20VC: Moxxie Ventures' Katie Stanton on What It Takes To Raise A First Time Fund As A Solo GP, The Entrance of Multi-Stage Funds Into Seed Rounds and The Inverse Relationship of Those That Fund Diverse Managers and Those That Say They Do

Katie Stanton is the Founder and General Partner of Moxxie Ventures, investing in founders who make life and work better. Prior to Moxxie, Katie was a Founding Partner of #angels and has the most incredible angel portfolio including Airtable, Carta, Cameo, Coinbase and Modern Fertility to name a few. Katie also served in numerous executive operating roles at Twitter, Google, Yahoo, and Color and also served in the (Obama) White House and State Department. If that was not enough, Katie is also on the board of Vivendi and previously sat on the board of Time Inc. In Today’s Episode You Will Learn: 1.) How Katie made her way into the world of tech with Yahoo? How did that translate into her investing in Lowercase Fund I? How did the angel investing lead to founding Moxxie? How has Katie found her investment mindset has changed moving from angel to VC? 2.) How did Katie find the fundraise for Moxxie? How many LPs did Katie meet and how did she structure the process? What does Katie think she did well in the fundraise? What would she look to improve or change when raising for Fund II? What advice was Katie given in the process by Semil Shah which really changed her thinking? What advice would Katie give to other emerging managers raising today? 3.) Does Katie agree with Semil Shah that "founders are voting with their feet in taking multi-stage money at seed"? What advice does Katie give to founders who do have these offers from multi-stage funds at seed? How does Katie assess these later stage funds moving earlier? How should smaller micro-managers respond to this? 4.) How does Katie think about portfolio construction today with Moxxie? What are the hard rules that mean Katie is willing to walk away from a deal? How does Katie think about and assess her own price sensitivity? In terms of decision-making, what support system has Katie built around herself to enhance her decision-making process? 5.) How does Katie advice founders when it comes to selecting their VC? What are the most common ways founders look for and need to help with? How does Katie think about party rounds? When are they good? When are they not? Why does Katie believe so much of the power has shifted to the hands of the founders? Items Mentioned In Today’s Show: Katie’s Fave Book: Becoming by Michelle Obama, Angel by Jason Calacanis Katie’s Most Recent Investment: ethel's club As always you can follow Harry, The Twenty Minute VC and Katie on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back. You are listening to the 20 Minute VC with me, Harry Stebbings. It's gonna be awesome to welcome you behind the scenes here. You can do that on Instagram, at H Stebbings 1996 with two Bs. But to the show today, and I've really wanted to do this one for a long time, having not only heard many great things from many previous guests, but also being a massive admirer of her angel portfolio built over the last few years. And so with that, I'm very excited to welcome Katie Stanton, founder and general partner of Moxxie Ventures, investing in founders who make life and work better. Prior to Moxxie, Katie was a founding partner of hashtag angels and has the most incredible angel portfolio, including the likes of Airtable, Carter, Cameo, Coinbase, and Modern Fertility, to name a few. Katie also served in numerous executive operating roles at Twitter, Google, Yahoo, and Color, and also

• 0:43Harry Stebbings?

  served in the Obama White House and State Department. And if that wasn't enough, Katie's also on the board of Vivendi, and previously sat on the board of Time Inc. And I'd also want to say huge thank you to a whole host of incredible people who helped with questions. Austin at Lambda, Elad Gil, Russo at Threads, Michael Kim, Roy Bahat, and Yana Meschishmit, just to name a few. I really do so appreciate that. But before we dive into the show today, I doubt you started a business to chat financial statements or make cash flow spreadsheets. However, now we have Pilot, and Pilot for Bookkeeping, giving you back the freedom to focus on your business. Every month, your dedicated account manager will send you an accurate, detailed financial report. Pilot does accrual basis bookkeeping in QuickBooks Online, so you're never locked into a proprietary platform. Plus, you'll work

• 1:25Harry Stebbings?

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• 2:10Harry Stebbings?

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• 2:55Harry Stebbings?

  payments and personal information. And that's where Dashlane comes in. Your fast and easy internet shortcut. Dashlane has so many awesome features, but some of mine are their ability to let you fill forms in so much faster. They allow you to access passwords anywhere. And last, but really by no means least, they allow you to bypass breaches and hacks. Plus, they never sell your data, always ad free, and you don't even need a credit card to start. Simply head over to dashlane.com to find out more. But it's time for me to shut up and I'm delighted to hand the mic over to Katie Stanton, founder and general partner at Moxie Ventures.

