upon reflection, it was sort of organic as to how I became involved in the startup community.

The second piece, in terms of thinking more like an investor as opposed to a startup advisor, happened because of another 85 Broads member, who started Pipeline Angels. When Natalia initially had her idea for Pipeline Angels, she reached out to me to share her idea, ask what I thought about it, and then asked me if I would be part of the first cohort. 

I did that first cohort of the Pipeline Angels and during an early presentation to the group, a male startup founder/angel investor described how he made investments. And he said something along the lines of, “I do my research into this and that, and then, you know, I trust my gut and this is why I make investments.” After hearing his approach, I was like, ‘Well, I can do that’.

Getting involved in early stage investing has really brought together so many of the things that I believe in: being actively engaged in your financial health, taking an active interest in companies I believe in, as well as the education component of being a lifelong learner.

When you started angel investing, how did that compare to your level of involvement with other financial asset classes? 

Doing the angel investing bootcamp really had me look at my other Investments differently, in terms of what my exposure was, and it made me much more vocal. I have an investment advisor in Canada (because of retirement funds there), and I have an investment advisor here in the States, but my involvement with my investments typically meant meeting with them annually and going over what's in my account. After the bootcamp, I asked a lot more questions (why is a particular stock in there, what I want in there etc.). I think doing the angel investment boot camp made me much more vocal as opposed to you know, just kind of nodding slightly, as the advisor reviewed the account. 

Did you approach your startup investments from an international lens? Or was it sort of opportunistic? 

It's the same way as I invested in Laconia. It's about who you know. It's totally relationships. Angel investments are made purely on the basis of knowing the founders. Products and markets change, people rarely do. Being an angel investor worked when I had the time to be really fixated on getting to know founders and had the bandwidth to be there to help them out and research opportunities etc. My two cents: if you're going to be an angel investor, then you need to decide whether you're going to be all in. You’ve got to be there and be active in whatever vertical or sector you’re looking at. After a certain point, I didn't have the time to do that. I figured if I'm going to be a passive early stage investor, then it's much better that I have somebody else do it, so I became an LP.

One thing that seems to come up repeatedly is that LP demographics typically skew a certain way. What have you seen work or not work in terms of expanding the traditional decision-making base in venture to a next-gen LP base?

I'm hoping things like this interview.

The women who are investing need to speak up and say why they are investing and who they're investing with and what they do. It's one of those things that when I'm asked to talk about it in situations like this, I do because I think women need to be much more active and visible.

And women need to think about how they are investing their money.  Your traditional investment advisors will not give you advice on early stage. It's one of those things you have to seek out. We seek things out through people we know and socialize with people, who look like us.

With the amount of wealth that is sitting in the hands of women, I'd like to see us actively doing something with it as opposed to bemoaning the fact that we don't see the types of products, services, and founders we want. My attitude is we can either complain or we can direct the wealth in the direction we want to go. And if you need education, get an education. If you need inspiration because somebody else who looks like you has done it, read this article. 

It seems like even in conversations I've had with underrepresented General Partners who have networks of women and minorities, their close rate is significantly lower. Why? 

At the early-stage, you have a lot of conversations in order for people to get comfortable and to get them to see themselves as investors and valuable contributors beyond money.

It is just going to take time. There will be a trigger point. Because this is not something we need to complain about as that’s not a solution. There's a really easy solution in terms of women saying they can't see female founders or fund managers, or people running investments who look like you, Geri. Pull out your pocketbook ladies! There are women to invest in. What's the problem? 

Speaking as an LP, as a female investor, besides knowing Jeffrey and thinking of him as mentor of mine and one of the people who I've always trusted in the New York startup community, when he told me about launching Laconia, my reaction was ‘How about me? Can I be an investor in your fund?’. 

There was also the way the fund was set up in terms of the complete transparency and the ability to get involved, because I hadn't thought about being an LP. I recognized it was important to be invested in early stage companies, but back in 2015, I was thinking about writing my book and knew I could not be a successful full-time author and angel investor at the same time. I remember Jeffrey and I were having breakfast, and he was talking about raising the fund. As he described the structure of the fund, something about the fact that it was really hands-on was really appealing to me as opposed to just handing over the check. I think that transparency in the ability to add value and get involved more than just writing a check is probably what tipped me over to be an LP. 

Any thoughts on people who are considering investing in any capacity on the best ways to get started?

If you don't understand your investment portfolio, go and meet your financial advisors. I'm sure people have a traditional financial advisor who can help them understand what stuff is really safe, where's the risk, etc. But you should figure out what percentage should be in a higher risk, greater return category (early stage investment) and then actively make a commitment to do that.

If you don't know how to get involved, then I would say go and do an angel investment boot camp. There's enough of those out now, and all you put at risk for doing the boot camp is the amount of money that any of us would be writing for a table for a rubber chicken dinner at a not-for-profit gala. So just consider it your nonprofit investment. Or become an activator with SheEO (global community supporting women-led ventures launched by Vicki Saunders) because you can dip your toe in, gain exposure to incredible female founders and then you get to write that contribution off as a not-for-profit investment. Do something to get the exposure and flavor of early stage investing. For me, going from an angel bootcamp group to investing as an LP was a really natural progression.

I also think doing the angel investments made me a better LP investor. I’d suggest to anyone that they think about what asset classes should be part of their overall investment portfolio and then think about how they want to be involved with those investments. Do you want to just have a meeting once a year and never hear from someone you’ve trusted with your money? Maybe that's what you do with your financial advisor. Early stage companies need more help and you want to be involved. 

You had written a piece a while ago about Aruba. Tell me a little bit more about your takeaways from that trip. 

What's funny about that piece on women in leadership in Aruba is that the first thing people (typically women) say to me is, “It's a small country” and my response is, “Time out.” It was a perfect petri dish ecosystem to examine leadership and competitive behavior between women. It's the same dynamics as with industries here in New York City -  not everyone gets to have the top rule.

So why is Aruba succeeding in behaving in a certain way (advancing and retaining women) and why can't we all do that? What struck me were the network dynamics of women in Aruba truly helping other women. There was no work culture of backstabbing and kneecapping. Women who understand the pressures and demands that other women have to deal with in their roles (whether industry or government) are delivering advice and feedback based on the role or position their friend is in, and not with any sort of rivalry or cattiness or scarcity mindset. 

The other factor that stands out in Aruba is that these women leaders all stayed in the game. It never crossed their minds to step out or exit their career, and that makes a huge difference because across the board at all levels, from top to bottom in government and industry, you have female role models and gender diversity.

When I was interviewing Arubans for the New York Times piece, I asked a young man what he thought about having all these female bosses. He told me he’d never even thought about it. Other than realizing they live in a place where there may be limitations on career, women in Aruba don’t have any feeling of a glass ceiling or limit on what they can do.

I immediately tell people, usually women, that this is an example for the rest of us to follow. Don't just dismiss the story. There was this immediate jerk reaction to dismiss the story when it came out, as opposed to saying ‘What can we learn from Aruba? Is there anything in my individual behavior I can change?’. We may not be able to change the entire country, but we can change our individual behavior. Shifts in individual behavior is what starts cultural transformation.

Thinking about Aruba, what I want other women to look in the mirror and ask themselves how are they supporting other women. Look at who you have promoted or recommended or sponsored. 

I’m really proud that I had the opportunity to highlight the women leaders in Aruba. Highlighting them hopefully encourages more women to see themselves in leadership roles. I'm also so interested in making sure we're shining bright lights on people who are succeeding rather than simply continuing to talk about the challenges. Problems are solved by action. If we only keep talking about how shitty things are, things won’t change.  

Through the Looking Glass: Amith Nagarajan

Amith is a serial entrepreneur who believes in combining purpose, passion and profit. He is the founder of Aptify, a purpose-driven company focused on providing technology and services to the not-for-profit sector around the globe. More recently, Amith founded Association Success Corporation, a group of businesses rooted in a shared purpose of helping associations achieve greater success. Association Success’ companies include rasa.io and AssociationSuccess.org. You can follow him on Twitter @AmithNagarajan.

I'd love to hear about your background and how you started your first business.

I am a Silicon Valley native. I was born and raised in California and grew up with computers. My dad taught me how to write programming code at a very early age. I've always wanted to be an entrepreneur, so early on, I had a variety of businesses a kid. I started my first real business when I was a junior at Cal Poly, San Luis Obispo, which is in the Central Coast of California.

That company turned into a business called Aptify, which I scaled globally over 23 years and ultimately sold in 2017. That was a really long chapter of my life and a fantastic experience. I grew a lot as an individual. The company grew tremendously, and it was a big success. There's a number of elements in that experience that shaped my perspective on entrepreneurship and the role I should play in entrepreneurship. 

Aptify evolved in many ways, as companies do over that long of a period of time. Roughly 15 years into the journey in the late-2000s, I thought the company was in a place where my own direct involvement was becoming less important on a day-to-day basis. I was still very much the strategic, visionary driver of the company. I loved the creation of innovative, disruptive new things, the team, and the culture, but I didn't really like the operations side that much. At that point, the company already grown quite a bit, with offices all around the country and starting a global expansion. I was fortunate to have a great executive team that was far better than I was at operations. 

