Aileen Lee and Kirsty Nathoo at the Female Founders Conference

So, I'm Kirsty Nathu. I'm a partner at Y Combinator and also the CFO. And our next speaker is Aileen Lee. Aileen is the founder of Cowboy Ventures, which has a fund that invests in seed-stage companies. Before starting Cowboy, Aileen was at Kleiner Perkins and she's also spent time at Gap and Morgan Stanley. Aileen is also famous for coining the term "unicorn," which you probably stick to the hearing about—now infamous or famous. Yeah, and we actually invite Aileen to talk to our founders at YC every batch. The reason why is that we just love that she gives this amazing no-nonsense advice to our female founders about talking through investors. So I'm excited to be able to chat with her today and in front of everybody. Thank you!

Okay, so Aileen, I gave a little bit of your history there, but why don't you go into a little bit more detail about what made you decide to go off on your own and start Cowboy?

So Cowboy Ventures is still kind of a start-up. We started five years ago, and I had been at Kleiner for a long time, actually almost 13 years. I was part-time from '07 to '09, and I actually kind of left part-time and went to run one of our portfolio companies as CEO. When I came back, I just had a different feeling about the firm and the work. I found that I was fortunate to be a senior partner at Kleiner at the time. As you see for these large firms, just like large companies, as you kind of get into senior management, you spend more and more of your time in meetings, less kind of doing the functional work, and more around kind of trying to help run the firm. I just really loved working hands-on with founders and with portfolio companies. I just felt like our firm had kind of grown quite large and I was spending more time in internal meetings than actually just spending time with companies. The industry had changed a lot too. I mean, as you all probably know, there are a lot more funds now and a lot more startups. They can be all around the country. Venture investors really have to be kind of open for business and available to meet with companies all the time, because you never really know what's under the hood unless you have a meeting and meet people.

So I just felt like having a job where all I really did was just meet with companies, get to know and challenge the people who might start companies or who might want to work at portfolio companies and help them was really all I wanted to do—with less overhead. Seed was this new category that was still pretty small in terms of the number of firms and also the number of well-respected brands in the seed category that were known for giving hands-on help. Yet, it was the biggest part of the funnel. So it seemed like a great opportunity to both start something new and make it more personal. Make it very small, with very little overhead. Really all we do is pure and very focused.

So, what did you see at Kleiner in places like that that you decided you were going to do differently with your fund?

It did get quite large and I think this isn't specific to Kleiner, but in general, the massive venture capital is such that venture capitalists make money through a combination of fee income and what is called carried interest, which is basically profit sharing with their investors once you've returned the capital. When you do the math on funds, if you have a 500, 800 million, or billion-dollar fund, the number of multi-billion-dollar companies that you have to be an investor in per fund is quite large. When you do the math, it seems very unlikely that most venture capital firms will be able to generate the kinds of returns to investors and to themselves that they have in the past.

So the math, I think, just works much better. It's much more aligned with entrepreneurs if the funds are smaller. That was one thing, but I also wanted the chance to be a female founder and hopefully build a brand that gets very hopefully well respected by entrepreneurs and investors for being a blue-chip, top-tier firm in terms of the quality of work, the quality of relationships, the integrity, and the outcomes, and helping to put numbers on the board and move the needle for women in tech is something that really motivates me.

Yeah, yeah. And you mentioned that one of the things that you wanted to have was a more hands-on approach with helping the founders that you invested in. What kind of things do founders ask you for help with, and how can you help them?

Well, at the seed stage, I know it's hard to suppress to seed, but how many of you out there are founders? Oh wow, that is awesome! So, how many of your seed stage or pre-seed founders? Okay, a lot! So it's DJ Jazz. You know you have not enough time, not enough money, and not enough people. Founders generally want advice, or help, or guidance on multiple fronts. One is on hiring. Many times, the founder has never hired certain types of people before. They've never hired a head of sales or they've never hired a UX designer and things like that. So they like advice and both introductions and help filtering and knowing where to set the bar in terms of who to hire, when, and how to know that the right people.