• 3:32Speaker 01

  You have now arrived at your destination.

• 3:36Harry Stebbings?

  Katie, what can I say? I've wanted to do this one for such a long time. I've heard so many good things from Afternoon at Modern Fertility, from Michael Kim at Sandana, and from Jana at Lightspeed. So thank you so much for joining me today, Katie.

• 3:46Speaker 02

  Thank you so much for having me. I understand that I am number 2697. So I'm really honoured to achieve that number. I mean, who haven't you talked to yet? I think I might be the last person in Silicon Valley to be on the show.

• 3:58Harry Stebbings?

  I think it just shows how old that I'm getting. I feel like Benjamin Button right now, but I would love to start today. A little bit on you. So hugely respected figure in the industry, operator and experienced angel. But for those that maybe don't know, how did you make your way into the world of tech? But also, how did that lead to your founding of Moxie very recently?

• 4:16Speaker 02

  Yes, so my path to tech was a little bit random. I was working in New York as a banker and was pretty miserable in my job. And this was in the late 90s. And I thought to myself, like, I need to get out of this. This is not what I intended to do. And I remember using Yahoo, one of the earliest iterations of Yahoo. And I thought, well, that's interesting. How fun would it be to work at a company like Yahoo? And at the time, they had just launched a version of Yahoo Finance. And I realized that was my opportunity. That was this intersection of this financial background that I had and bringing that content to more people. And convinced a friend of a friend of a friend to offer me this role at Yahoo. Got a job, moved out west, and that became my path in tech. So that was in 99. I worked at Yahoo for three years.

• 4:59Speaker 02

  After Yahoo, I thought, wow, you can really love your job. What could possibly be better than Yahoo? And was lucky enough to get this role at Google. So worked at Google for six years. So between Yahoo, Google, and Twitter Color, that became my pathway in technology.

• 5:15Harry Stebbings?

  How did that lead to the founding of Moxie?

• 5:17Speaker 02

  Yeah, so while I was at Google, I felt like I was surrounded by these exceptional entrepreneurs. And it gave me my first two opportunities to invest. The first was in a fund, second was in a company. And in both of those cases, they were exceptional people with a ton of guts to start something new. So with a fund, it was Chris Sacca, who told me he was creating this new fund called Lowercase Capital. The first time I was exposed to a venture fund. And I said, well, what does that mean? He's like, well, you give me money and I spend it on other companies. Like, well, that seems weird. But okay, like, you're really smart. You've got a lot of hustle. And I believed in Chris. And then the second person was Sumit Agarwal, who was creating Shape Security. And there too, another exceptional founder with a tremendous background,

• 6:02Speaker 02

  who understood this intersection of defense, cybersecurity, and product. And I invested in Summit. And I got, you know, very lucky with both of those two investments. Lowercase Capital became one of the, if not the, top performing fund of all time. And then Shape Security was just acquired about a week and a half ago, actually, in mid-December for a billion dollars. And so at that time, I really didn't know that much about angel investing. I got very Busy with my day job, raising three kids. And so I didn't have much time for other things. But then this really interesting turning point happened about five years ago. I was at a birthday party for my very dear friend, Jess Furley. And there were six of us and we were all friends, we're all executives at Twitter. And we're having drinks as one does.

• 6:44Speaker 02

  And we talked about, you know, that there's this, you know, this pattern in Silicon Valley with a lot of angel investments. And companies getting funded tended to get funded by the same group of people. And that same group of people tended to be, you know, mostly white guys. And we're like, well, we're all the women, we're all the people of color. And we have all this experience and we have this network and we have judgment. At this point in our careers, we had some capital. And we thought, well, why don't we band together? Let's create an investment collective called hashtag Angels. And really pool our network and bat around decision making and become classic angel investors in Silicon Valley. And so, um, so over the course of about five years, we collectively had invested in about 120 companies.

• 7:28Speaker 02

  I had personally invested in 40. And I should actually add an important point here, which was I was able to invest in a lot of these companies because one of my good friends and mentors and former board member Bijan Sabat at Spark Capital approached me with this incredible opportunity to become a scout. And that really accelerated my ability to invest in these companies. So earlier this year, as I was thinking about investing, I was looking at my portfolio. And I thought, you know, I kind of like investing a lot and I want to do this full time. And went through a variety of different paths to figure out what's the best way for me to become a full time investor and ultimately decided on doing my own path, which was creating Moxxie Ventures.

• 8:11Harry Stebbings?