I should mention I never raised money or took on debt at Aptify. That approach has its pros and cons. The bootstrapping process taught me a lot of valuable lessons at various points in time. 

I realized that I wanted to get involved in earlier stage businesses again and started investing in early-stage companies as a way of giving back. My investment process was about finding entrepreneurs who I thought had great potential, decent ideas and were solid people. I wanted to take on the highest possible risk at the earliest possible stage because that's where I felt that there was a need. 

That’s my story. Aptify has been a big part of it, as has investing in companies over the last ten years. Since selling Aptify, I have been actively focused on an artificial intelligence startup called rasa.io. It is a platform for content personalization, specifically in the form of (what we call) Smart Newsletters. That’s what I spend most of my professional energy on.

I'd love to talk a little bit more about the bootstrapping angle. You mentioned it didn't necessarily make sense to raise money for your company. How do you get a sense of whether or not early stage companies are what we would refer to as venture scalable or whether the business warrants taking outside capital?

Well, I think that it depends on how you want to focus the business. In product-led companies where products are capital-intensive to create, there's a significant ramp-up period of time before there's any noticeable revenue. In those types of businesses, you typically need funding. 

What I ended up doing was doing a mix of products and services. The DNA of Aptify was always a product company, but we supported ourselves through professional services. You could argue that approach is great because it allows you to bootstrap and reinvest services profit into product development. You could also argue that slows you down tremendously because you're distracted from the product development. But then you can argue that by doing services, you're on the front lines with the customer, with a far better understanding of the customer’s problems. You can craft a product solution across multiple customers based on that pattern recognition that people who are in the ivory tower of pure product development couldn't do. So, you can go back and forth on that.

I think it depends on the intentions of the founders. It's obviously the cool thing to do to say ‘Hey, we're going to do a venture scalable business. We're going to have an exit or an IPO,’ and those are great businesses on a number of levels. But the probability of success in that format of business is usually significantly lower. The risk levels are higher intentionally since they are going after the bigger opportunity and deploying a lot more capital earlier. In the other business model where you're starting a little bit slower, you can have a hybrid model of services and product, funding part or perhaps all of it yourself.

Then you're calibrating to figure out where the product goes. That model might lead you to large scale, but it can also become a business that just has an evergreen kind of a feel to it, able to generate significant cash flow and wealth for the founders and other stakeholders.

I don't think there's a single formula for venture backable companies. A lot of times people who are looking for funding look at services as being a toxic element to their business model, and I think that's an unhealthy approach as well. There are a lot of situations where services can be a strong complement. 

How do you think about Advisory Boards versus Boards of Director? And what advice do you have for entrepreneurs on setting those up and managing them effectively?

My companies haven’t had outside investors, so I haven’t needed an official board of directors. I have a group of advisors as opposed to a group of directors. Regardless of what the terminology is, I believe that outside advisors should be active in experience sharing, deliberation and even decision-making, in some cases. 

I don't like advisory meetings where everyone gets together once a month or once a quarter to say, ‘Hey, here's all the great stuff we've been doing,’ and for the advisors to say, ‘Oh, good job.’ Everybody loves to get a pat on the back, but the point of advisor meetings is to take you to the next level, to coach you up, to drive you harder, and sometimes to take you to places you wouldn’t have gone on your own.

For my meetings, we send a brief ahead of time and expect advisors to invest the time to study the materials beforehand and come into the meeting with questions. We start the meetings right off the bat with Q&A. Then, we go into two or three discussion areas where we expect to have a vigorous conversation and leverage particular advisory expertise. I construct the groups by looking for industry experiences or skill sets as well as networks for introductions. And I set the expectations that in addition to attending the meetings once a quarter, we're looking to the advisors to help us connect with partners and prospects and occasionally roll up their sleeves a bit to help on projects. 

We're looking to them to engage in a very limited way in terms of project work, as we don't expect people to be part-time employees or anything like that. But if they end up putting in an hour a week, that's a pretty big commitment over the course of a quarter. That's 10-15 hours per quarter as opposed to just attending an hour-long meeting once a quarter. And that's a different level of expectations that most advisors have, but my point would be that if all you're going to do is meet with advisors once a quarter for an hour or two, it's almost impossible to get a lot of value out of them, no matter how great these people are. So, I give my advisors a bit of equity, and then I expect them toto be a part of the team. 

How did you end up in the market segment of associations? Was that incidental, or did you seek out a mission-driven or social impact-related industry?

It was really dumb luck. When I started off in ‘93, I had no idea what an association was. I had no idea about pretty much anything. All I knew how to do back then was write code, and then I figured if I want to start a business, I better take on a business major. I knew fundamentally a lot of the basics, but I was a really good developer. I started building products. And our products were actually fairly successful the first couple of years.

We didn't make a ton of money, but we had over a thousand organizations adopt the low-priced tools that we were selling. It sounds impressive to say 1000+ companies, but they were buying either products for hundreds of dollars or services. A lot of these companies would call us up and say, ‘Hey, we purchased your tools and they're awesome. But we need you to come help us take advantage of them.’ We didn't know what professional services were. We helped our customers use our tools and checks started to come in for much larger dollar amounts, for tens of thousands of dollars. Eventually, six-figure checks started coming in for services, and we thought that was fantastic.

Then we started to realize how hard it is to scale a services organization. The DNA of the company was always focused on intellectual property and product development and building a consulting team was a very different thing. One day we got a call from an association that had come across our tool suite and wanted us to help them build a reporting application. Our tool allowed programmers to more rapidly build all types of business applications. By then it was the mid-90s.  We ended up doing a lot of service work for them and realized that selling a very generic product like ours across all verticals made it fairly difficult for a small company to find a product-market fit because you're selling anything to anyone. Anybody could be your customer.

It got us thinking, ‘Hey, what if we built some applications? We've got this platform that's so incredibly fast at building apps that rather than selling the platform, what if we picked a couple of specific applications that did a lot more for people and would be valued higher  than just tools?’ 

And that was around the time when we met this association. After working with them, we realized this could be an interesting space because it was obvious that they were spending a ton of money on custom application development. It didn’t seem like there was anything good at the enterprise level for this market.  

It also just so happened that the person who was our main contact with that association decided to change jobs, went to a different association, and took on a new job. The association he moved to was looking for a new CRM system, and he knew that we were thinking about building this type of application.

He agreed to be our first app customer in 1998. At that point in time, we stepped on the gas and grew very quickly. We were beneficiaries to the fact that Y2K was in full swing, and people were replacing systems rapidly. We grew like crazy in those couple of years and from that point forward. We thought we would go after multiple verticals, but we really never looked back from the association space as it was  a large market that served people in a way that we really enjoyed. 

The nonprofit and association space often gets a bad reputation as being a small market, and I think it leaves a lot of white space for founders to build interesting things.

It really does. It's viewed in two ways. In the first way, people look at it and say, ‘We want to do some pro bono stuff. Let's go help these guys out.’ In the second way, people look down their noses at it a little bit. And the result is that the technology in this space tends to be behind. It's usually more than five years behind that for mainstream companies. It's tough for those people, and that creates massive opportunities. 

There are hundreds of thousands of associations around the world. In the United States and Canada alone, there are tens of thousands of sizable associations. We had sold our product to hundreds of the largest ones by the time we sold Aptify. Our focus was on the largest groups because our platforms strengths appealed best to that part of the market. There's a lot of space in the market for people who have a truly innovative idea and are willing to help solve big problems. Associations are hungry for good ideas. 

You mentioned that you started making angel investments. We’re seeing more and more startup founders starting to make angel investments relatively early on when they're still building their own business. What are your thoughts on that in terms of opportunity cost, focus, and pros and cons? What would your advice be? 

I think it depends on how involved they are. If it's ultimately purely an investment, and they are putting a little bit of money into something because they believe in it and are not really putting a lot of their time into it, I would probably fine with it. If a founder I had invested in was diluting their attention by serving on boards and doing a lot of other things, that would concern me, because startups are all-consuming and no matter how good the founder is, there's not enough time in the day to do what you need to do in your own business. That being said, I do think it's awesome that founders are starting to pay it forward.

When you're evaluating your venture activity, how do you think about making fund investments versus direct investments?

As an early stage investor, the deals that I do are more based on founders I believe in or want to support.  

I am purely focused on driving entrepreneurship forward. It is not intended to be a donation. It's intended to be an investment, but it is much less financially driven than an LP investment into a fund. That, to me, is investing in an asset class. As an LP, I'm putting dollars in looking for a return in that fund just like any other investment in any other asset. 

As for the individual investments I make, I do see returns on them, too. I've had a couple of exits already, which have been great. To me, it's more about being supportive. It's a way of giving back to entrepreneurship, which has been something I feel incredibly fortunate to have had success with. When I started out, I didn’t have any support or resources so I try to be helpful to other entrepreneurs.

Tell me a little bit about your process for making investments.

I like to see at least two founders because there's always a benefit to a balance between people. I like to see founders who are fully committed. They have to be either full time or willing to be full-time upon receiving the investment and not looking back.

