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ICYMI on IG: CEO Sallie Krawcheck on Raising VC Funds as a Woman Founder

By Ellevest Team

Each week, Ellevest hosts Office Hours, an Instagram Live session in which our coaches answer your burning money and career questions with data, expertise, and strategies to help you get where you want to go, financially and professionally. But not everyone can make a livestream in the middle of the day! That’s why we’re publishing the Office Hours transcripts (edited for clarity) here on the Ellevest Magazine.

Last week, Alexandra Ramirez, Ellevest’s Director of Brand Marketing, spoke to our founder and CEO Sallie Krawcheck about our big recent Series B news and what it took, as a woman founder, to get there. You can read their chat below. (Or, if you want, you can still hear / watch it for yourself here, too.)

Sallie Krawcheck and Alexandra Ramirez in boxes that mimic Instagram Live. Shapes like dollar bills and a question mark surround them. Collage.

Raising VC funds as a woman founder: A conversation with Ellevest CEO and Co-Founder Sallie Krawcheck

Alexandra Ramirez: Happy afternoon, and happy Thursday! Thanks for tuning in for an Instagram Live with Ellevest. My name is Alexandra Ramirez, and I'm Director of Brand Marketing here. I'm going to be joined shortly by our CEO, Sallie Krawcheck. We're going to be talking about raising VC funds as a woman founder. So there's going to be lots of good advice, if you're thinking about doing that soon. And there's a lot of juicy details, because Sallie is the best. Hi, Sallie!

Sallie Krawcheck: Hey.

How are you doing?

OK, ready for the juicy details?

Juicy details. That's why everyone's tuning in, right?

Here we go, let's do it.

OK. So, before we jump in: In case any of you missed it, we closed a Series B funding round of $53 million last week, thanks to Sallie and an incredible group of women investors that came together to participate in this round, which is awesome. And honestly, thank you to all of you who are tuning in, because the reason that we are where we are today is because of our community, and you all showing up.

So we are here to celebrate, but also to talk about your experience raising VC funds. Because this isn't the first time, it's [been] a couple times, so give us lay of the land. How bad is it? Give it to me straight.

Yeah, oh, it's terrible. But first, let me start by thanking, also, our [VP] of finance [Connie Hsiung], and everybody on the Ellevest team who put up the results, told the story, really got the business to where we could have the good fortune of raising a Series B round [at all]. And thank you, of course, to the community, because we are exactly nothing without all of you. So thank you.

What I'm really glad I didn't know, Alexandra, is when we founded Ellevest, if you just go straight by the numbers, the chances of our getting through Series B and raising, as we [have] now, more than $100 million, about $140 million in venture funding, is — the chances were 0.0002% or 0.00019%, or something like that.*

And, we just stare at these numbers that women now are raising 1% of Series B dollars, or women now are raising 1% of fintech dollars, that women of color are closer to zero. And we sort of are numb to what these numbers actually mean, and how much it both hurts the companies and exhausts the founders. You remember, I looked a lot younger before we did the financing round! But also, all the businesses that simply aren't started, all the ideas that go unfunded — it's a tragedy, really.

So it's bad. Can you describe just at a high level: What is the VC funding gap? There's a lot of money gaps, unfortunately. So, just to give a level set, tell the people.

Too many money gaps, right? So, we talk so much about the gender pay gap, and [how] women make [83] cents to a white man's dollar. And a friend of mine who's also a startup woman CEO, said, "Yep. You just know you've got an 18% tax, when you walk [through] the door of corporate America." Every day, they just take 18% off of your paycheck to get to the 82 cents.

But if you're starting to say, women are raising 2% of venture dollars, 2% of Series B — 1% or 2% — what you're actually saying is you have a 98% tax simply from being a woman. Because — by the way, don't anybody try [to argue], “Well, the results aren't as good,” et cetera. In fact, there’s research that shows that companies run by women — probably in part, because they're forced to be so capital efficient, because it's hard to raise money — have better results and better returns than those run by men only.

Women-founded companies have better results, but get 2% of VC funding.

So wait, explain that to me. Let's just pause there for a moment — so women-founded companies have better results, and yet are only getting 2% of VC funding. What? That doesn't add up. What's happening?