On the financial plan, as many of you may know, the bar has kind of been raised in terms of how much Series A investors want to see you accomplish from seed stage before you raise an A, and then from A to B and B to C. Because a lot of these funds have gotten bigger, they have more money, they can kind of wait and write a bigger check at a higher valuation for more traction. I think at seed, or even pre-seed, getting good advice from experienced folks on what you really need to prioritize and accomplish with the money and the time that you have is important. Customer introductions, feedback on roadmaps, help with positioning, strategic messaging, and PR—just kind of across the board—that's the way we like to help.

Yeah, yeah. And so, you know, if one of the things that you're doing is working closely with the founders, what kind of traits are you looking for in the founders? What really attracts you to the companies that you invest in?

Because it's, as you said, it's all about the people.

Yes, it's a lot of it's about the people. So, you know, high integrity, high intelligence—people who have also shown a certain amount of hustle and scrappiness in figuring stuff out before they raise money. And then having kind of an aggressive but doable plan for what they're going to do with the money and make within a reasonable period of time. We usually suggest that your seed round last you at least 18 months, if not 24 months or more than that. You know, going for a big mission and vision that's quite ambitious that can be backed up by, "Here's where we want to be and here's how we're going to get there over time." This is what we want to get done in the next 12 months, in the next 18 months. Relevant backgrounds, if possible, or at least a personal connection to the problem that the person and the team is trying to solve. We'd love to see ideally some kind of a technical angle or a technical solution—this kind of it.

We also talk sometimes when we meet with the women in each class. So I will just say it—I do think it can be harder for women to raise money than men, and so I think that kind of sucks. We will fix it over time, but for now, the thing we have to do is know what you're up against being a woman entrepreneur raising money in a largely male industry. Understanding then kind of where you are and what you need to work on, because a lot of pitching—all the other thing I would say is storytelling is really important. Yeah, and being a great storyteller is important. If you are not a great storyteller, you can become one. I have seen so many people who started out not being great storytellers become excellent ones, and it's just a matter of feedback and practice—especially at that early stage where you're really selling a dream.

Yes, so in full sum. Yes, so you know, you mentioned that it's potentially harder for female entrepreneurs to be pitching to male investors. How does somebody pitch to somebody who is not necessarily their target market?

Well, hopefully, there are plenty of women. The more we can do to get more women into the venture industry, the more women you'll have to pitch. But you know, it's a 95% male industry, right? They're very much denying it, right? Yes, there are many men in the room. But look, if you look at Pinterest or Houzz or Stitch Fix, I mean, the majority of the investors in those companies are men. So obviously, there are men in the industry who understand problems that they may not personally relate to, right? Why don't we? It goes to show doesn't it? If you have enterprise startups, and the people who you're pitching to aren't your users in that situation, right? So exactly, it is possible. It's just all about that story.

So definitely, and I think the folks at YC publish a lot of great things about tips and tricks for how to go about doing it. But I think for many of you, if you're going into a fundraising next, you know, generally starting out with what is the mission and vision of the company? How big is the market? Venture investors are looking for large addressable markets. What is the problem that you're trying to solve? Who's on your team and how relevant is the team? What is the product that you've built? If you have built something or what are the wireframes look like? What kind of traction or feedback have you gotten from the market in terms of whether people are going to like the product or whether they do like the product? And what is the financial model? What is the economic model look like? And what are you going to do with the money?

That's pretty much how I think those are the main elements of the story and just how you tell the story and the personal narrative that goes along with that. I think that's what investors are really looking for.

Yeah, and I think a lot of it just comes with confidence as well—just walking into that room with confidence. So how would you advise the women in the audience to be able to internalize that and project it in those meetings?