I also look for people who not only have the commitment bu also have the stamina, the determination, the grit to persevere, and the emotional intelligence gained from having been knocked down a few times. People who have unbelievable talents but have had nothing but success in their lives or have been insulated from defeat don't recognize signals from the market quickly enough to react to them. There are a lot of really smart people who don’t succeed because they're so full of themselves that they have a hard time figuring out when they have it wrong.

Part of what I do is interview founders somewhat similarly to how I interview potential employees for various companies. I try to give them some critical feedback, directly in the meeting; it is very rare for people to get feedback like that, in terms of their presentation or something else. Then I can see how they react to it. Are they coachable? Do they take feedback well? I look for people who react positively to feedback in the sense that they are open to the input. Not that they are willing to change their view immediately as that would be something that is concerning too. I want people who have conviction in their beliefs while at the same time are open to hearing opposing thoughts.  In these types of discussions, you can usually tell pretty quickly if someone's genuine or not.

I look at the idea, of course,  but I don't do massive amounts of diligence on the idea at the stage that I invest in because it's so early. And idea is going to evolve tremendously. I look for a good core of an idea, and I look for a rock-solid group of people that are passionate about it. 

Are there certain values that are important when you're selecting entrepreneurs to invest in?

Definitely. Social purpose is my preferred way of describing it. Essentially, I invest in companies that exist to do something positive outside of just making money. Just making money is something of a hollow victory. My companies have always been aligned with that way of thinking, much more so in the last 10 years than before that. The success that we had with Aptify and what we’re doing at rasa.io is very much driven by this idea of a purpose that fuels the team and provides the bedrock of the culture. I look for entrepreneurs who have a belief system. I want them to be extremely motivated and driven by financial return, but I also want them to be looking for something bigger than that. I'm hoping that they are people who want to drive positive social impact as well. 

Through the Looking Glass: Lo Toney

Lo is the founding managing partner of Plexo Capital. Previously, Lo was an investing partner at GV and Comcast Ventures. Lo has held executive roles at both startups and global consumer brands. He was the general manager of Zynga Poker, the gaming company’s largest franchise, and held operating positions at Nike.com and eBay. You can follow Lo on Twitter @lo_toney.

I would love to hear a little bit of background on what led you to start Plexo. 

This all started when I was at GV. We were looking for a way to get access to a lot more deal flow to fill the top of the funnel. One of the things that we noticed was the dramatic increase in 2015 in the number of seed-stage funds. I realized that was a great way to get access to deal flow: building relationships with folks that are upstream. 

Then one of the things that we noticed was that along with the increase in the number of firms in that particular stage of investing, there was much more diversity than you would see at larger billion-dollar funds. The thing that was interesting to us in conversations -- and this was not a surprise to me -- was that the path for women and people of color was a non-traditional path relative to other folks in venture capital, and, as a result, women and people of color ended up with really interesting networks. Also, they had a different lens to evaluate deals. 

There's a number of other things but those two, in particular, are important because we realized that by establishing relationships with those folks, it would allow us to get some differentiated deal flow. One thing I have noticed is that as an African-American VC, I will see a lot of deals from African-American entrepreneurs. They almost seek me out and I've heard this anecdotally from female VCs as well: if you're a female, often you'll get deal flow from a little bit outside of your network or from referrals from other female entrepreneurs. That's an interesting way to tap into deal flow that other folks may not be seeing. 

I think what's interesting about the different lens that women and people of color have in certain instances is that there's not a lot of data. If a company is going after a particular market or a problem that the GP has familiarity with, or if the problem has some relevance to the ethnicity or gender of the GP, and there's not a lot of data to show that the company has traction yet, then, there may be an ability for women and people of color to identify very promising companies earlier. I think those two things were pretty interesting at GV. We made five LP Investments into seed-stage funds led by women or people of color, and it worked for us.

I saw the potential to scale that model up and around February of 2016, I started to think about what that model could look like. I spent some time researching it and got a lot of support, which was great. I approached it like an entrepreneur would approach building a company.

I would say that this journey has been much more entrepreneurial in nature than venture-like in nature. The first thing to do was to really understand the market, the problem on both sides --

1. both for LPs trying to deploy capital, and, in particular, if they were looking to deploy capital in diverse GPs, and 

2. the challenges that some of the GPs have with trying to raise capital 

-- in other words, really trying to frame the problem or the opportunity and then determine how big the market for that strategy is.

If my fund was going to be investing as an LP into diverse GPs, how many of these diverse GPs even exist? If there are only five, then there may not really be a model there. But there are many more than five. That's the good news. Then I began thinking about what I could do to differentiate the model and position it differently in the marketplace. I thought the hybrid structure of investing both as an LP as well as directly into deals was interesting. Then I got back to the roots of this, thinking about how I could work with LPs like GV: what if I could get the interest of a downstream investor to invest and feed them deal flow as well?

I started to have conversations with those who would ultimately become some of our LPs such as Cisco Investments, Intel Capital, the Royal Bank of Canada, Hampton University, Kapor Capital, the Ford Foundation and others, to really try to see if there was something interesting around this model. I even had some conversations with LPs that like to both invest directly as an LP into GPs and then also do directs. They saw Plexo as a way to ultimately learn more about GPs that they then might be interested in investing in directly. So once I started to kind of gather all of this feedback, doing my own customer development work on all the different sides of the market, I came up with what I thought was the right approach.

That was right after Thanksgiving of 2016 and then I started to work on it full-time in December of 2016. I incubated it at GV, really started the journey of raising capital, and ultimately spun it out after we did our first close in March of 2018. We brought in our founding LPS, including our anchor Alphabet, and as part of that structure, we brought the original 5 LP Investments that were done at GV. This made sense because at the end of the day, GV was not in the business of trying to manage LP investments. It really was a good match as GV was able to continue the relationship with me and continue to get access to the deal flow, while we could get started with that track record of the original 5 LP Investments. 

Can you share more about the value proposition of offering your LPs access to the direct deals, given that Plexo can also invest directly into Plexo’s GPs’ deals?

Our GPs are mainly mentoring and investing in a company at the pre-seed, and GV, Intel Capital, Cisco are all downstream investors, investing at the later stage. There have been instances where we identify companies through our GPs that are interesting, and we might invest alongside our GPs at the pre-seed or seed, or we might invest after our GPs have invested. Usually, we try to not have our initial entry point be too far down the road for a company. We try to stay at pre-Series A/B (or below a $150m post-money valuation). 

At the same time, we’re trying to surface companies that might be interesting to some of our LPs -- GV, Intel Capital, Cisco Investments, even RBC to a degree. Most of our LPs are really Series B and C investors. We're completely happy if our LPs identify deals that are not a good fit for us or that are at a later stage than we like to participate in -- or, we can also invest alongside our LPs as well. 

We have actually done one deal with GV, Blavity. We surfaced Blavity, a media company based in Los Angeles, founded by former Intel executive Morgan DeBaun -- I think about it as a Huffington Post for millennials of color. We had been tracking that company at Plexo since the start. Two of our GPs had invested. We surfaced it to GV, which led the Series A. We (Plexo Capital) participated in that Series A as well. 

When you look at the criteria for selecting emerging managers, are you looking specifically at demographic criteria of diversity or are you looking at other factors as well? 

At the moment, we're looking for people who are not well represented in the venture community by ethnicity and gender.

I’m sure you’ve seen the stats from the work that Richard Kirby, formerly of Venrock, now of Equal Ventures based in New York, did. He has looked at probably over 1,500 VCs and he found, I believe, about 18%  are women, and I know that 3% are African American (2% African American men and 1% African American women).

We try to use the representation within the venture community as our way to determine who is underrepresented and use that criteria -- so it ends up being mainly people of color and women within the United States.

We also look at other geographies. We have made an LP commitment to a GP in Latin America. We have looked at Southeast Asia and the UK as well, though we have not pulled the trigger there yet. We are also looking at the continent of Africa, mainly sub-Saharan Africa, where we will likely pull the trigger. Our criteria remain the same; we're still looking primarily at GPs by gender or by ethnicity. We like GPs outside of the United States within local markets that are large enough to have good outcomes to give us the returns that we need from our LP commitments. We also like international GPs to have strong ties to the United States in the event that they do come across a company that has the ability to achieve global unicorn status, as those markets typically don't have a venture community with pockets deep enough to get those companies over the finish line.

It sounds like a lot of the GPs you’re evaluating are emerging fund managers. They may or may not have institutional track records. How do you evaluate performance or manager quality?

We are completely comfortable investing into a first-time fund. We do not like to invest or commit to first-time managers. So, with our model, it's very important for the GP to have a track record either as a result of the fund that we're evaluating being Fund II or Fund III, or from the GP coming from an existing shop where they have a verifiable track record. We have to be able to see the deals that they were responsible for sourcing, the deals that they were the lead on, the deals where they took a Board or Board Observer seat. Then we look to understand which firms  invested both before and after.

