Venture Capital Investing in Women Managers

Yasmine Lacaillade:

Pleasure to be here. Thanks for having me.

EMS:

Absolutely. So, to kick off the conversation, tell us a little about the firm and how you got to where you are today.

YL:

Love to. So, we launched Sinefine two years ago now, and everything we do is in service of backing women managers, and we do that in all sorts of ways. We have a consulting business that works one-on-one with top-tier women-led firms, and then this summer we are bringing a fund platform online that'll bring our own capital into these women-led firms.

EMS:

Great. So, given your focus on investing in women-led firms, love to hear your high-level overall outlook for the space.

YL:

The women-led market is a really interesting one. When I wanted to go out and start my own firm, it really was because in my background, I found that I loved working with people who are clearly high performers but not necessarily well covered, the underdogs, you might say. And in my background, I most recently was the CEO of Drive Capital, but I've spent my entire career in operations as an operator in the venture industry and I joined Drive when these two Sequoia Partners were bringing venture to the middle of America, which today sounds like you can build venture firms everywhere, but 10, 11 years ago when we were starting with $0 on our balance sheet, we were definitely not people's first phone call. But there was tons of performance data, both in the past performance of the partners and the future performance of the firm based on the raw ingredients that they had there, that it would be a great opportunity set, and now that firm is one of the biggest 15 firms, I believe, in the country, and definitely the biggest one between the coast and so, I love that journey. And the women-led market is in this amazing inflection point too. If I were to have tried to have started this firm ten years ago, I couldn't have. There was, in 2012, I believe the number was a dozen, maybe 20 women-led venture firms, and that market has exploded 150x since. And so today the TAM is somewhere between 400 and 600 women-led firms, and that is the greatest opportunity because it's this nascent market, but women will really become an asset class, I believe, in the venture world, and I want to be an early one to help prove that.

EMS:

Yas, as a follow-up, I'd love for you to touch on some of the specific greatest opportunities you see in women venture space and why.

YL:

So, what I love about working in this industry is... And look, anyone I've ever worked with, I love to work with really smart people, and any person who is going out and starting their own venture firm has a true belief in their own success and the ability to do that. And what I love about women is they don't come from the traditional pattern-recognition checkmarks. They don't necessarily all come from the same backgrounds and schools, even countries, and I love that diversity is baked into more than just their gender. And it makes for a super interesting diligence cycle too, because you're not always underwriting track records that are ones that you can easily just pull off a spreadsheet. And I think that is what's really interesting about women in this industry, because I think that the opportunity in technology is endless, and we've only covered such a narrow sliver. We talk about tech as trillions of dollars these days, but the truth is that most traditional industries are less than 30%, 40% digitized. So, that means that the arc of innovation is still... We're still very early in its development. And the truth is that in order to broaden the aperture of what will become venture-backed or how we're going to apply technology to every part of our lives will require people to have a broader background, a broader perspective, a more diverse perspective, and women will bring that in spades. And that's not just a hypothesis. That's something that there's tons of data to back up that women have a proclivity to invest in different markets, invest in different founders, and then that means that the outcome of that will be that much more of what we do will be venture-backed, technology-based, digitized. It'll change our world.

EMS:

Yas, on the other hand, what are some of the greatest challenges you face in your investing space and why?

YL:

The greatest challenge to me is people not doing... So first and foremost, I don't like women being a DEI checkmark. I hope to live in a world where... And this is not my line. This is Sheryl Sandberg's line. “I want to live in a world where there's not women leaders. There's just leaders.” And in order to get there, you have to be super systemic and dedicated to bringing more diversity into your asset allocation, and it cannot be something that is done in a bull market because it's easy to do and dropped when things get hard. And it's also not something that is a sidecar investment vehicle. It needs to be foundational, and in order for something to be foundational, people really need to dedicate consistent time and resources. You have to understand your entire market. Venture is, I think, the trickiest asset class in the private market, and it's proven to be, because the delta between top decile or quartile performers and bottom quartile performers is way bigger than any other part of the market. So, in venture, the power law that exists at the company level exists at the firm level. You have to pick top performers in order to have a successful portfolio, i.e., a top performing portfolio. There's plenty of data out there that says that women are outperformers, but you still have to find them, and in order to find them, you need to understand your whole market. And in order to understand your whole market, you need full-time resources and teams dedicated to this, internal or external. And so, that systemic approach to it is, I think, the only way you do it right, because if you don't do that, you are not going to cover your market well. You're not going to pick the best managers. And then my biggest fear is that bad application of the concept will lead people to say, "Look, investing with a DEI mindset doesn't work." But it's not because diversity doesn't generate superior returns. It's that in venture, whether you're investing in women in venture or any other market part of venture, it needs to be a very thorough cycle, and so people have to apply it at all times in very thorough ways.

EMS:

Yas, to shift gears a little bit, with ESG top of mind for the industry, I would love to hear how your firm is addressing this topic.

YL:

It's funny because I don't see my firm as addressing the topic. I just think that I have the good fortune of being able to build a team that is diverse and inclusive at its core. This is a firm in service of women, but it doesn't mean that it's exclusionary. It's a firm that is super balanced and diverse from a gender perspective, background perspective, and that'll be core to how we operate from now through the end of time.

EMS:

And, Yas, as a follow-up to that, being a very successful women investment manager throughout your career, clearly, you're an inspiration, and I would love to welcome your thoughts on what you're doing to inspire future generations of women to follow in your footsteps.

YL:

It's funny you asked me that question today, because honestly, last night I was trying to have a quiet moment after putting three/seven children to bed, and I often do that by going into a YouTube rabbit hole. And I heard Jeff Bezos say something really interesting. I always talk about lean into your superpower and lean into your passions, and when I think about being an inspiration, I also really tie that back to my kids because I think it's the best way to show, how do you inspire people? Well, it starts right in your own home. And so modeling behavior is really important to me. And then I tell people, "Lean into your passions." And then Jeff said something super... Jeff. I don't know him on a first-name basis, to be very clear. He said something super interesting, which is, "The things that you're good at, those are gifts. And how you apply those gifts, that is the success." And he framed it up in a much better way than I did, because the way that I talk about how do you build a business or build whatever venture you want to pursue: on the days that are easy, it flows. On the days that are hard, it's tiring. But the days that really matter are the days that you're, I always say, scared. He frames it up in a better way and says, "It's the days that you're uncomfortable." And I always find that when I sit with my fears or I sit with my discomfort, those are the days where I glean the greatest new appreciation or insights into what I'm doing. It's a very hard thing to teach. It's a very hard muscle to build. But the minute you know that the things that come easy will always come easy, and the things that are hard in that process are the ways that you grow the most, the more you do those uncomfortable things, the greater your growth trajectory will be.

EMS:

Absolutely, Yas. So, we've covered a lot of ground today, and I wanted to see if there are any final thoughts you'd like to share with us.

YL:

No, I'm really excited to be here and it's a great opportunity, and the next five years of Sinefine are going to be incredible years of growth and learning. It won't be a straight line up, but along the way it'll be super fun, so I'm really excited to go and prove out the concept.

EMS:

Yas, I want to thank you so much for sharing your perspective with our listeners.

YL:

Thank you for having me.

EMS:

And thank you for listening to the EisnerAmper podcast series. Visit EisnerAmper.com for more information on this and a host of other topics and join us for our next EisnerAmper podcast when we get down to business.