Ah, it is exactly what you said, QC. There are some great examples of women founders out there who have raised a lot of money and are building quite valuable companies. So we know what's possible. I think especially with a lot of the news that's come out in the past week, we hopefully have a better window than ever—more openness, more support than ever. I think there is a gathering army of not just women but also men who realize that the deck has been somewhat stacked against women in the industry since the beginning and that it needs to change. Those are all good things. There's also just such an amazing ecosystem of people who have raised money who can friendly pitch your story to and get feedback and iterate. I mean, nobody comes up with a perfect pitch right away. Everybody iterates on it, gets feedback, and practices, and it gets better.

Yeah, and I think that's one of the things that people don't necessarily realize—that you know, there's a lot of people that can help you with the pitch that have been there. Seed-stage investors are very much focused on helping their companies get to the next stage and will help with those pitches.

Yes, we do like to do that! Yeah! So I'm going to go there—all this news that you just mentioned, you know, what do anyone know about the news? Yes? Anyone that want to have some stuff going on recently? And you know, as a female VC, what was your take on it? What can we do?

I'm pretty pissed off. I think we have to use it. You know, you can't just be mad. Right? We have to be constructive. We have to use this as an opportunity to come up with new ways of doing things, new solutions, using it as an opportunity that it both is like I think a carrot and a stick, right? There's going to be—not going to be one answer, there are going to be multiple things that we can hopefully do to be constructive based on what we've learned in the past week. I don't think that this is— I don't think the story is over. I think more sad stories will come out over the coming weeks about behavior that shouldn't happen in the industry—behavior that's unprofessional, that's unacceptable—that will piss us off even more. So we have to, you know, all of you, hopefully—this will give you more motivation to be successful, to kick some major butt with your companies, to build modern inclusive cultures, to hire a diverse team, to nurture and develop a fantastic slate of lots of women and people of color on your management teams and in your ranks that will become the next generation of CEOs.

[Applause] [Music]

And also, we need more women investors. You know, something that I had the fortune of having breakfast with a bunch of general partners—at a bunch of women general partners at different firms. We talked about what can we do to help the associates or principles, the women and people of color at other firms so that we have more people becoming general partners faster. So there are more people to call when we have a successful company that's going to have choices raising an A or B or C. We at Boy Ventures are going to try and steer those companies to modern firms that have women and people of color in the investing positions. If you all have only men at your firm, and the founders—it's their decision—but most of our founders feel this way: if they have a choice, they would rather work with a modern firm. Like, why should we make money for you, you know?

Yeah, for sure! And you know, if a VC misses a deal that turns into a hot deal because the founders have said, "No, I'm not going to work with you," that's how change can happen.

Yes, so I think you know if you have a company that's successful or entrepreneurs, and friends of yours who have successful companies or if you're a great operating executive who has lots of opportunities to be recruited to be a VP at different companies, you're making a choice kind of with your feet or with your wallet by who you make successful. I hope that you will use your leverage to steer people and steer yourself to firms and teams that are inclusive and diverse.

Yeah, for sure! It's going to take a concerted effort, but we can get there. So, you know, we've talked a bit about choosing these modern firms to work with, but how else does the founder, you know, what would they be looking for in an investor? How do they decide who they should be working with?

They do think being networked with other women and other entrepreneurs. You know, there were a bunch of articles about how the information that came out has been kind of an open secret in Silicon Valley for years, and some people knew about it and some people didn't. But you have to ask, right? So you have to ask. We investors do references on entrepreneurs before we invest. Entrepreneurs and executives who are thinking about joining startups do references on the folks that you are considering joining. Hopefully, you'll figure out: are they people of integrity? Do they have skeletons in their closet? What do I need to know that I’m getting into? How's the culture?