There have been instances where the GP may be at a first-time fund without coming out of an existing shop. However, they do have some type of verifiable track record; e.g, they could be a prolific angel investor.. Prolific angel investor does not mean having two investments of $5k each, though I encourage people who want to get a feel for investing to look at something like that as a start. What we like to see for an angel investor is investing in great companies alongside or in front of great institutional investors and being able to understand how that translates into the strategy that they would like to use for their first-time fund moving forward. So, it's very important for us to have a verifiable track record, even if not part of a prior fund, because it's part of our analysis and process that we use to understand the judgment of the GP.

And do you have a minimum allocation or minimum fund size? 

For the most part, we invest in sub-$100 million funds where the primary point of entry is pre seed or seed. If it's a sub-$10 million fund, we will typically invest a straight $500,000. If it's $10m-$100m, we look to make commitments of $1-5m dollars depending on the portfolio construction. Is it thematic or generalist? We factor all those things into the context of our overall portfolio, the impact on our projected returns, and the health of the portfolio. 

We like GPs who typically take leadership positions for the bulk of their investments. We do like commitments for follow-on. We will look at either a concentrated or a larger portfolio. It depends on the approach of the manager and really comes down to whether the funds are thematic or generalist. 

Like I said earlier, we will look outside of the United States. In fact, deciding to think globally at the outset was a critical decision. 

How would you define concentrated at the seed stage? 

It is typically 15-20 companies -- a very, very small number of portfolio companies. And typically, those are going to be ones where the GP is taking leadership positions.

We run across it more in thematic investors who are investing in a particular area such as enterprise or hardware. Even then, it kind of depends. I don't have a hard rule about the portfolio size for a GP. It really depends on the strategy of the GP and their network.

We spend some time looking at the sourcing network of the GP to understand if their network and background align with their approach. We want to see disciplined managers and make sure that they have a very clear portfolio construction strategy. The number one complaint of most LPs is strategy drift. We just like to make sure that when a GP says that they're going to approach investing in a certain way that they follow through and do that. That's the most important thing for us.

Tell me a little bit about what the process is for an LP to evaluate you. 

I'm in this interesting position because we do raise like a GP as well. At GV, where Alphabet is the sole LP, there was no true fundraising. Obviously, there's an annual meeting with the Alphabet execs and founders, Larry and Sergey, but it's different than actually going out as a GP into the market and pitching family offices, fund of funds, endowments, pension funds, etc. That was a new world for me, and since we do have this hybrid approach, the first thing we look for is whether we’re a good fit for the LP, given we do have corporate investors who have different motivations.

We do have normal institutional investors LPs as well. We've got a big large European family office that behaves much more like an institutional investor. They have a CIO and in their process for evaluating us, it was clear that they were looking for returns, but they were also very interested in being able to better understand the tech market in the United States at the seed stage. The family office wanted to get a feel for interesting GPs they could commit to directly. They saw Plexo as a very simple way to be able to make a commitment and really begin to understand the market and meet some of the interesting GPs in the market. We have made a number of introductions to GPs we have committed to, and some we haven't committed to, and the family office has made some commitments to some of those GPs.

We have also received a commitment from an endowment, Hampton University, which is where I went to school for undergrad. So I was very excited about that. Hampton is a Cambridge client and looked at Plexo purely based on returns. I don't think of Plexo as a fund-of-funds. I truly do think of us as a hybrid using a strategy of making commitments to GPs to get better access and get to direct opportunities that can provide great returns more efficiently.

I’ve learned that there is a certain view of the market around fund-of-funds, and it's the extra layer of fees. What's interesting is that if you look at the research that's out there in the marketplace, there's a good bit of research that the only place where it makes sense for the type of model that we have -- investing as an LP form a pooled asset -- is in the very early stage because of the power law nature of the returns. If you have the ability to pick the right managers, the data shows that you can actually have better performance by investing through an entity that's going to be focused on the seed-stage fund market with a deep understanding of the players and the right funds. The returns are actually better than the returns of investing in multiple later stage funds. Part of the reason is that the power law really doesn't exist at the later stage, so you get a normalized distribution. And because of that, you take a hit for the extra layer of fees.

Often, we will have conversations with LPs and we just won't be a good fit for whatever reason. What I enjoy is the ability to be able to say, ‘Well, Plexo Capital is not a good fit, but let me tell you about some of our GPs that are in the market that you should take a look at’ so both sides can leave every conversation feeling super productive. I've made a number of LP introductions for our GPs, in some cases for GPs who we haven't committed to but I know are interesting funds despite not being a fit for us. I know how hard it is to raise money and if you think about it from your perspective as a GP, what's the thing that's most helpful to an entrepreneur? At the end of the day, all an entrepreneur wants is customers, employees to build the product for the customers, and financing to pay the employees to build the product for the customers. This is very similar for a GP as well -- all a GP really wants is the LP commitment so that they can go out and find the entrepreneurs. So, if I can help with that, that's the biggest value add that I can provide. 

How do you think about things like succession planning? 

Super important. In my opinion, there are a few things that come into play.  Let’s say there is a situation where a firm started by a solo GP decides to bring in another professional, either as a partner or someone that can be groomed to become a partner. I’ll make a parallel back to GP investing when GPs invest into a company: a prospective LP needs to think about whether the new professional has enough economics in the fund they were raising to remain with the fund moving forward.  It is difficult to find experienced partners, so prospective LPs need to think about the risk of a junior partner being lured away by a larger firm.

In this sense, starting an early stage fund is similar to starting a company; the equivalent being how does a startup hang onto an employee when Google or Facebook could come knocking and pay this person a million dollars a year?

I had to have that conversation because that's the reality of our market: if you have good experience, you're getting headhunted every week. So that became an important conversation and a lot of the dynamics are again very similar to a start-up: Does this person have enough equity – or, in this case, carry -- for the economics to make it beneficial and worthwhile to keep this person long-term so that there can be a succession plan and handoff. 

Do you look at management company ownership? 

Management company ownership is important, but I'm really more concerned about fund ownership and economics. How much of the carry are they going to have in that particular fund?  That said, management company ownership is important to understand as it can really come into play if the partners decide to split.

Speaking of team, who else is on your team? 

I'm the sole GP but we do have four venture partners. We have Ken Coleman, a true luminary, who really is more of a sage mentor -- given us good advice, made great introductions, introduced us to one of our LPs. 

We have Georganne Perkins, who spent 23 years at the Stanford endowment working on their LP investments in private equity and venture capital.

We have Laura Alber, the sitting CEO of Williams-Sonoma, who is really amazing at understanding general business strategy and also tech infrastructure, given that Williams-Sonoma is an omni-channel retailer.

We also have Keith Walton, who is the administrative officer for an infrastructure fund out of New York.

They’ve all been extremely helpful. We also have a couple of interns -- an MBA intern and an undergrad intern. 

In the long term, I won't be the sole GP. I do want to build a franchise, but I'm going to be very patient in trying to find the right person because I've seen what happens when you don't have the right team in place. It's hard enough when you don't have the right team or founding team in a start-up. It's even more difficult when you have a partnership because it's very hard to untie and untangle that.

Where do you find your interns? 

I went to Haas, and I am a big believer in Haas MBAs in particular. I have consistently tapped into that network to find quality people. We also have an undergrad intern from Cal Poly Pomona who is studying computer science and business.

You mentioned this notion of a lot of funds wanting to have an underrepresented investor on their team, this concept of token hires – are you seeing a lot of this? 

I like to think there is a positive side to it, but without question, there may be cases, and I can’t say with certainty because I just don't know what's going on behind the scenes, where it may just be window dressing. Entrepreneurs ultimately have the power and we've seen some examples of entrepreneurs saying, “Hey, I went with this firm because they have the same values that I do. They have a diverse team and that was important to me.”

I think there are going to be some firms that are going to say,‘We better get someone up on our webpage. We don't want to miss out on deals now’. I don't like that aspect of it. But you never know. I like to focus on what happens when you get someone that's a woman, a person of color, and then they now bring in a whole new set of relationships giving access to deals and some insight that may not have been part of that firm historically. 

What are your thoughts on how everyone in the entire ecosystem can be more intentional about intersectional diversity? 

You have to start somewhere. When someone invites me to a diversity-focused event, I always have to ask, ‘What's your definition of diversity?’ Because I’ve been like, ‘Okay, I'll come to that’, and then it's just for women -- and just white women. I do think that’s just being aware. 

Soraya at Trail Mix told me about these calls that she does where she gathers female GPs to cover a specific topic on every call. To be more intentional about intersectionality, when it is time for questions, she puts women of color at the front of the line so that their voice has an opportunity to be heard. I thought, ‘Wow, now that is very intentional’. The fact that she had the awareness to do that said a lot to me. 

How long do you think it'll be until this is no longer something that has to be an actual focus area and it's just sort of the default?

I've been thinking about that since the day I first thought about the strategy for the fund. It would be great to make this model obsolete and then for us to transition and have a model that wasn't directly associated with diversity on the LP side.

Unfortunately, I think there's an opportunity for our model because you just look at the numbers and we're so far behind on the representation really matching the demographics of our society, especially here in the United States. So, unfortunately, I think this model is going to be in place for us for at least several funds.