  Well, I mean, I did not know that a Chris Sacker lowercase was the first LP check. And think on record, that must make you one of the most successful LPs in the valley. Congrats for that. And the first two there, they're very special first few deals. I'm really intrigued because you mentioned obviously the angel investing there with hashtag Angels. And now institutionally investing from Moxie. When we had Andy McLaughlin on the show, obviously he was a very successful angel like yourself. And then made the institutional transition with Soft Tech and Uncork. But he said he became more conservative when he made that transition. So how do you think about that transition? And how do you think your mindset is impacted with the transition?

• 8:44Speaker 02

  Yeah, similar to Andy, I definitely have become more conservative transitioning from being an angel and now being a full-time investor. And part of that is because I've raised capital from important institutions, from mentors, from friends. And so that bar has been raised quite high. I need to be rigorous and I need to get it right. So that means I spend a ton of time, a lot more time doing diligence. I do a lot of reference checking. I spend time with the teams. I try to talk with customers if that's relevant. And I also have this newer checklist, a checklist item, which is, you know, how would I feel about introducing this founder, this set of founders, this team to my LPs? It's a different bar, something that I didn't really have when I was an angel investor.

• 9:27Speaker 02

  The other thing is that I'm more willing to walk away from deals where they don't fit my criteria. I have a much more narrow set of criteria that I look towards as a fund manager versus being an angel investor. For example, I'm only investing in seed-stage deals. I'm looking for valuation caps of less than 10 to 15 million. I'm requiring a certain allocation level to make sure that it's, you know, time and money well spent. And Arlen Hamilton has this great quote that I heard her talk about recently, which is, you know, I've come for the cake and not the crumbs. And so I think for a lot of fund managers that have come from angel investing, it's about putting down sizable checks and not just angel checks anymore.

• 10:07Harry Stebbings?

  Can I ask, do you find, because that's always the interesting transition and it's one that LPs will always ask, kind of the angel turn the institutional investor, which is absolutely getting the 50K allocation, works and you've done incredibly well. How have you found the ease or maybe challenge of moving that 50K to 250K? Is that a very different ballgame in terms of really getting into the best companies?

• 10:26Speaker 02

  It definitely is a different ballgame. I think almost anyone can come in for a friendly 25 to 50,000 dollar check. But in the most competitive deals, you often get squeezed as a fund manager. So I think it's really important, and the challenge is on me, to find those deals earlier, to show where I can add value to the team and to the founders, to show why my capital is a bit different than perhaps somebody else's. So. It definitely is more competitive, but it's not unmanageable.

• 10:58Harry Stebbings?

  Totally. No, I do see that and especially agree with you in terms of getting in there early. Really interesting that you said there about kind of showcasing the founders to your LPs. I do want to talk a little bit about the fundraise. It's a super interesting one, always a first time fundraise. How was the fundraise for you with Moxie?

• 11:11Speaker 02

  Yeah, it was super interesting. Until I went through the process myself, I really hadn't given the sources of capital that much thought. I knew VCs had money, but I never really dug into where they got their capital from. So now, having gone through that myself, it was a good learning experience. I actually enjoyed the process and I suppose being an extrovert helps. In terms of stats, I ended up meeting with or contacting 279 potential LPs. So that was a good learning experience. And while I net-net enjoyed it, there were definitely some tough times too. I tried to push myself that if I wasn't getting rejected daily, I wasn't pushing hard enough. And then I realized I was probably pushing myself too hard. There was one day, I remember where I had about five rejections and I thought, well,

• 11:54Speaker 02

  this might be the dumbest idea I've ever had in my career. But I got over it and I know that process has made me stronger. It has made me more thoughtful. And I think it's also made me a better, more empathetic investor because I feel the pain of founders going through the fundraising process.

• 12:11Harry Stebbings?

  Oh, totally. It is sometimes the most painful times. We met 412 LPs in our fundraise and everyone was as joyful as the first. But I do want to be a little bit self-reflective with you and almost analytical, if that's okay. And it's like, what did you do really well in the fundraise, do you think? And what did you not do well when you reflect on that fundraise?

• 12:30Speaker 02

  I think what I did well, I was very organized and I worked very, very hard. This was the first thing I did in the morning and the last thing I did at night. And so I tried to really be diligent and determined. What I didn't do well was that it was hard for me to remove the emotion from the process. Venture is a relationship business and so it tends to be somewhat emotional. And if someone says yes, that's because of you. And if someone says no, that's because of you. And I remember brainstorming with Semil Shah, who I think has been one of the most hugely helpful leaders in this space. I'm sure he's helped you and many others as well.