I'm hoping that we'll come up with some way— I mean, I think the great thing is that women and other people are starting to come forward and name names and talk specifically about people or firms they've had bad experiences with. All this stuff has just been—I mean it's happened to probably most women in this room. You just eat it, you know? It just makes this little pit in your stomach that causes you to doubt whether you're welcome in technology, whether that firm really wants you to be there. I mean, there are so many microaggressions and little cuts that people do because subconsciously they're trying to make you feel uncomfortable, or they really just don't have confidence in you. But you should all have confidence in yourselves, and I'm hoping that more people will be encouraged—that you'll be a hero or a heroine by coming forward and being brave, because it's a hard thing to do. But you know, factually and using data and evidence, showing what's happened and that it's not okay, there are many people to have your back because it's not okay.

Yeah, yeah, we get that. We ask founders to tell us if investors have behaved badly because we have the power to be able to do something to help. You know, we can stop them from coming to demo day or we can—there are numerous things. But it's so hard to get women to tell us who they are talking about, and it just requires so much bravery. But the more that it happens, the less bravery it will require.

Yeah, I really appreciate—I think in the last batch that we talked to, a woman said something about a male VC who had said some very inappropriate things, and you all found out his name and disinvited him to demo day. I was in the section that—thank you!

Welcome! [Applause] [Music]

So we have to really talk too much about your portfolio and the kinds of companies that you look at. You know, where do your interests lie?

So being as we are generalists, you know, there are some vertical-specific funds like they only invest in healthcare or big data or robotics. We're generalist funds. Our goal is to hopefully identify and work with the most promising startups at stage days that are technology-oriented startups every year, whether they're enterprise or consumer-oriented. I think we have a really interesting mix of founders and companies that we've gotten to back. Some of them are consumer-oriented, like Britain Co., Brand List—which is a company that's launching on July 11th that we're super excited about—and both female CEOs and founders. Also, security companies, infrastructure tech CEOs, and enterprise SaaS companies that we've backed—also founded by fantastic women CEOs. It's really, I think, hopefully, we can be helpful and hands-on in all the things that I mentioned, like team building and go-to-market strategies and helping you get ready for your Series A, regardless of what type of company you are.

Do you think that founders should consider, you know, how should they consider these funds that say they are ethically specific this is the annual list approach?

I mean, the fun thing at seed is—one of the reasons why I also decided to move earlier from being a Series A investor to a seed investor—at seed, it’s collaborative. So it's Series A. Generally, the way the industry works is you're going to pick one Series A lead investor, and that firm is going to own twenty to thirty percent of your company going forward. And hopefully, your prior seed investors will invest pro-rata. But you can't—you don't split your Series A between two different Series A firms. At seed, we don't. We always co-invest with other people. So we can partner with a data-oriented firm or an enterprise-focused firm or a consumer-oriented firm and we do that quite a lot—also with angels, individuals who have special expertise and relationships with a founder. So it's cut, it's more like a village, and it's a team approach to trying to help the company because it's the riskiest time. We feel like having lots of good people around the table to help the company and support them is more fun for us, and it's going to help the company more.

Yeah, yeah, it's definitely different than Series A where you have one investor who's on your board and they're the ones who are driving it.

But yes, at the seed stage, it just takes—like you said—a village!

Yeah, and I also think hopefully our village tries to help guide and advise the founders on who is the best Series A board member, because that is really a big decision. It's really hard to get divorced from your Series A board member, right? You should treat it like a marriage—it's a dating process. And that person is going to help you grow as a CEO. If you want to be a CEO that lasts for the next ten years running your company, making sure that you develop a relationship of trust with your Series A investor, who's really—who could try and get rid of you or could help you develop—is a big deal. And that's one of the things that we work with our founders on, is trying to help them find that right person.

Mm-hmm. So we're running out of time, but you know we have a roomful of women here. So many of them, as we've seen, are founders. What's the biggest piece of advice you can give to them to help them pitch to a seed investor and be successful?

So, as I mentioned, I do think that women have to walk a finer line in today's environment of mostly male VCs than guys do. Like, as you may have heard me—I try and say this whenever I have the opportunity—like one of my trigger phrases is "he's such a good guy." I can't stand that phrase. Like the phrase "good guy" people say it all the time and it doesn't really mean much other than like high five, we love that bro. Let's go shoot some hoops!