There's another aspect of this which isn't our model, but we look at a lot of funds that have this model: GPs that focus on making investments into companies based on diversity. We're an LP in Female Founders Fund. Female Founders Fund focuses on companies where there is at least one female founder, just as the name implies. I always thought that one was interesting just because half of the population is half female, right? So yeah, I mean, you're going to see a lot. Female Founders Fund, for example, sees every deal that's worth seeing that has a female founder. I thought that was pretty compelling. Their performance has shown that when you match excellent investors like Anu with a market opportunity of half of the population that really gets overlooked, some magic can happen. There are also funds that focus on specific ethnicity. We haven’t made commitments to those type of GPs yet, but I understand why that's necessary when you just look at the low numbers of entrepreneurs of color getting funded.

I think that we're going to see these funds out here, but the thing that has to happen across the board, both at my level (the GP level) and at the entrepreneur level, is everyone has to perform. It's nice for Plexo Capital to have the impact of moving the cause along for diversity and inclusion -- but it's a much more powerful when the performance is there, right?

But if the performance isn't there, then what I get concerned about is, are we going to muddy the water? Even though in Silicon Valley it’s often said, ‘Hey, failure is fine’ -- I don't know how well that applies to women and people of color. 

So I'm hopeful that once people of color get commitments at the GP level and get funding at the entrepreneur level, they will go on to really excel in terms of performance because that's going to be the best way to show the power of this model. It's not going to be simply having demographic data that improves over time. We have to deliver the returns as well.

Through the Looking Glass: Holly Lynch

Holly is the Founder and CEO of The 85-Percent. She is an advertising, strategic planning, and brand communications veteran, with twelve years’ experience at agencies such as Ogilvy, BBH, and StrawberryFrog. In 2010, Holly founded The Good Girls — the first branding firm focused on women-led enterprise and social innovation. She is currently running for Congress for New York’s 10th District. You can follow Holly on Twitter @hollylynchny.

By way of background – were you always mission-oriented?

I think I was born with a justice bone or an entire body of bones with that sort of perspective. I grew up in New York City during the ‘80s. It was really hard to grow up here and not realize the level of injustice in the world.

There was the Homeless Epidemic, the AIDS Epidemic, the Crack Epidemic. I grew up on the Upper West Side, and everybody thinks the Upper West Side is a pretty cute wealthy neighborhood. And unless you lived there in the ‘80s and were offered crack at the age of two, you don't really understand just how challenging New York City was at the time and how much of a disparity there was between those with wealth and those without.

It was hard for me to not see the fact that there were drug addicts all over Central Park. Central Park was off-limits. I wasn't allowed to go there without at least one adult, if not more than one. At the same time, there were a lot of buildings that were being torn down. We had a major real estate challenge back then similar to how we were dealing with it now. A lot of buildings that could not support themselves were being torn down to be replaced with high-rises. So, the ‘80s was kind of similar to where we are right now in the sense that we're seeing a lot of these issues that have sort of bubbled under the surface but not been as obvious. And one of the reasons why I'm running for office now is because I've seen this already. It's only going to get worse unless we start stepping up and doing our job as citizens. 

I got very engaged at about the age of six. My parents actually gave me a petition board and pimped me out to the local churches that were going to get torn down to be replaced by high-rise buildings. They thought a six-year-old would be more appealing to get people to sign petitions then an adult.

And I think it's a really great experience for kids to have to do that sort of thing. You lose your shyness really quickly. I also went to a very progressive school run by some crazy Episcopalian nuns who protested in Tiananmen Square. 

I was raised Roman Catholic, but I went to an Episcopalian school and the Episcopalian Church is much more progressive when it comes to the ordination of women, gays, etc. My school was very focused on women's education and advancement. I gravitated towards what I was taught at this really politically engaged school.

I ended up going to Harvard where I naturally gravitated towards the Phillips House. I did environmental action work and I built homes with Habitat for Humanity. And Harvard is kind of like New York. It's a whole bunch of really ambitious people that care deeply about trying to make the world a better place, and I just naturally gravitated towards the human rights and environmental action work. 

Finding my career path was significantly more challenging than I thought it was going to be. I thought I was going to go into environmental science and public policy, and I didn't do that. I ended up pursuing social anthropology. It landed me in the world of trying to understand human behavior and how the world that we grow up in shapes our behavior and decision-making. 

I ended up going into advertising. I really loved it for the most part, but most of it was really bad. I had a hard time working with stupid brands. My more meaningful work was with cars like Volvo where it was all about the safety of the passenger and with the Dove campaign where we're trying to flip the conversation on beauty and what it means to be a beautiful woman. I entered the advertising world with a specific agenda which was to make things better, and I took every opportunity— whether it was the hybrid affinity drive with Toyota or it was some other initiative. My proudest moments were pitching organizations like Al Gore's Climate Fine Protection Organization. Those are the things that really got me up in the morning, and they're still the things that get me up in the morning. When I decided to branch off and do my own consulting work beginning in 2010, I did it because I was exposed to Silicon Valley in its early development.

I knew a lot of techie guys who were getting angel investments and had no problem asking for money. And meanwhile, I saw all these young women with really great ideas who were too afraid to say anything. I really wanted to help them develop their own brand identity to pitch for money and to feel confident in front of people pitching their ideas. It's like being pregnant for the first three months. You don't want to say anything, but if you don't say anything, you don't get the support system to get you through the rest of your pregnancy. I am driven to change the mentality of not being ready to talk about it because who cares if it's not ready? I know it's a good idea, and there are people out there that should be interested in hearing about it. A lot of my work with 85-Percent was really focused on getting women more comfortable with the ask, communicating what they do, and communicating why it was important to them. I loved that work.

I also worked with Harvard University and a number of higher education institutions that were trying to raise money for really important initiatives. Soon after all of that, I really found my grounding within the angel space because things were kind of exploding in 2012. I joined the Pipeline Angels where I met Angela Lee and a lot of other women who were of a similar age group and financial means. We realized that it was our responsibility as a new generation of people who could actually make a difference to do it.

It was a great experience to learn how to invest with other women of the same age group. The challenging part for me was realizing that there are women of significantly more wealth who were 20 years older who don't care that much. I don't know if it's a boomer mentality, but I know that Gen-Xers like me and Millennials have a very different perspective when it comes to supporting younger women and their dreams. It really excited me to know that I could do something really impactful with my money to help women get their ideas off the ground and through working with some of those organizations.

I met Nnamdi [Okike] and became an early investor in him simply because I believed in what he was doing. When you meet somebody who is so above board, so honest, so forthright and so buttoned up, it was just an obvious thing to want to support him.

How do you see the landscape evolving as it relates to social impact investments?

I’m actually going to be chatting with a company called Closed Loop Partners next week. Their whole strategy is around the whole circuit, from birth to death, of recycling all resources to actually continue to invest in more solutions-oriented stuff. For me, I think it should be an element of every fund. Look at Blackrock. They’re getting more and more invested in social impact because they realized that they’ll lose their consumer base if they’re not investing in climate change and resiliency.

So I think it would be a logical move. I’m not saying they have to put a majority of their funding into it, but maybe just 1% or 5%. A lot of things are already promoting their impact funds as a selling point. I’m going to be talking to Morgan Stanley about how I can just work my assets over there because I’m really concerned about that. I have a great portfolio of Blue-Chip stocks, but that only favors me and won’t solve any major problems in the long run. I think those of us with the capacity to invest should really be thinking about the future for everybody. It’s not just about our own portfolios.

I may be an outlier from the norm in that sense, but it’s only one planet we’ve got and we all need to survive. It’s not like I’m investing for the sake of giving money away. I’m investing because I’d rather have a return on my investment than just give a charitable gift. I could give money away, but it’s not a good model to set up when there’s no real return on your investment. And I think we need to be thinking about the world as an important investment.

I’m becoming more conscious of making sure that my own portfolio reflects my value system, and what I’ve always cared most deeply about are gender equity and making sure that minority and immigrant families have the capacity to survive here. It’s just getting more and more challenging for people to survive. It’s very expensive. We’re not making it easier. The more real estate property goes up, the more challenging it becomes to afford anything.

My focus has really been on the environment and ensuring everybody can have a sustainable job. My other concern is education. We’re not preparing high schoolers for anything at this point. I’m not sure what jobs will be available if they’ll be able to get jobs. They certainly can’t afford college. We’re walking into a dead-end street where nobody’s really paying attention to what’s fundamentally important to the survivorship of the human race and this country.

My first investment was in a company called Day One Response, which is actually female-founded. They make disaster-response water bags. A Cal Poly grad worked with her professor and P&G to develop a water bag that decontaminates water in disaster situations. To me, we should be looking towards things like that as major investments down the road because the one thing that we can be sure of is that climate change is real, and access to clean water will become more and more important every day.

There’s a couple of organizations that I met with down in DC that are focused on helping individuals think differently about their personal investing. Millennials are about to be handed 30 trillion dollars from their parents. That amount would solve a lot of the world’s problems. The sooner we start doing it, the sooner we start solving the problems. I don’t think federal government funding is going to do it.

I think we need to have really smart investors, really smart banks, really smart venture capital firms, and technology companies taking this on as a public-private partnership. Because unless we’re all on board, we’re not going to solve the problem.