• 13:09Harry Stebbings?

  For sure.

• 13:10Speaker 02

  And he gave me some really good advice at one point, which was like not to get too emotionally attached to particular LPs. And he was right about that. So it's one of the things that I probably could have done better.

• 13:21Harry Stebbings?

  No, I totally agree. It makes it no all the much more challenging when that does come. I do want to ask, you mentioned that the advice from Semil, when you reflect on your journey fundraising, what advice would you then have for fund managers who are contemplating raising their first time fund, for emerging fund managers listening, what would you advise them, given your experience raising Moxie Fund One?

• 13:39Speaker 02

  I have a lot of learning. So I think the first one, just build a very long pipeline and just keep building it. And every time you talk to somebody, ask them for three new names, for example. The second is to focus on your allies, the people who know you best, the people who will likely write you that first check or make those first introductions. It's important to get that legitimacy early. The third thing is figuring out what's so special about you and your strategy. Why should an LP care about you? Why should they write you that check and why now? The fourth thing is something that I learned along the way, which was starting the clock early on institutions. Most institutions that have AUMs exceeding, say, $2 billion are probably

• 14:22Speaker 02

  unlikely to invest in you early on, but they take a long time to get to know you. So start that clock early. Another learning was just, you know, that determination and Ray Tonsing of Caffeinated Capital was a great mentor to me along the way. And every time, but have a tough day, I'd reach out to him and get his advice. And he's just like, keep pushing, keep pushing. And I remember one of my earliest LPs that I talked to that I became emotionally attached to, I really loved them. I thought they were awesome. They rejected me and I couldn't handle that rejection. So by the time I got to the end of my fundraising, I went back one more time. I sent them a cameo and told them that it's really important that we work together. The cameo was also great. And then they came back and said, yes. So I think, you know, not taking no for

• 15:05Speaker 02

  an answer, just keep pushing for the ones that are most meaningful to you is important. And then tactically, there are a bunch of funds that I think are institutions that are really good for Managers and the trifecta that I think are the best and obviously biased because they're LPs and Moxie, but they're Foundry, Industry Ventures and Sandvana. And I found them also to be very helpful, very knowledgeable, and this is a space for emerging managers. It's a great partnership. Another thing I learned along the way, there are a few LP, what I call LP whispers. One of my favorites is Lyndall Ikman at Foundry. He was one of the first LPs that I spoke with. He knows everybody. And so I think of him as this godfather of LPs. And then I think there's also a godmother

• 15:46Speaker 02

  of LPs, which is Beezer Clarkson. It's a he must have made, I don't know, like 10 to 20 introductions for me when I did my first close. She took me out for lunch. She was just amazing. And then a few more, I know this is long, but I think and I hope they'll be helpful to others. Talking to VCs, seeing if they'll invest individually or as a fund. And there were a few that really stood out for me that just to give them a big shout out because I think they're so extraordinary helpful. Katie Bryster at Felices and Jen Kha at Andreessen and Jeff Clavie at Encore. They basically like walked through their LP list and made a lot of introductions where they thought it could be very useful. And then two more things. Family offices can be great. So, you know, they move fast. They can write checks between 250,000 into millions, but they can be harder to find. And the

• 16:31Speaker 02

  last thing I'll share, which is a tougher one, is that if you're older, if you're a woman and/or a person of color, I hate to say it, but this process will be harder. And in my experience and several other people I know, we found an inverse relationship between the LPs who are very public about funding diverse managers and those who do so. And that perhaps is a whole other podcast that we can talk about. But my advice to those emerging managers that come from those different perspectives, don't waste too many cycles and get your hopes on those institutions. I'm happy to talk to people offline. There are some amazing quiet allies out there. Find them and lean on them and just keep pushing.

• 17:11Harry Stebbings?

  I mean, my word, I was nodding my head at so many aspects of that. I, we mentioned earlier, people we were jealous of their portfolios. Ray is one that I'm incredibly jealous of. Man, that guy's a good investor. And then second, Beezer is one of my dearest friends. And so I couldn't Have enough love for her, but I do wanna dive into kind of the changing tide of venture. She mentioned some big evolutions in the industry there, so to speak. And so if we talk about one that's particularly really interesting for me at the moment. And Samuel Shaw, actually, who you mentioned, said on the show that founders are voting with their feet in taking multi-stage money at seed, end quote from Samuel. I'm interested, would you agree with this? And how do you think about the multi-stage approach to seed investing today?

