Penny Herscher, FirstRain: Successfully Sourcing Venture for Women

Transcript follows & video below, This is Part II of the interview. You can view Part I here.

I saw your comment on the xxcombinator discussion on Fred Wilson’s blog AVC .  How do you feel about incubators like ycombinator & the proposed xx combinator that would cater to women & men who are unable to uproot themselves for y combinator?  Do you feel that participating in these sorts of programs can contribute to success for female startups?

I’m not a big believer in that frame of thinking.  I think you have to groom women to have the skills. And then you have to help them get the ideas & the audiences.  I think half the venture community would back women given  the right ideas & the right operational background.

Penny Herscher

So you believe that the incubation needs to happen on the job?

I believe so.  The way you learn what to do & what not to do, is to do it. You, yourself know that, you’ve just got to do it.  You’ve got to do it in companies, you’ve got to do it in  your own time & that’s how we learn.  I remain unconvinced.  I hope they succeed but I remain unconvinced.

Penny Herscher

You also stated in your comment: ‘I was a lucky one. Exposed to the VC world early as a (rare) female tech exec and so able to bring a track record to the game – but even then my backers have been VCs who already knew me from before. I have been in countless (hundreds) of meetings with VCs and now know within 10 minutes whether I’ll get to a second conversation or not.’  Could you give some feedback about what measures you use to tell if you will get a second conversation with a vc? (I want the secret!)

So I got funded each time by people who were familar with my track record even if they weren’t familar with me as an individual.  It didn’t take very long for them to figure out my track record & to talk to some of the people that knew me & to figure out that I could walk & chew gum at the same time. Now when I meet venture capitalists if they engage (by the way I don’t use powerpoint) in a discussion of the idea, the business, my background, why I believe in why I want to do whatever it is I am trying to pitch (sometimes I am trying to pitch for money or sometimes I am pitching on behalf of a friend or a non profit or whatever).  If I can get them to engage with ME & my ideas with my personality & my experience set then I have a good shot a second meeting getting them to at least really to consider my idea.  If they don’t engage with me, if there is no connection, it sort of a distant thing & its more of a judgmental discussion, not in a negative way but just as distance & judgment, I’m not going to get a second meeting. Because if the person I’m pitching doesn’t get me, they’re not going to fund me because I’m not the right profile.

Penny Herscher

So are there practical or pragmatic signs that you would be able to share with us, that you read? Because I can hear that there is a subtle thing that is going on where you partake of that judgment?

Yes it’s the connection thing, the things that you understand better than I do right?   Are they really looking at you?  Are they laughing at your jokes (that’s a classic trigger for me)? Do they ask intelligent questions?  Do they challenge my assumptions? Do they really engage in a discussion around substance?  Or do they just flip to the spreadsheets & go ‘Well I think your pricing model is wrong.’ or ‘There’s 5 other people doing the same thing, what’s your differentiation?  Then its a more disconnected association.  But if they go ‘Have you spoken to so & so?’ and you respond & then they trigger off a response.  If they’re really engaged with you, then they’re trying to analyse your idea. If they’re not don’t waste your time, say thank you very much & leave.

Penny Herscher

Would you like to see changes in the venture capital community that could support women startups & if so what would those changes look like?

So I think we are about to go through a really difficult period in the venture capital community because the 10 year look back is now bad.  And so venture capital as an industry may have a 70 to 80% drop in funding over the next 5 years.  That in itself is going to make it very, very much more competitive for any entrepreneur to get funded. Apart from the top 5 or 10 firms, I think its also going to make it hard to get very unconventional ideas funded.  I think there is a lot of lemming behavior in venture capital.  I’m a venture capital snob – I think there are 5 or 10 firms worth spending your time with & the rest are not worth spending your time with.  And they will get money but they will be able to be very discriminating about who they will invest in.  So my best advice is  you need a great idea, you need something you are very, very passionate about, that you have a conviction you can make money with even if you are not quite sure exactly what the business model is going to be.  You have a really powerful conviction & you need to have enough operating experience to be able to execute it because the days of $150 or $200million financing are gone.

Penny Herscher

So we could summarize that is to be selective about the venture capital community that you approach?

Well you want to get practice so you want to do the pyramid of vcs & practise your story on the ones that you don’t believe are going to fund your idea & get it really, really well honed & do it in a short period of time.  Because I’m a big believer in that you want to take a month & do 50 meetings in a month & start with the small ones, the ones that are less likely to fund you & get it really good before you go to those top ten.

Penny Herscher

Thankyou that’s really great advice.  Gigaom recently posted an article “Is There a Female Funding Model? By Stacey Higginbotham who quoted ‘wondering if there’s a better model for funding female companies, or if women tend to form companies that are better suited for raising debt as opposed to venture capital. Or is the trend simply a result of venture investors being blind to female entrepreneurs and then those spurned entrepreneurs doing what they do best — finding an alternative when a roadblock pops up?’  How do you feel about this question, do we need a different funding model as women?

I don’t think so.  Most ventures are not the young white guy in a garage. Most ventures are people in their late 30’s or 40’s who’ve got operating experience, who have an idea that they passionately want to pursue.  That’s the unspoken secret of Silicon Valley.  There aren’t many women in technology with middle management operating experience.  We have to get women into the funnel in order for them to come out the other side as entrepreneurs.  Yes there will be some 20 something white guys in a garage & hopefully 20 something Chinese girls in a garage who figure out the next facebook.  But the statistics show that the vast majority are people with 10 to 15 years experience & there aren’t enough women.  That I think is the number one issue.

Penny Herscher

Thank you so much Penny I’ve really learnt a lot from this interview.  I really appreciate you being involved in this project

You are most welcome.

Penny Herscher

Comments are closed.