If we got everybody on board, it would be a much easier fix than depending on public funding to solve the problem, especially with a divided government like the one that we have. 

So much of what we do in this country is a waste of money. We spend it on wars where we’re still there 20 years later. We’re still sinking trillions of dollars in two wars that we will never win.

Nobody’s paying attention now to climate change. I just feel like we spin a lot of wheels without anybody just owning it, campaigning, and coming to the table with a realistic solution as opposed to a pipe dream.

A lot of the solution is giving women the microphone so that they can be who they are. Women and men run things differently. It’s a completely different leadership structure. Whenever I run a team, it’s not been a top-down; it’s been a sideways networked effect of we all have our jobs, know where we’re going, and don’t need one person on top. It’s all of us figuring out what role we’re playing, and we’re all moving in the same direction. I think that network approach allows for more collaborative work than a pyramid approach does.

But how do we get it? I think we need more diverse founders. I think we need more people who have actually worked in the social impact space advising venture capital firms and technology companies. It’s still a very selfish industry where the unicorns are guaranteed billion-dollar exits or whatever. And that’s a really short-sighted perspective from my point of view.

Silicon Valley is still living in its own little bubble and not paying attention to what’s happening in the real world. The last time I was out in San Jose, I was horrified at the level of homelessness. You have the crazy speed bus that takes people from Cupertino to San Francisco where they’re living, and they completely bypass the real world of homelessness, drug addiction, and opioids that is the road between Silicon Valley and San Francisco. They just don’t see it because they don’t have to see it. I think, at some point, we need to force them to see the impact of their greed, whether we’re talking about a Wall Streeter or Silicon Valley person. It’s the same money, different coasts, right?

Are you finding other people who are as motivated as you to solve these issues? 

I'm trying to find those people. Luckily, the Upper West Side is a pretty liberal progressive community. We have Columbia University and NYU, so there are academics, corporate interests, and organizations that are much more socially engaged with what's going on in the world. But when it comes to the average person, most people don't care. I was having a conversation with a friend last night, and her issue is that for a lot of people, it's just about whether or not you can afford to feed your kids. We're talking about these high-minded issues like healthcare and climate change while the average person who's working three jobs just wants the tax credit so that they can maybe get a bigger apartment or afford more clothing for their kids. We're in a place where the immediacy of everyday needs is becoming more apparent. 

It's why I love Dessy. I'd like to get more engaged with what Nnamdi and some other more progressive thinking venture capital funds are doing because unless we have at least a few bastions of people who see it and are willing to put something against it, it's just going to end up being the immediate need.

How do you integrate your values into your decision-making process for investments, whether they’re public equities, angel investments, or LP investments? 

As I said, the first investment I ever did was in DayOne Response. That was my toe dip into the world of social impact work. It was also a female founder. There a lot of things that came together in a beautiful way, and she's done extremely well ever since then. I have made a concerted effort. I have a great banker. We meet every couple months to talk about my portfolio and how I can be moving more into things that I care about. She's done a lot of research on gender-parity funds and climate change funds for me. It's very active pursuit. 

I sat down with my friend, Jamie Moyer, who does a lot of blockchain work and impact work with blockchain. She's been introducing me to other people, if my banker can't necessarily do it for me, reallocating some funds to other places where they do have access to certain types of investment structures.

It's a constant pursuit. And it is something that I care very deeply about: diverse founding teams and impact investments. I have the luxury of being able to do that. I'm not using anything that I need to live on to make these investments, so it's not really a gamble.

It's more of an experiment. If it works, I don't know how to get more people to realize that it's not charity. What you're doing actually will have more impact in the long run. I think they're a lot of conservative people who just think giving is giving. I have some friends who would rather give to charity without investment returns at all. There are a lot of different perspectives. I happen to think that the two should be together in the same structure. I understand some people think they will make more money and give more money away if they stick with the traditional investment structure. I think that approach is short-sighted. But you know when something's been doing 10% for the last 20 years, and you have our offer something that only give you 1.5%, that's a sizable return difference.

Now I'm patient; I'm young. I don't need the 10% right now. I'm not seeing it as a zero-sum game. I see it as an incremental engagement in solving a problem. 

I think a lot of it needs to happen early in school. If I hadn't been exposed to a lot of things early on in life, if I had not gone to a school where these topics were regularly discussed, if I hadn't grown up in a cultural situation where immediate crises were evident, I wouldn’t be as open minded. I see a lot more than most people because I allow myself to see a lot more. I've also traveled a lot. I've been to India, I've been to sub-Saharan Africa. I’ve been to the South. I've been to a lot of places further away where real crisis is evident every single day. But a lot of people don't want to leave their suburban safety net and their comfortable investments in portfolios that guarantee them certain things.

Do you think the data on performance of certain sectors, like investing in diverse founding teams or social impact companies, will ever be sufficient to change the perception of scale?

No. It has to do with LPs pushing for things. I think we need to start enforcing quotas. I think the only way we're going to see massive change is when we require venture capital companies to invest a certain proportion in diverse trending teams and social impact. I don't know how you do that. 

I don't invest in anything other than places like 645 Ventures and social impact, but I don't think most people are like me. I would hope that more women are like that, but I don't know that for sure. Unfortunately, as long as we still have mostly white men running venture capital and banking industries, it's going to continue to go in the direction of what they're comfortable doing until we have more people of diverse backgrounds in positions where they can push this thing even at an early age. I look at Europe and other parts of the world where there's a 20% board quota. We need to start experimenting.

Bill Gates and Microsoft are heavily invested in a lot of these funds that I'm looking at. They're just not talking about it publicly the way they should be. I think Bill Gates could have a really positive impact on the world if he stepped out just as he did, condemning Mark Zuckerberg for saying that technology is amoral. Technology is not amoral; technology takes on the morality of whoever designs it. And until we have more people like him or Elon Musk actually stepping up and saying they're putting their money in social impact investing, nothing's really going to change.

And I would love to see more female tech founders doing that too. I mean those who have seen success. There hasn’t been a hugely successful, female-founded company that has stood up and said something for change.

On a different note, how did you end up deciding to run for office? Because that is not an easy decision. 

It comes from almost dying from cancer twice. In 2014, I was diagnosed with the massive brain tumor, and that's when I first stepped away from my business. I actually just started working with multiple Myeloma research foundations when I was hospitalized with grapefruit-sized tumor in my head. But after six weeks of radiation, everything looked okay, and I went back to life and started my business again. Then in 2016, I was diagnosed with cancer again. It was in a different location, but the same size. It was also more critical so I spent about six months in chemo. That was when Hillary was running for office. I made a promise that I would survive because she was going to win. I needed to see the first woman president of the United States. I basically spent my time in chemo rewriting my will, getting all my friends together, phone banking, doing everything I could.

Then it took me about six months to figure out what office I was running for because New York is challenging.

The morning Trump was actually elected, I was just like, ‘Fuck, what did I live for?’ I was so excited to see the first woman president. I worked for President Faust, the first female president of Harvard University, who transformed my alma mater. It became a better place, a better school, a better environment, more loving place, and I was so excited to see the first woman president. I just, I saw all of our problems potentially being solved, and she lost. I was so angry, and on that day, I decided I'm going to run for office. 

As it turned out, literally the only office I could run for, where I could get everybody in my family, was if I challenged Nadler for Congress. I started doing my research on the him. He's been there for 26 years and hasn't done anything.

Our infrastructure is falling apart. Our transportation is falling apart. I lost healthcare both times that I was diagnosed with cancer. Our education, like everything, is falling apart, and he's been sitting there doing nothing for 26 years. And with AOC last year, I believed this is possible. The Democratic party in New York is so corrupt that it's time to blow things up a little bit, but it was also me waking up in my home district and realizing that I was back in the same place I was as a child, surrounded by homelessness, drug addiction, and incredible poverty. 

If this District ends up underwater, the rest of the country is underwater. We have no water security in this district. We're surrounded by Hudson River - if we have a foot of sea rise,  some streets are gone. We have contaminated water for the rest of human history, and he's doesn’t get the message. He just completely doesn't get it. He's too focused on Mueller, but that's not what's going jeopardize the lives of his constituents and the people who are my neighbors. 

And that is because it's mostly people between ages of 50 and 65 who know when the election is -- because that's another thing they don't tell you -- they hide it from a lot of people and it's majority-white older people. 

It's not the vulnerable immigrant populations. It's not the seniors who can't even get out of their apartments to go to the polls. It's really rigged by a system that benefits the wealthy elite who have the knowledge and the capacity to go vote that day. That's got to change. There are people still paying off student debt, they'll never be able to afford to live here, or they're not getting an education at all. And they're going to end up underwater on so many levels, struggling to keep it together. This includes a lot of women too.

The levels of injustice in what should be the most progressive, advanced congressional district in the country is horrifying to me. And he's going to get reelected because nobody has ever bothered to challenge him. 

He knows that I exist. I guess he's taking me very seriously and I'm glad. It’s the same challenges as starting a business. It’s being able to raise money, being able to stand up and yell louder, having the confidence in the network, the influencers, the social media following, the right audiences, and the access to the right room. It's rigged against women just like the business world was rigged against women, so I have to break some rules. 

