 Why do I feel like I'm on a game show? I know. Well, and today I'm your host, Harry Mead. We're on investor-survivor. OK, so I'm going to throw these out, because we're already off track. Before I start, I want to make sure that you all know that this is not a diversity and inclusion panel. We are focusing on investing. And how this all came about is, and I feel it's important to set the stage. Back in over the summer, I was at a venture summit in Napa, California, and where I met Monique. And Monique was talking about flipping the table. And one of the things that became very, very obvious is there seems to be a misalignment between market demand in underserved markets and the investment dollars. And it became very, very clear when there was a white male investor who asked the question, is the black market big enough to support startups and invest dollars? At which point, I realized that we really need to address this misalignment. So this is why we have Monique here today speaking with us. And then one of the other areas is investing in women. And Albert is on the board of Clue, where Ida Tin, CEO co-founder of Clue. And I saw her last year on stage here in Helsinki. And she is the one who coined the term femtech. So in order for us to begin, let's go ahead and start with our first question, which I think is really very obvious, which is, why don't we see more venture capital going to startups focused on building and providing products and services for the underserved market? Seems like a no-brainer to me. Women control 70% of consumer spend in the US, 80% of household health care spend. So why aren't we seeing more of this? So I think if we talk about why capital isn't going to some of the companies that already exist in these markets, I think we have to talk about the numbers of venture capitalists who are women, the number of venture capitalists who are black or Latino. Because I think those things are related. Less than 1% of venture capital goes to teams with a black or Latino founder. And roughly 1% of all venture capitalists are black or Latino. And then for women, Albert, I think you had the stat that 7% of the GPs at the top 200 funds are female GPs. Yeah, and that's up from only 3% a few years back. Right. So if you look at these numbers, where on the investor side of the table, there's underrepresentation, then that leads into the fact that there's underrepresentation in the way that venture capital dollars are moving. I can take it as an example. One of our portfolio companies is called Maven. And the founder and I have known each other for years. And when Dishan was raising money for Maven, which is a hair extensions business, essentially, the pushback that he got from a lot of white male investors was, I don't understand this market. Why don't you let me introduce you to someone else? And so when there are so few venture capitalists who are black or women who might understand this market, that's really not an option. So imagine if an investor had an AI startup in front of him and said, I don't understand anything about AI. Let me introduce you to somebody else who is more fat than I do. At this point in the game, you would say, that investor isn't really willing to do the diligence on his or her side of the table to understand a market that is going to be really big. And that investor isn't doing their job. When we led the investment in Clue, there was a comment online where somebody said, oh, venture capitalists really jumped the shark investing in these niche businesses. And somebody said, wait, for women, there are roughly three and a half billion women that's not a niche market. I do think there's this problem of what people call the availability bias, right? So in order to understand statistics, you have to actually spend time and effort on understanding them. And it's much easier to just judge on, instead of looking at statistics and drilling into market sizes, it's just much easier to judge on what's immediately available to you, which is what your own immediate personal needs and demands are. And so I think that makes certain businesses much harder to fund, given what Monique pointed out. And a lot of times when VCs see a company that has something to do with women, they'll say, oh, let me go ask my wife. Well, that's not a good answer because your wife isn't necessarily the target market for what's in front of you. Which is what Jennifer Hyman encountered with Runt the Runway. I was just about to bring that up. We see we are. We are simpatico, friends. So, well, let me focus on, so I know you're particularly frustrated with VCs who see investing in black and Latino markets or LGBTQ or women, looking at it through a diversity lens, rather than looking at it as creating products and services for underserved markets. Over 50% of the population is comprised of women. We are not a niche market. And if you look at the statistics in terms of multi-ethnic consumers in the US have a total buying power of $3.4 trillion. That is not niche. That is not small. So what do you see? And that's just in the United States. That's just the United States. That doesn't count other parts of the world. So what is the market shift that you see so clearly and how should VCs be capitalizing on the opportunities for significant and real returns? So the biggest opportunity that I see is really around demographic growth. And so the first of that is, of course, the US. By the year 2044, people of color will be the majority in the US. And 37% of those people will be black or Latino. That points to a major shift in the way that people use and consume technology. And then if you look globally, Africa has the fastest growing population in the world. And nine of the fastest growing economies happen to be on the continent of Africa. So I think that there's a big global opportunity that a lot of investors are just missing. And so when you start taking into account these demographic shifts, the way that people use technology differently in each of those communities and in each of those areas, I think you come away with this big market opportunity. And people are seeing it as diversity, but really it's about plain old market opportunity and returns. If you start to invest in some of these companies, yes, your portfolio may start to look more diverse, but honestly, that's just the organism working as it should be, right? The organism should be more diverse. And when you start investing in these areas in a certain way, then your portfolio looks more diverse. And I would say that