You know — isn't it weird, Alexandra? Because then you're like, "But isn't venture [capital] a returns game?" Well, may I reintroduce you to the fact that, in the investing industry, women make better investors, or at least just good investors, as men do. And the research has shown that — at a hedge-fund level, and the mutual level, and the individual investor level — that women tend to have as good or better risk-adjusted returns. Alexandra, question for you, and you do know the answer: What percent of mutual fund dollars do women manage?

2%.

Yes. What is this 2% that keeps coming [up]? Men manage 98, 99%, even [when] women are as good or better. And again, like in venture capital, despite better results. What in the world? It begins to point to the systemic issues. 

I know “bias” is a very loaded word, but may be the inherent expectation, the way we've all been socialized. If I were to wake you up — which I will not do, Alexandra — at 3 AM, and say, "What does a start-up CEO look like? What does an entrepreneur look like?" — even someone like you would immediately think of a hoodie-wearing, Stanford graduate male. Not a woman who has a little maturity going on for her.

OK. So it's rough out there. The stats aren't good. Even though the numbers are promising.

Yeah.

Walk me through: You were preparing to go out a couple months ago, maybe over a year ago, to start these conversations. How do you prepare for that? Knowing how hard it's going to be.

Well, it's so funny — you sort of don't. Because you're like ... I remember an entrepreneur friend of mine was like, "Yeah, I mean, at the beginning, that's probably the case. But by the time you get to Series B and certainly Series D, the numbers are the numbers. And so then people just look at the numbers." And so, when we were going out — and we have advisors who sort of know the industry — we're like, our numbers look — I don't want to say, but it starts with a G. So it's not great. It's good to great, right? The numbers are terrific. So I'm thinking to myself, “It's just the numbers.” But it's just the numbers in corporate America. It's just the numbers when it comes to managing the money. And so you would get a lot of, “Well, the numbers are good now, but you haven't scaled.”

And you're like, "Well, hello, duh! That's what a growth round is for, right?" First you find product-market fit, and then you scale, or those look good, but we used to hear, “But you've never been tested in a downturn.” Well, then we got tested in a downturn. “Well, I think you've really scaled through the number of women who want to invest.” It's half the population. So their job is to project out. So if you have these internalized expectations, then you project out differently. And I tried to be super-aware that the research tells us that men have more aggressive projections than women, and so try not to fall into that trap. But I feel like I went out all punching and ready to go. And then, as soon as someone would say, "But, well, what happens if a competitor gets in?" I'm like, "I'm just going to wilt. I'm just wilting at this stage."

Oh man. OK. So, that is some very interesting conversation. Let's talk about some of those really memorable ones. What were some that were disappointing, that were unfortunate?

There are so many. And we want to be careful because, by the way, for those who are watching, there is an answer here. There is a solution to cut them, OK? But look, it's the brand-name, well-known venture capitalists who tried to explain to me what financial advisors do. And I'm left sort of, like, “I ran Merrill Lynch and Smith Barney! I know what they do!” Right? "You've run zero of them! I've run, I don't know, 25,000!" I know, it was wild. As I said on TV the other day, I thought I was having a stroke. I was like, “I'm going to collapse,” right? So that was sort of weird, and a little bit challenging. 

The ones that made me sad were young women, young venture capitalists, who would be so excited about it and come in like, "This is exactly why we got into this. This is what we want to do.” And I remember one group of young women, I went and I told them, "Listen, you're not going to get this through your investment committee." "Well, yes we will." And I said, "No, there's a guy there who doesn't like the business, he told me years ago, he thinks we just should shut down parts of it." “No.” And I'm like, "OK." And you could just feel that knowing what those biases were on their investment committee, and knowing their level of seniority — that broke my heart.

The other one that broke my heart was a senior woman. It was a sole senior woman at a company. There were two different stories. One told me back through the grapevine that she “just can't fight that battle anymore.” That she fought the battle to get ahead for herself as a woman, and she just did not want to fight more battles by being the woman at her venture firm who always was fighting for women. She's like, "I'm tired." And I'm like, "I definitely do not agree with that, but I do understand it." 

And then there was a woman who was like, “You’re 14 out of 15 of my checklist of what I look for.” I'm like, "Awesome, write the check." She said, "I'm not going to write the check, because you're not number 15." And I really felt — I mean, I was telling someone the other day, water started leaking from my eye. It was the weirdest event, Alexandra. All of a sudden — water. And I'm like, "What is this water … leaking … as I am speaking to her?" Because I'm like, "If you, as a woman of color in a senior role, won't invest, who's going to?" And she'd invested in zero women. And then later, I realized she was the sole woman and the sole person of color on her leadership team. And so, of course, she's playing the game the way the game needs to be played. She needs to be risk-averse.