What was your call to action to start?

Yeah, every day feels really overwhelming. I wake up every day terrified that I'm making a huge mistake and that I'm going to be a laughingstock. But where do I start?  I've never actively felt like I made a choice in my entire life. I've always sort of felt like I was pushed in directions.

I have always felt like there has been some guiding force. There's always been some element that has told me when I’m wasting my time here.

Reflecting back on college, I thought I was going to do environmental science and public policy or English. I pursued both of those courses and decided they were a waste of my time. I end up doing social anthropology because I wanted to work with Habitat for Humanity.

I got into angel investing, specifically with women, because as I was starting my own company, I was just talking to a bunch of rooms with people like Janet Hansen of 85 Broads. You pick up on the do's and don'ts of starting a company and how to network.

I think if something is right for you, it'll choose you. You don't have to force yourself to want to do something like when the Dove campaign found me. I actually really didn't want to work on that. I had just worked on IBM. I love B2B technology, and I love doing research and strategy work with C-suite guys, server room guys and hanging out in the basements of banks, but I am a total nerd and I love hanging out with R&D people at Unilever.

I like hanging out with the nerds who are really passionate about what they do every day. So, when I was put on the Dove campaign, it was like, I had to do the fluffy beauty shit. It wasn't until I got to know Sylvia who was just a badass angry Brazilian woman. She hated the fact that they wanted her to have three forms of plastic surgery, and her feelings were contagious. So, we all got mad with her. A whole world of women got mad, and when you can harness that level of passion and when you can identify with it, the rest of it takes care of itself. And my whole life has been guided by these things that have just popped up and I’ve thought, that's wrong; it’s my job to fix it.

And maybe it's just that all the wrong things find me, but it's hard for me to ignore them. I've always had a hard time ignoring things that I know are wrong. That's what got me to start a business. That's what got me to help women get their businesses off the ground. 

I don't know how much I can do. But I'm alive. Almost dying a couple of times really brought that home.

If you've got a life to live, then you better be doing something meaningful with it. Otherwise, you're wasting your time. But, even if I lose this election, I'll have tried, and that is why I'm terrified every day. I have nothing to lose. I've almost died, and this is certainly not going to kill me. It might be embarrassing right? I might lose some friends, but I don't think so.

I think what I'm trying to do is obvious, and I hope people get it. The message I'm moving around with this rise up, and what I want every woman, every minority, every vulnerable population to realize, is that empowerment is a fiction. Nobody is going to empower you. I have lived a life of listening to people tell me about empowering other people.

It's not going to happen. You either rise up and take it, or somebody else will take it from you. I need every single woman to realize that her job is to rise up and take her own potential to do something. Maybe it's starting a business. Maybe it's about taking five dollars out of her account and putting it into something that she cares deeply about.

It's not even doing it for somebody else -- do it for yourself. And I think if more people just owned what they care deeply about or allowed themselves to feel the injustice and inhumanity, then it wouldn't be so hard for them to recognize their own potential to make change possible.

Through the Looking Glass: Diane Henry

Diane is the founder of Rogue Capital Collective, a venture capital firm that invests in tech startups that focus on building solutions in the following categories: the future of money and real estate. Prior to Rogue, she dedicated 10 years to the successful operation and expansion of her Manhattan based commercial real estate company, landing her in Forbes Company to Watch. You can follow Diane on Twitter @InvestorDiane.

I'd love to kick off with a little bit about your background and how that led you to the world of early stage startups. 

I started out as a bootstrapped founder. To be totally clear, I was a founder first, and an investor second. My previous business made it possible to make angel Investments, which I started doing five years ago. One motive for me was the meaning and purpose I find in providing founders with resources, advisement and capital in a way that I did not have when I started out. I definitely cut my chops doing it the hard way, and though it toughens you up, the hard way can be overrated. Instead, you can get a lot done with the right counsel and resources at the right time. So part of my objective was to share some of the hard-earned knowledge I acquired launching and subsequently running my business for a number of years. 

The other thing that drew me to this work -- and I spoke about this a little in my TED talk -- was curiosity. Long before I was a tech seed investor, even before I could legally drink, I was making small investments. I worked through school, and whatever didn't go towards necessities went towards making very small investments, often in tech companies. This was back when companies would IPO a lot sooner, so I was able to buy a modest number of shares in public companies, many of which grew to become household names in tech. 

I was a thesis-driven investor before I had that language for it. I asked myself, ‘Where is the world going? What's happening in the Zeitgeist, and how is that influencing consumer decisions and how we live our lives?’. I think about products as an extension of how we live, how we view the world, what we want from life -- all of which drives consumer behavior. This thinking informed my early investment decisions and it played out well. 

Can you talk a little bit more about your own company and some of the key learnings there that are particularly relevant to your early stage investing now? 

One of the things I learned from my first company was how to hire well. Making an early investment in not altogether different from making a decision about whether I'd hire this person or team to be the founders of this company. Sure if the title of “founder” had a JD, it'd be broader, more cross-functional, and have higher risks and responsibilities than a regular job would, but it's still a question of fit -- is this person fit for this mission? 

My most significant business was in commercial real estate. As with any founder starting out, there was a lot of recruiting people into something that was just a vision at the time. Winning the best talent early often meant effectively competing with the perceived security of lucrative roles at established companies. To win the war for talent as a new company, you have to be beyond persuasive, you have to have an opportunity that's legitimately compelling, and be someone people can get behind. Winning candidate interest is the first hurdle, choosing the right hires is the next, since first hires are mission critical. Assuming a sound founding team, these all involve learnable skills and I emphasize them in my work with seed stage founders. 

Another thing I've developed a nose for is partner dynamics. This one makes me laugh because it often gets relegated into the world of soft skills, which is code for "optional things". But in fact, it's one of the leading causes of startup failure: founder disputes. 

So I think about the dynamics of founders and whether their strengths are complementary. None of these considerations are prescriptive but they are important factors that I take into account. 

What portion of the experience that you've accumulated, especially regarding hiring, is transferable or teachable to the founders? 

If a founder is of sound character and intrinsically motivated, a lot can be learned. If the raw material is there, a founder can be coached. With hiring, there's identifying the right person for the right role, and then there's getting a yes from your first choice recruits when you don't have as much to offer upfront. Beyond that,whether it’s recruiting, fundraising, or selling the product, someone on the founding team must be able to draw people into a vision before it exists and demonstrate that they are the leadership team to bring that vision to life. While I can't hand a founder these skills, I do choose founders who show potential in this area and then build on that, sharing my own tried and true strategies and perspectives. When it comes to hiring, it’s knowing how to see a person beyond their LinkedIn and their stats to determine if they're a cultural fit for the team and have the aptitude to deliver on what needs to be done. It's also important to suss out whether they can thrive in a start-up environment because of the vast difference between start-up and corporate. Before I was a founder, I worked briefly at a top global investment bank -- the level of resources and the number of tiers of support are worlds away from that of a startup. 

Lots of people are up for that adjustment to start-up life because they want the creativity and the opportunity to have their contributions directly affect outcomes. They want to feel vloser to that generative process of building a company.

Can we talk a little bit about what your focus is at Rogue Capital Collective? 

I tend to be a thesis-driven investor. Right now I'm focused on two areas. One is what I call the future of income, and the second is real estate software. 

For the first area, when I say the future of income, I'm not talking about the gig economy or even the future of work necessarily. I'm specifically talking about the future of income itself. I'm looking at the various ways that people pull in money that do not necessarily connect to any type of conventional employment. I like to look at recreational income -- whether it’s from managing a small stock portfolio on my own,  earning credits for creating game content on my favorite gaming platform, or selling my old clothes on consignment online. I'd include these or anything else I do online for fun that also contributes to my financial well being. 

Usually when we talk about fintech, we think about payment and savings, but I'm really more interested in the creation of alternate ways to make even small amounts of income. So, platforms like earn.com. I would even include Airbnb, where there's secondary income being generated and it's not being generated from what is traditionally considered work. You could call it the future of non-work. 

The second area I mentioned is real estate SaaS. Apart from having domain expertise here, real estate interests me as a sector whose time has finally come. It’s overcoming its historical reluctance to change. It has particular incentives as an asset class and nuanced stakeholder behavior patterns on the commercial side. The residential side changed first, and the commercial side is soon to follow. Commercial real estate also has its own set of problems to solve that haven't been touched by software. But software is a great decision making tool for the built environment. From repurposing existing real estate assets to discovery of real estate assets to construction management. For perhaps the first time, there's enough capital to support growth in that sector. 

Can you talk a little bit more about how you view your role as an investor with these companies and what your level of involvement and engagement tends to be? 

I often say I'm an investor and I'm invested -- meaning, I have a stake financially and otherwise in the outcome of this company and it's a bit personal in that regard. I'm invested in what happens. Seed stage companies' needs differ from companies that are further along. So to me, seed investors are loyal advisors at a time when founders are getting a lot of conflicting advice. They're a fresh pair of eyes on the situation and dispatcher of resources. Even if strategies and business models inevitably evolve, investors should be supporting founders and upholding their vision. 