• 17:49Speaker 02

  Yeah, I agree with Samuel, and I think that it's something really interesting happening at a super high level. And Jim Marshall at Silicon Valley Bank frames this pretty well. So he talks about there are four waves of venture. And this first wave was the original giants. It was kind of the old boys' club of Silicon Valley. Capital was scarce and there were families looking for some high yield return potential. And so we saw these iconic firms of Sequoia and Kleiner. And nothing changed for a while, but then we had this boom in 2000. And we saw this second wave, venture as a service. And we saw some great firms emerge, Andreessen, First Round, True Ventures. And we saw more of this service business and capital started to get commoditized. And then we had this democratization of VC.

• 18:33Speaker 02

  We saw this micro VC boom. And we saw, you know, new companies at seed level and firms who could raise these new funds and funding Web 2.0. And that's where we saw Lowercase and Unkork and Felisa start to emerge. But now there's this really interesting fourth wave, which you and I are a part of. So there's differentiation, there's diversity. This isn't just a Silicon Valley story. This is something that is starting to become geographically spread. You're in London, I'm in Silicon Valley. And there are people who come from different backgrounds, who didn't go to Stanford, but they have a really strong network and thesis. And we're seeing really interesting, diverse seed stage investors who come with either a particular stage or focus.

• 19:14Speaker 02

  So we see people like Grant Kimmel, Arlen Hamilton, Pair VC, Harlem Capital, hashtag Angels, these really interesting groups starting to emerge. And so back to your point, while we're seeing a lot of the multi-stage firms that are basically going mega and they're getting bigger and bigger and more global and they're investing the full spectrum of seeds, IPO and across Multiple geos and sectors. I do think founders are in this driver's seat. Pendulum has swung to them, which is great. And so they have a lot of options. And this is my opinion and also my bias. I do think it's better for a lot of founders at the earliest stages to have at least one or two of these micro funds who specialize in this stage

• 19:54Speaker 02

  or in a particular sector and who truly care that can roll up their sleeves and add value to the teams and be part of that journey for the forthcoming years.

• 20:04Harry Stebbings?

  I mean, naturally, as being in the same seat as you, I totally agree with you there. And I always say to founders, like, at a multi-stage fund, if it's, you know, a quarter of a percent of their fund, how much GP time will you actually get? It just doesn't make sense. And that's often how I position it. I do want to ask you, because you mentioned some brilliant names there from Arlen to Briam. And it's, as you said, a very different crop of seed investors popping up today. I'm interested in terms of the value-add elements. What do you find founders most look for when selecting their VCs? And the like commonalities in where you see founders struggle at this stage?

• 20:33Speaker 02

  Yeah, I think that they're looking for capital they can trust. And they're looking for a specific set of skills. So looking for help going to market, finding product-market fit, specific to marketing. Hiring and closing top talent is one of the key things that I get asked as an angel investor to my personal portfolio and something now with my fund portfolio. And sometimes it's just looking for that trusted person to vent. It can be very lonely starting and running a company. And so looking for that partner that they can lean on. And then in terms of where founders are struggling, there are really two things I see. First, valuations. As you know, too, valuations in venture right now are just unjustifiably high.

• 21:14Speaker 02

  And it's so difficult to invest in a company that is pre-product, pre-revenue, basically zero data, valued between $10 and $20 million. I've seen some seeds in the $30 million. And I think these are vanity metrics, right? And this may seem really exciting right now, but I do worry for these companies when the market turns. And so I think that's something that some founders are struggling with. And the second is around distribution. So earlier, startups used to be able to reach their audiences organically. But now because of distribution consolidations, you see startups that need to pay for their audiences who are aggregated or consolidated on Facebook or the App Store. In fact, I'd love if you have this or anyone else has this, I'd love to know the stat of how much venture money is actually getting reinvested in Facebook, Google, and the App Store for customer acquisition.

• 21:59Harry Stebbings?

  I think it's forty three percent according to ClearBank. I might have to check that, but I believe forty three percent of venture dollars goes directly back to Facebook, Google and Amazon. As a fun fact, yeah, it's a lot of money. I'm too interested not to dig in on those because if we start on the valuation one, I'm totally with you. My question to you is, and I'd love your advice here, when you see the twenty twenty five million pre and it's pre-product or pre-launch, I hold back and I say no. But I'm very aware that Bill Gurley said on the show, you know, the secret to winning is to enjoy every last minute of the upside. And if you'd pulled back two years ago, you'd have missed out on some great opportunities. How do you think about when to pull back versus when not to on the valuation?