Yeah, exactly! And I see this all the time, you know, in meetings with these VCs where if we have a company that's doing well and we're thinking about who we're going to call for our Series A, and it's mostly men around the table and myself, and we make a Google Doc of like, "Who are the target investors for the round?" and someone will be like, "Oh, what about Scott Jones?" and someone else will be like, "I love that dude, he's such a good guy!" And then someone else will say, "Oh, what about Brian Smith?" It's like, "I love that dude, love that guy! Put him on the list." And it doesn't mean anything—like he's going to be a great board member and that we should get married to him for ten years. But then if I bring up a woman—what about Susie Smith? They'll say, "Oh, did she invest in security?" Like there's no, "Oh, she's such a great girl," or "she's a great woman." Like it's just—it’s infuriating!

Yeah! But that's kind of what happened. But the same thing happens to entrepreneurs. Like if you pitch, or a group of guys pitch in the closed session after you leave, the VCs will be like, "I just love those guys," and some of us would be like, "You have such good guys! Love those guys! So fun to work with." And yours—like her—but it's not fair, because they can't say that about women. Like it's such a—like what if I say something that's offensive? Or like, "I just love that woman." What does that mean? Like women dime-sized about women either. I know it's not fair, so like we should stop saying it, but that's kind of the world that we live in, right?

So the advice we like to give women entrepreneurs is, you know, be confident but don't stretch. If you are a little too arrogant or if you kind of puff things up a little bit too much, they will—they will ding you for being an exaggerator. So that's one thing. But you know, don't be too shy or under-confident, because to be honest, I think guys can get away with being, "Oh, he's just an introvert," whereas women—and there was an article recently that basically showed a quantitative study that showed that women and men get different judgments and they get different questions depending on, basically, by investors. So it is not fair; we just have to know how the deck is stacked and work around it.

So, you know, practice your pitch, do you come across as confident but not overconfident and not spinning? Because they will ding women for over-spinning. Know your numbers—women are overly dinged for not being quantitative enough. I have a friend who works at a unicorn company; her father's a math professor, she was a math major, she was the CEO for a company doing 100 million dollars in revenue, and like in charge of quantitative acquisition marketing—all these things. When she interviewed at this unicorn company, first of all, all of her interviews were with men. Every single person asked her, "How do I get the confidence that you're quantitative enough?" Like there's just no way that men get those kind of questions!

No! So just know your numbers. It's not—you know, if someone asks you what's the CAC, what's the LTV, what are the margins, what's the revenue plan for next year? Just know it! Just practice it, and if there's things that you don't know about, or you're not sure how to calculate them—these are the things that you can ask for help from so many people around. Yeah, you know, women really do have to know those numbers back to front, because they will get pushed on them much more.

So that is so important! Be good at follow-up. If someone else—if people are asking you questions or if there are some follow-up things, take notes, send an email the next day, and say, "Here are the things that we discussed. I wanted to follow up on these points." Like showing that you're super conscientious and that you're on it. Well, actually, there's like, I think, there are some women who get put into this category of like "she's a killer"—like that's the kind of category that you want to be in! That's how men think about it. There's like women and there's like "women killers," and like, "Oh my god, she's an animal!" Like she just was all over her, and she just knew her numbers, she followed up—like she's an animal!

And I mean, to be honest, VC firms that are mostly male do want it—they want to show the world that they are that they get it—that they're with it. And they also know that it's just women. Because they don't attract women founders, they are leaving a lot on the table, and it's going to be harder for their firm and for their portfolio companies to attract women or people of color if they don't walk the talk in some way. So I think they are more open for business than ever to back a more diverse set of founders.

That's great for us, right? We can do this! We just need to know what you need to do.

Fantastic! Well, thank you so much for today! Thank you!

[Music] [Applause]