right now, Silicon Valley and at some extent technology industry writ large, the organism isn't necessarily working as it should be because it is not as diverse as it needs to be. So I think that diversity is a byproduct of investing well. Okay, so Albert, can I, I'm gonna address the next question to you. So I wanna talk about the recent IPO of Stitch Fix. And for those of you who don't know what Stitch Fix is, they deliver clothes to customers door primarily for women, but they recently expanded into the male market. Do you think that this is something that will ignite the interests of investors and startups that are targeting the female customers? Yeah, I think there have now been a number of success stories. I think this is a particularly important one because it is a female founder targeting female demographic and capital flows to where people are earning returns. So I think this has been sort of part of the pernicious cycle here is that people don't get businesses funded because they don't get them funded. There aren't any exits because there are no exits. People are saying, well, they've never been in the exit so we won't fund anything. The Volvo Ocean Racing, which is a big sailboat race just did something really interesting where they basically changed the rules to give some benefit to mixed crews, male female crews. And the main argument was that unless there are female races with ocean racing experience, you won't get them onto crews and how do you get them onto crews if they've never been on it? It's sort of the circular thing. And so I think the reason the Stitch Fix IPO is so important is because it now is something that people can point to and say, look, here's an example of how this type of business is venture-fundable and produces venture scale returns. I think examples are really important and capital flows towards where returns have been earned. So I do think this makes a big, big difference. Well, what's really interesting about that is they raised $42 million in venture funding before the IPO, which was $120 million raised in the IPO. They were profitable after eight years and are now worth somewhere between $1.2 and $1.6 billion. It's very good execution, very capital efficient execution. A lot of companies have raised way more money than this in the private markets and are having a hard time going public now. So I do think it sets a lot of really good precedent. Yeah. Well, hopefully we don't make female founders have to work so hard with so little in order to demonstrate even having a higher mark to even demonstrate success. I think some of that capital efficiency is need-based. I mean, I think it's much more difficult for women to raise money, especially when you're working on a business that has a largely female demographic. It's much more difficult for black founders to raise money, especially when they are raising money with a black demographic. And so that creates incredibly capital efficient businesses, especially resilient entrepreneurs. And I think you see that play out in a lot of different examples, Stitch Fix being one of them. So one of the other areas we're starting to see a lot more startups is in the healthcare space. And I focus on digital health. But in FemTech and pediatric health technology. And we talk about FemTech being everything from menstrual care to fertility to general health and sexual wellness for women. One of the things we're also seeing is that these startups are not B to C. You know, like Maven Clinic is now going B to B and providing a service that they are selling to employers to offer to demonstrate that they are female and family friendly employers. So shifting from the B to C to the B to B and I'm like, okay, Albert, I'm gonna come over to you on this one. Do you see this as potentially being more attractive to the primary male VCs? Or will the startups still be overlooked because of lack of relatability or the ick factor so commonly associated with female focused companies? Well, I do think that going after B to B opportunities is something that some investors will find more attractive and will wrap the head around more easily. I think that could in the end be a mistake though because some of the most interesting opportunities today are to be able to go direct to the consumer. I think that's fundamentally what the internet has made possible. And I think the most transformative companies in healthcare and in FemTech will be the ones that go directly to the consumer. So it may make it easier potentially to raise money but if that ease of raising money comes at the expense of the bigger opportunity that might not be a great trade. Do you have any thoughts on? No, I would agree. I think I tend to be a more consumer oriented investor anyway. So I think that there are often a lot of opportunities that we're overlooking because B to B seems a little bit easier to monetize, easier to understand for a lot of investors who are on the investor side of the table. So going back to Black and Latinx markets, where are you seeing progress in getting more money into the hands of startups focused on those particular markets or are you? So I think where I'm seeing progress is seeing GPs step out and start doing their own funds, to be honest. I don't see it happening at any sort of scale in any of the existing top venture capital funds. But I do know a lot of GPs who have started their own funds and are investing in this way. I wish that I was seeing more activity at large funds, but that's just not the case yet. I think the new firms being formed is a very effective way of competing for these markets and serving these markets. Forerunner Ventures Christian Greens firm has done a phenomenal job backing e-commerce companies, serving female markets and also female founders. So I do think that's a big opportunity and some way it changes easier when you form a new entity than when you're trying to change the mechanics of an existing entity. I think something that's really important to understand is sort of the longevity of firms and of individuals within firms. A single fund cycle is 10 years. So like a three to four year investment period and then a six plus year sort of harvest period. So firms tend to be in business for a long time and they tend to not grow very much. So for instance, at Union Square Ventures before we brought Rebecca on just now, the prior GP was Andy Weisman in 2012. That's five years that we didn't add a GP. So I do think that new firms being started specifically to go after certain market opportunities is