• 22:35Speaker 02

  Yeah, I'm with you. You know, I am price sensitive now that I'm managing a fund and I'm trying to be consistent with what I have, you know, talked to my LPs about. But I also am mindful that sometimes the best deals are the priciest deals. And bottom line, like, if you have conviction on the team, you should write the check and you should right-size it for your fund, not necessarily your ownership target. And, you know, ultimately, the price may not matter in the long run if it plays out. And I would be so mad at myself if I missed the next Stripe or Glacier or Google because I thought it was priced too high at speed. So it's really tricky. So I think, you know, ultimately, it's a balance between having some, you know, criteria, but also when you have high levels of conviction to just go for it.

• 23:17Harry Stebbings?

  Totally agree, Leah, in terms of when you have those high levels of conviction. In terms of the distribution element, we had Peter Fantson on the show and he said, for the first time ever, free and open distribution is now no longer in existence. And obviously, with the rise of pain, as we said there, with the rise of startup reliance on Google, Facebook and Amazon, it's a real problem. And it's a big thought for me in terms of that lack of free and open distribution. Is it a big concern for you? And especially kind of having seen the internal machinations at Twitter, how do you think about that lack of free and open distribution today for your companies?

• 23:46Speaker 02

  I do think it's a challenge. And to your earlier stat, I mean, forty three percent of venture money going towards customer acquisition, you have to be right, or you have to learn really fast at the beginning about your go-to-market strategy. And very early, most companies are thinking about their various distribution channels and making sure they get that right. And so, for example, if you're a marketplace and you're thinking about a horizontal strategy, but it's better to go vertically, you might run out of money too fast. So I think it's really important for companies to be extra thoughtful about the distribution channels, the go-to-market strategy, and how much they're willing to pay for customers to be able to prove product-market fit and ramp up quickly.

• 24:25Harry Stebbings?

  Totally agreed in terms of the ramp up quickly there. I'm really intrigued though because you also said about the importance of having the more boutiquey or specialized micro VC funds in the earliest stages of having one or two. Because you did amazing work with hashtag angels in terms of the gap table, obviously representing the disparities in mensch in relation to cap tables themselves. I love the name there. But in terms of your thoughts there, what are the core and most important disparities to highlight in your mind, do you think?

• 24:50Speaker 02

  Yeah, I think some of the biggest disparities are first that when we partnered with Carta to measure the gap on the cap table, AKA the gap table. We found that only nine percent of equity value goes towards women and that's looking at over 6,000 companies, 15,000 founders, 180,000 employees. And so that is a huge disparity. The second stat that is quite incredulous as well is that less than three percent of funding goes to all female founding teams. And so in the year 2020, that's ridiculous. So and what's also insane is that there was a recent gender gap report that mentioned gender parity won't be attained for almost 100 years.

• 25:29Speaker 02

  So we need to take bigger swings at changing this inequity in the system at ground zero and through the different stages of development.

• 25:38Harry Stebbings?

  Before we talk about solutions, bluntly, thinking of causation, why is this still happening in 2020? Is it a pipeline problem and what's driving this disparity?

• 25:47Speaker 02

  There are a number of things, a few theories. So the first, and this is anecdotal, but what I've observed that a lot of female led startups get valued lower and diluted more. I actually noticed this at Y C and would love to dig into the data a bit, but what I found was that the female led companies at Y C that I met with were valued less than 15 million. The male led companies were valued much higher, as high as 37 million. So that's one. The second is that there's less total capital allocated to women due to some investor and industry bias. The third is that there's an underrepresentation of women and people of color as investors, both DCs and angels.

• 26:27Speaker 02

  And I'm excited that there are groups like hashtag angels and F7 and of course all raised bringing that forward, but we need to do better bringing to the table. More people of color as angels as well. I've also noticed and been guilty of not strong negotiation skills. When I was at Twitter, I managed a very large team and I noticed all the men on my team were great at negotiating. And less women on my team were great at negotiating. So something I talked about with all the women on my team is just really push the teams harder to negotiate. And I think that's something that is a bit pervasive in the industry. And then I'm also seeing too that, you know, women aren't being hired for early engineering and leadership positions. And that tends to be where the lion's share of equity gets distributed.

• 27:09Speaker 02

  And when women are coming in later for say like even other engineering roles or for sales or HR or marketing roles. They're getting less equity because again, they're joining later or potentially because those roles are valued differently. So I think that feeds into some of that inequity. And then the last thing that, you know, we see is this virtuous or you're not so virtuous cycle. That when you see these teams that have big exits, those early employees, those early executives. Have the capital now to reinvest in the next set of companies. And if you don't have diversity there, it just kind of keep perpetuating itself. So it's important that we kind of break that cycle a bit and allow more people to participate.