Yeah, and what I just keep hearing is just — women, whether you're a women founder, you're the head of a women-led VC, you're just being held to higher standards across the board, as per usual. So all these conversations, they take up a lot of time. That, to have these, whether the good conversations to be positive, it's meetings after meetings after meetings. So something you said to me a couple weeks ago that really stuck with me was the “uncalculated cost of being a founder.” Of course, you mentioned the tax, but can you just bring to light what the reality is, in spending so much time?

Well, think about it for a minute. The way the math works is, if women are getting 2% of the venture dollars, then in order to get the same amount [as men], [a woman would] need to do 50 times more, right? Two times 50 equals 100. And of course those aren't exact, but [she’s] gotta do a lot more. And so you're always hearing about women saying, "I had hundreds of meetings," right? And you never stop and think about, “What does that actually mean?” That means hundreds of hours away from the business, beyond what men need. And by the way, not a lot of guys are walking in and getting the money in the first meeting, either. So if they have to have 10 meetings, you've got to have 500 meetings. And by the way, it's not just the meetings — it's the follow-ups, it's the questions, it's the model, it's going through the model, it's updating the deck, it's following up, it's bringing it back to the top of your email chain. “Just making sure, just checking in.”

“Just following up!”

“Just want to make sure you saw this!” And we pretend to update, right? “Here's an update!” Which is just a way of just emailing them to see. It's the ghosting. And look, I don't care. Because I've been around, and I worked on Wall Street and people were terribly mean, if you've got a little thinner skin — [but] like the ghosting, come on people, stop it.

It sounds like dating. Sounds … not ideal.

Yeah. Well, I don't know, how is dating these days?

I'm partnered up, but that's how I imagine it is, the ghosting, how that feels.

There you go. It's a little bad. Look Alexandra, it is easier to divorce your spouse than get rid of [an] investor in your company. So, while you're doing this, you're recognizing that if you don't have a lot of folks coming in when that person comes in, depending on how much they invest in the company, they're going to have a big role. And if you don't have a lot of choices among them, that has its implications. [I was] saying the other day, you don't get a couple of drinks, glasses of wine, into a meeting with women entrepreneurs [without one of them mentioning] the jerk board member who they have to sort of jolly along, because they don't have 67 other people trying to give them money.

Yeah. So we've shared a lot of juicy details — and unfortunate details, honestly. But yeah, I mean, you make it sound funny and Sallie-like, but also it's sad, at the end of the day.

It's a bummer.

It's a bummer, exactly. So, what are some of your biggest takeaways, as someone who has done this a couple times that you would want to share?

Well, let me share the good news. The good news is that, particularly at the early stages of raising money, women are stampeding at women investors. And there is not a week that goes by, Alexandra, where I don't hear of another really high-powered, really smart, really sharp woman who's starting a new fund to invest in women doing X or Y or Z. And we have a lot of them on our cap table. We're fortunate to have Rethink Impact, Jenny Abramson, GingerBread Capital, Linnea Roberts, Astia Angels, Sharon Vosmek. I mean, I could go on and on about them. But that is some great news. And they're all working to make themselves approachable. “This is how to apply, this is how to sort of move through.” So, that's happiness number one.

… And then here came the women

What we also found when we did our raise is, I act like it was horrible. [But] we were doing good. We had a lead, we had a co-lead, we had people filling in, taking a little bit longer than I would've hoped, a cap fell away that I would've hoped hadn't. Then the market started to correct in January, and I'm like, "Ugh." … And then here come the women.

And it really started with Jesse Draper at Halogen Ventures saying, "I'd like to invest, and I'd like to form a special purpose vehicle and have some of my friends, community, colleagues, invest alongside." And I'm like, "Awesome." And then we got a call from a venture capitalist out on the West Coast. Rogue Venture capital, Caroline [Lewis], who said, "I'd like to invest, but I don't have enough to meet the minimum. What if I pull together a special purpose vehicle?"