likely the faster change model. So one of the shifts that I'm seeing as well is there a number of women in the angel area who are trying to get more women to invest in order to invest in more diverse market opportunities, not just in women's products for women but also for LGBTQ and other underrepresented markets. So what are you guys seeing in terms of the expansion of introducing not just new venture capitalists or moving from one fund to another but how about in the angel space and getting women or other investors who typically wrote philanthropy checks or bought another boat or bought another piece of art or something and getting them to shift over and rather than writing that check, putting it into startups. I definitely think going to the earliest stage and the early stage is super important and whether that's individuals or a firm like backstage capital that are explicitly set up, you're absolutely right, like all the way to the very beginning. And again, this is why change will be unfortunately somewhat slower than we would like it to see because if I give you an analogy with a city, so New York City had a much smaller tech ecosystem and one of the problems was people hadn't made money in tech. The people that made money in Wall Street and they were putting, they were funding businesses that they understood they weren't funding tech businesses. It was only after we had a series of exits and so we need something similar to happen. We need, you know, and this is why it's a long change. We need female founders and female operators and managers that have been successful in tech and made money in tech that then fund the next generation. But isn't that putting the onus on the people who most acutely feel the problem? Why not put the onus on institutional LPs who should be really backing some of these GPs? It's a great point. My point isn't about trying to shift the onus. It's just, I think the change, the pace of change is slow in the industry. So LPs are the right point of leverage because that's where the money for the VCs comes from but it doesn't address the angel question, for instance. So I do think the angel question is, there's some wonderful organizations, like 37 Angels, Pipeline Fellowship, Golden Seas, some others, yeah. So we need a lot more of that. Well, and there's a portfolio in order to train them because women haven't traditionally been very comfortable with investing in this asset class. It wasn't something that was necessarily introduced to them, didn't understand it, didn't know how it operated. But one of the shifts that I'm also seeing has to do with the alignment of values. And so if you have philanthropy over here and ROI at all costs, what we're seeing is an opportunity to do well and do good at the same time. And investing in these underrepresented markets seems like a great opportunity to have more consistent doubles and triples because we may not see the huge outsized returns, but we're also not going to necessarily see the ROI at all costs. But we're seeing with Inventure, 5% return on an average basis, which is ridiculously low. So I'm also seeing the shift in terms of looking at it, looking for, not looking for a unicorn every single time from a return perspective. So, Monique, since, well, this is gonna be, this is super fun from a political perspective. Do you think the political climate in the US will have any sort of an impact on either investing in, supporting in, or the addition of new startups supporting these markets? Too, I think. Yeah, we have three and a half minutes left, so where do we go? Yeah. I think that the current political climate is making people, making the consumers more apt to support some of these businesses that are already in existence. And so you'll see more people talking about wanting to support women-led businesses. You'll see more people talking about wanting to support black-led businesses. So I think that that's a product of the political climate right now in the United States in particular. So- Yeah, I would agree. I think there's a powerful counter-reaction. I mean, more women are running for office than ever, which I think is great. I think more women are starting businesses with everything that they read about male VCs behaving badly. I actually think that the counter-reaction will be a net positive. Yeah. I mean, do you think something like the wing would have come about if there wasn't this sort of big discussion now about behavior of men in the workplace? I think that that's kind of one of the things that you see as an outcropping of this discussion, of women wanting to claim their own space and have their own space where they can go and not be harassed and not be put down and all this sort of stuff that's always happening in business and in offices. And so having something like the wing is a natural outpouring of that. Well, it gives women a comfortable place to be where they don't feel like the outsider and they can actually have some level of camaraderie around people who are like them. So final question for both of you. So if the majority of the capital is controlled by white male VCs, how do we let them know that if they don't shift their investing strategies that they're missing out on huge opportunities? So I think the only thing that speaks to people is losing out on something. And so I think returns speak for themselves. So I think when there is a big deal, a big acquisition, a big IPO that someone lost out on and didn't invest in it because they didn't see it, either they never got a chance to invest in it so they actually didn't see it or they had a chance to invest in it but passed. I think that is when change happens. When you lose something, you miss out on something. So missing out on the Stitch Fix IPO or missing out on Sundial, the acquisition by Unilever, missing out on all of these, the wing at some point, missing out on all of these opportunities, I think that's what makes people change. I second that. That and your earlier comment about institutional LPs. I think them saying we're going to move our money to firms that have more diverse teams is also going to really move the needle. So trying to encourage the source of the capital to influence the investing decisions of some of these more traditional venture capital firms. Well, we're just about out of time. So thank you very much. And thank you for listening. Do you have questions from the audience? What? We have questions from the audience. We do, but it's not 100% relevant. So I'm sorry. So thank you very much. Thanks.