• 27:50Harry Stebbings?

  So I'm shocked by what you said about the gender parity. And I totally agree with you there in terms of the elements of causation. So say you had a magic wand here, Katie, what would you do? What solutions would you suggest and really actively advocate for in the coming years? That can really reduce this disparity, not in a hundred years, but in the next three to five years that we can really see and enjoy the benefits of.

• 28:09Speaker 02

  Yeah, I mean, the first is data. And as you know, we say in Silicon Valley, can't manage what you can't measure. And really give props to Henry Ward, the CEO and co-founder of Carta. Who partnered with us at hashtag angels to measure that gap. And so, and Carta did a really good job of updating the data earlier this year. So we need to keep pushing for the data to be open, transparent and talked about. The second thing is ownership. So I think for founders, being intentional and fair and mindful about how allocations of equity are being made for founders.

• 28:45Speaker 02

  For early employees, for women investors, for executives, for angels and so forth. So just being again more intentional. And then also for VCs and for founders, also being thoughtful about those valuations, how they're being set. Is this something, you know, that is fair, is this reasonable, especially in this hyper crazy market? But being thoughtful too about if this were an all male team, would this get the same valuation? If this were a more diverse team, what is the right and fair thing to do?

• 29:12Harry Stebbings?

  Yeah, no, I totally agree, especially on the valuation front there. I think that's a really important one. I do want to discuss the moxie, the very exciting times ahead before we move into the quick five. Because the thing that I'm naturally struck by when I think about new funds is the strategy and the blank slate that you have with the new fund. So what is the strategy? How many initial checks? And how do you think about the right levels of diversification? Diversification is like one of my nerdy passion topics. So how do you think about that when constructing from a blank slate today?

• 29:38Speaker 02

  Yes, so it's a $25 million fund. I'm looking to invest half of the capital and reserve the second half for follow-ons. Only investing in seed, so pre-seed, seed, seed plus, what have you, basically anything before the A. Open-minded with respect to sectors, but I do tend to gravitate towards the sectors that I love, which are consumer internet, future work, fintech and health tech. I plan on investing between 250 to 500,000 per company. And my ownership target is 5%, which I think allows me to be a great fast follow to some of the larger firms. And so ultimately this allows me to invest in roughly 20 to 25 companies over the next two to three years.

• 30:17Harry Stebbings?

  Okay, totally with you there in terms of that level of diversification. We're actually, 23 is what we found when we ran the Monticello simulation. It gets you 83% of the benefits of diversification. So totally with you there in terms of that portfolio construction. The other really interesting element to me was we mentioned the multi-stage firms there. They have very large partnerships, decision-making is spread between many people. And often you get the benefits of thought sharing across those different people and profiles. How do you think about decision-making as a solo GP? And what are you doing to actively enhance your thinking and decision-making, given that it is just you making the decisions?

• 30:49Speaker 02

  Yeah, it's great to be a solo GP because you can move fast and you can make decisions quickly. But I do rely on a number of people to help me make sure that I'm making the best decisions possible for this portfolio. So I have three secret slash not so secret weapons. The first is that I have an amazing group of LPs, many of whom are operators, entrepreneurs, seasoned investors, and many of whom have expertise in a particular vertical or particular market. And so I lean on them for deal diligence and deal flow. The second is I have a friend of mine that I work with at both Google and Twitter, Alex Redder. He's an incredible leader. He's an engineer. He's a great investor. He's a venture partner from Oxy Ventures and my technical advisor.

• 31:33Speaker 02

  And so, once a company reaches my level of interest, and I've had a number of conversations with the founder, I asked Alex to meet with them and talk to them about the technical challenges and considerations, and basically doing that due diligence and helping those companies, once they're in our portfolio, attract and retain and close great engineers. And then third, I have this amazing group and network with hashtag angels. They're my LPs in Moxie. They're some of my best friends, and they're tremendous individuals and investors. And I share a lot with them to get their feedback because I trust their judgment.

• 32:04Harry Stebbings?

  I have to say, when I look at the support system around you, it's not one that I have ever seen before, I don't think. I think the love and outpouring of support for you and Moxie has been incredible and totally deserved. But yeah, absolutely, you can see how that brings really the team around in terms of mind share and really getting the benefits of the community. So that's super exciting. I do want to move that into my favorite element, Casey, which as you know, is the quickfire round. So I say a short statement, and then you hit me with your immediate thoughts. Are you ready to rock and roll?