That being said, I personally believe in founders running their own companies. I'm not a fan of internal power struggles.With the exception of cases of misconduct, I am unconvinced that it leads to better outcomes in the long run. To the degree possible, founders and their investors should be on the same side of the table. 

I think that aligned investors are going to keep founders true to their vision of the company. It’s what I would want. And that alignment comes from the founders and investors having the same goals for the company and understanding what venture capital is and isn't for. All of those things should be part of the picture. 

Do you run into a lot of situations where it seems like there is a mismatch between a given company's trajectory and expectations and venture capital as a whole?

 I think you sometimes see it from the outside, in hindsight, if founders publish post-mortems. Sometimes these things play out for further downstream, after the seed stage. My focus is in the very beginning, and I think that is a great place to determine alignment: who is on the cap table matters, what the configuration is matters, and how well they reflect the founders' outlook for their own startups matters. I actually think fundraising can become easier when that is part of your strategy at the start. 

What drove you to start your own fund rather than join an existing one? 

I was surprised by the degree to which people had been waiting for me to launch a fund. After I announced, that became clearer, but you know, I'd been working in the ecosystem, advising, and investing for five years at that point. A lot of people had sort of suggested that I start a fund here and there, but it wasn't until I sat down with a very prominent VC friend who really made the case in no uncertain terms that this was the direction that he strongly believed I should pursue. He was not the first person to suggest that I launch a fund, but he was the last. 

I think that for me -- and this is true when you start any business, a fund is no exception -- it came down to this: is there a gap in the market? is there somebody else who's doing this that can help as opposed to starting my own thing? When all of these answers pointed to a new fund, it became clear that this was something worth pursuing. Once it was clear that there was a market gap in terms of my thesis and who I am as an investor -- only when that was clear -- did I decide to explore doing a fund. 

I think a misconception about venture is that you want to break into something. People are always trying to get into the space and break into the VC game. Ok, you want to break into it, but why? Does that space need you, and if not, well, what can you bring that the space does need? I think that's a hard question but once enough of us have a strong answer, it elevates the game. 

What have been the biggest differences in the transition from angel to sole GP institutional VC? 

I am the founding member of the Rogue Capital Collective and at the moment, it's a solo GP fund. That may or may not change in the future, but I'm ready, willing, and able to do it solo. 

One of my favorite differences between being an angel and running a fund is having LPs. I've been an LP, and now Rogue has LPs, and any time you have other stakeholders, it changes the trajectory of what's possible. When I saw that the work I was doing had material benefits and favorable outcomes, it became clear that expanding upon it was important not only to me, but also to the ecosystem. 

Being part of a fund, which I called Rogue Capital Collective for a reason, changes what's possible. It changes how much you can offer founders and how many founders you can support and at what level. It's also drawing together of a set of people who have an outlook in common that is a little different from what already exists. 

That word, "Collective", is an expression of how fundamentally collaborative this investment work is. Every group movement or every set of cultural factors of this industry is driven by a collection of people who agree about something. And there are collectives of people who agree about things that are not yet industry standard, but when we find each other, it completely changes what's possible. I would include you in that collective for sure. There are a lot of new voices coming into this business, and I think that's what's going to create the new opportunities. That's what's going to create the next fresh crop of ideas because in the end, this industry is about discovering what's new, not replicating the past. I think that when the industry gets too stuck on replicating the past, it stagnates. And for venture capital as an as set class, stagnation is death. I actually think that it becomes a risk factor. The difference between being an individual investor and being part of the fund is that more is possible within an institutional structure rather than without it. 

Absolutely -- having LPs adds a different level of rigor and accountability that I think changes the dynamic in the working relationship in a positive way. 

A thousand percent. I believe that having external stakeholders and having accountability are incredibly useful for many reasons, not the least of which is having a sanity check. Primary control rests with whoever is in charge, but external accountability will help people see blind spots and possibilities they weren't seeing, and I'm no exception. If you're a founder of a fund, you're subject to the same status of being human, which means that there are things you can't see, and there are only 24 hours in a day. So that leverage is incredible. 

I also really liked your point about stagnation in the venture industry and how that is, as you said, death. I'd be curious to hear a little bit more about your thoughts on what you feel has changed over the last couple of years as you've been increasingly involved in early stage funding. 

A few things. There's more money in venture than when I started five years ago. And that money is also pooled more and more towards the later stage. I think that the need for seed stage capital is increasing in a way. Yes, there are a lot of microfunds, which are counted as anything under $100 million. But there's a lot of daylight between, say, $1 million and $100 million, yet they're all considered micro. 

The increased size of rounds and the pooling of capital later, even later in terms of what we'd formerly refer to as "seed", has really created white space in what I'd call "true seed", by which I mean a team with a defensible market position, a working prototype, and maybe some early users. People conflate the overall increase in capital in venture with everything getting funded and that's not actually true. The distribution of those dollars matters. These dynamics create opportunity for me as a seed investor. So I'd say that's a big change - the amount of money and how that money is being distributed. 

I will mention this briefly -- the conversation about diversity did not exist five years ago. When I started, it was not a thing. One of the byproducts of that, interestingly, is that a lot more has been said about it than has actually happened in terms of increasing the numbers. The numbers don't bear out the degree of attention that the topic has gotten. I think that could be a little dangerous because people think it must be a solved problem because of how much has been said, but when you look at the data, it doesn't bear that out. Yet, I am what I call a battle-tested optimist. I believe that those dynamics can and hopefully will evolve, but at the moment, the conversation is ahead of the progress. 

What do you think is causing that lag? 

That’s a good question, and it has a multi-faceted answer, but I'll just say that there's got to be people who deploy capital with the willingness and the authority to depart from business as usual. And I'll leave it at that. It really comes down to the replication of the past versus building towards the future that we want. 

What do you see being the main drivers of that shift, if you were to map out what it looks like on a structural level? Because it's one thing to have a one-off success story and it's another to really re-evaluate the incentive structures and the alignment issues that we were talking about earlier.

I think that it's important when we have this conversation to think about how the incentives work in this industry. As individual investors, we are driven by returns. So I really need to see where are the opportunities to realize financial returns, and do so in a way that creates real value. To me, those two things are tied together. There are ways to make money without generating value, but those aren't what I'm focused on as an investor. I'm focused on what's actually going to generate value creation for people, and the financial returns are a proxy for that value creation. 

Not everyone who's managing capital is looking at it that way. Sometimes, the incentives are to not lose money. Then you're not looking for opportunity, you're looking to avoid risk. I think that any conversation that doesn't speak to the actual incentives of the people at the table is going to be a conversation that goes in circles. 

As far as what it will take to move the needle, I think a lot of people are genuinely ready to see things done differently for a number reasons -- not the least of which being the fact that everyone's looking for alpha -- where we can get more returns? So we have to be in places that haven't been tried before.

I'm a big believer in directing resources towards people who have a credible track record of supporting places and people that aren't overrepresented already. For LPs backing funds, it's important to back fund managers who have already actively gone to bat for diverse entrepreneurs in some way, ideally over a meaningful time period. Let me be completely clear about this: | think anyone and everyone can back founders who don't look like them. I certainly did. It's not to say that the only people who can do it are the people who represent the group in question. 

There are many, many groups that are underrepresented in terms of access to capital. But when it comes to the redistribution of resources in a way that will allow these emerging opportunities to reach their full potential and to realize the return that they're waiting to deliver from the market, I think that it's a good idea to give the reins to people who know how to ride the horse. Channel the resources to people who have the credibility to deliver and to properly evaluate founders who are matching new patterns, because every investor is pattern-matching in some way or another. The problem with pattern-matching is when you have hidden heuristics - like when people are not counting that all the founders have something in common that's not being named. 

If you want to see different outcomes, then you want to back people who know how to properly evaluate a candidate who doesn't match the existing pattern, but matches a new pattern -- one that positions them for success -- and is not based upon dubious factors that have nothing to do with success such as gender. 

Can you share some thoughts on your outlook for the industry? 

I think we are in an incredible time in the industry and in the world right now. In my time in the ecosystem, one thing that I've seen is that when new VCs step up to the front, new founders surface. That's an incredible thing -- who's at the front of the room influences who raises their hand. As venture investors, it's our job to find opportunity where others are not looking. It's our job to stay ahead of the curve and to open pathways for founders who are ready to deliver tremendous value and will take off once they have a way in. And that's the role of the seed stage as I see it. 

Right now I'm laser focused on the two areas I mentioned, and as a founder, if you even think you might be in one of those areas, contact me. I read every deck that crosses my desk, even if I can't respond personally, and there's a reason for that. I think the closed network aspect of the industry can make it harder than necessary, especially for first-time founders. 

I also think there's enough information out there that first-time founders can assess for themselves if they're even ready to pitch. It's a two-way street: we have to make a pathway for founders to get in, and founders have to be able to accurately self assess if they're ready for prime time, if they have something to pitch that's actually investable. 

But if we all do our part to widen our lens -- and that includes GPs and LPs -- we can all play a role in the industry leveling up.