• 32:30Speaker 02

  I'm ready to rock and roll, Harry.

• 32:31Harry Stebbings?

  Okay, so it's been the Christmas break. We should have all been reading. I've read precisely nothing. So what are your favorite book and why should I be reading it?

• 32:39Speaker 02

  Okay, so three books of 2019 at least. I love Becoming because I love Michelle Obama. Where the Crawdads Sing was an excellent book. And then, very begrudgingly, I thought Jason Calacanis's book on angel investing was really good for new investors. And I do recommend the audio version because he's very entertaining.

• 32:54Harry Stebbings?

  I do totally agree. I love Jason on the audio version, and his level of excitement is one that even exceeds mine, which is very rare to see. Tell me, who's the best board member you've sat on a board with and why?

• 33:05Speaker 02

  I have two. John Fahey, who was the chairman of the Time Board because he helped negotiate the acquisition of Time from Meredith. And then Dan Rosenzweig, who is the menshiest of them all. He brought me on to the Time Board and he's the most thoughtful, honest and helpful mentor, I think, in the business.

• 33:22Harry Stebbings?

  What was your very first angel check? I think you mentioned it earlier, but what did you learn from it?

• 33:27Speaker 02

  My first angel check was Shape Security and what I learned from that was always bet on the founder. I think Summit Agarwal was one of the best founders, most tenacious, most determined and most ethical that I'd worked with in the past and just always bet on the founder.

• 33:42Harry Stebbings?

  Now, we laughed before the show about the research that I put in and a little birdie tells me that Jewel tried to recruit you for a role. Tell me, how did you respond?

• 33:50Speaker 02

  So Jewel is a ridiculous company. They had approached me while I was working at Color. And Color, as you know, is a health tech company trying to help people stay healthy by understanding their genetics and predispositions to things like cancer. And a recruiter had approached me about an opportunity to be the CMO at Jewel, which was a health tech company, "harnessing disruptive technology to improve and progress its mission globally." And I thought that was kind of a ridiculous thing to try to approach somebody already at a health tech company that was actually making health worse for people. So, anyway, I said no.

• 34:23Harry Stebbings?

  Yeah, that's a, I'm not surprised to be honest, but that's fascinating to hear. Tell me, what do you know now that you wish you'd known at the start of your investing career?

• 34:31Speaker 02

  Ownership matters. I think early on I didn't realize how important it was and now it's something that I focus on quite a bit.

• 34:37Harry Stebbings?

  Does it matter if you're an angel, bluntly?

• 34:39Speaker 02

  I think so. It really depends on what your goals are. Are you doing this to learn? Are you doing this to get wealthy? Are you doing this to be helpful to the founder? That answer will depend on what your goals are.

• 34:51Harry Stebbings?

  What would you most like to change about the world of venturing tech?

• 34:55Speaker 02

  I would love to see more women and people of colour in decision making and funding roles.

• 34:59Harry Stebbings?

  And then finally, what's the most recent publicly announced investment that you've made? And why did you say yes and get so excited?

• 35:05Speaker 02

  So the most recent publicly announced investment I made was an Ethels Club. And I did that last summer because I became really captivated by the founder, Naj Austin. And I think she's building something important. So I don't know if you know Ethels Club, but it's the first social and wellness club designed for people of colour. And I think she's tapped into this growing need for communities to feel safe and supported and communities moving from the online world to offline. So I'm really excited about what she's building and looking forward to seeing that scale.

• 35:33Harry Stebbings?

  Katie, I was so thrilled when I saw the news about Moxie. I can't wait to see the exciting times ahead. And thank you so much for joining me today. I look forward to having you back on when we have fun too for Moxie. So thank you so much.

• 35:42Speaker 02

  Thank you so much for having me.

• 35:45Harry Stebbings?

  I just absolutely love doing that one. And I can't wait to see the incredible portfolio Katie builds with Moxie. And if you'd like to see more from Katie, you can find her on Twitter at KTS. Likewise, it'd be great to welcome you behind the scenes here. You can do that on Instagram at H Stubbings 1996 with two Bs. However, before we leave you today, I doubt you started a business to track financial statements or make cash flow spreadsheets. However, now we have Pilot and Pilot for bookkeeping, giving you back the freedom to focus on your business. Every month, your dedicated account manager will send you an accurate, detailed financial report. Pilot does accrual basis bookkeeping in QuickBooks Online, so you're never locked into a proprietary platform. Plus, you'll work with the same person each month, so you can really rely on them to become an expert in your business.

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