And then someone in that special purpose vehicle said, "What about me?" And so the next thing we knew, all of a sudden — even with the market sort of correcting through January, February, March — all of a sudden, everything sped up. These women who are angel investors were coming in, and we finished our round with 90% of our investors being underrepresented [investors]. So women, people of color, LGBTQIA+, and two-thirds of the money being from underrepresented investors. Which, at this size of a round, I don't think you ever see.

And so we are here today with Ellevest: majority women-owned. And I meant to mention earlier, when I looked at the numbers, I think we're one of five or six fintechs run by women that have raised this amount of money. And I'm sure the only one [with a majority of its investors being underrepresented].

So, whenever I feel discouraged or frustrated or blocked, I just turn back towards the women — the women have just lifted us up, Alexandra, every single time. These women say, “We believe in what you're doing. We want to be part of it. Even if, for me, it's too late, I want a better life for my daughter. I don't see anybody else doing what you're doing.” Water may leak from my eyes again, because it's so powerful! And it's the way we overcame those inherent biases and structural inequities.

It was like telephone, except all the women got the message and showed up.

Yeah, now when I hear you tell a story, I think of the game of telephone, except all the women got the message and showed up, which is so incredibly powerful. And we've seen this so many times, it's not “act like a man” or “act like to fit this mold,” [it’s] “let's do it [our] own way.” We have to do it differently across the board to succeed.

Yeah. Well, and I've talked about this many times. Men play the game like a team sport — they're investing in each other and we don't even see it, right? Because it's so the norm, they invest in each other, they talk each other up, they put each other on their boards. And when we start to play that team sport, rather than, “Let me play it the way it's always been done and try to beat the odds.” When we say, “Let me flip it,” and “Let me” — again — “lean into the sisterhood [of] women coming together.” That's where the magic is starting to happen.

Sallie, would you explain what a SPV is?

It's a special purpose vehicle.

And that means…

It is a vehicle that is brought together to invest on, say, a one-time basis, in something like an Ellevest. So, you hear about venture funds where you put the funds in and they invest away from you. With a special purpose vehicle, one can pull together sophisticated investors to invest on it on a one-time basis.

And because of that, I don't think you said the number yet — 391 women, right?

Yeah.

The right number? That's why it's—

So it's in there. You're a little high, but yeah.

Around there.

365**, let's say. But a lot. 

365, that's amazing. OK. So, before we end out, amazing new strategy that you did to accomplish this, what advice do you have for women founders who are going to listen to this as they potentially explore this?

Yeah. It's good. Alexandra, I feel like I'm supposed to say, “Just keep at it, you go girl, you got this, you're a girlboss, make it work.” What I would say is, “It's just hard. And don't let anybody tell you any different.” And “If you want to start a company, just make sure you're truly passionate about it, because it's consuming.” I do think there is something about either doing it when you're new to your career, when it’s like, "Oh, what the heck?" And there's something about doing it when you're a little more advanced in your career, where you've got the contacts, you've got connections, you got your emergency fund in place, you've got your investing account, and you're able to go for it without having to listen to the ticking clock. But I would come back to try to be disciplined, which I was not all the time.

So an example: I just 100% know that if I reach out to a venture capitalist who has majority men on their investment committee and I am talking to a non-decision-maker, that investment will never be approved, never be approved. If I were there, they would say things like, "Aren't women risk-averse? And why do women need their own thing? And what if they get divorced?" All those sort of questions that are well-meaning and based on a lifetime of internalized messages — I can answer all those. In fact, I think I can convince anybody of it, if I can be [in the room] with him. But what I can't do is get to an investor, convince him or her, and give them enough information to turn an entire investment committee our way. I can't do it, right? Alexandra, I think I am zero for 400 in those cases.

But you're always like, "This one investor really likes us!" And if you just follow the lead here, what we did and what we've actually done every round that I've only recently articulated myself, is that, rather than going to the traditional venture folks, people who have money, and try to convince them of our view of the world, it’s better to go to people who believe in our view of the world — indeed, are making our world — who are pushing forward on that view of the world — and convince them to invest. These meetings are uphill battles. These meetings are homecomings. Homecomings. And so, again, what's exciting is, you have more women coming in at the earlier stages, finding a more reachable, going to an IFundWomen — [run by] my friend Karen Cahn — where they've got like-minded investors who can get you off on a really good start, and then move up to the angel investors, etc. I think, to me, that's the lesson. But Alexandra, I gotta learn it every time.

To me, that's the lesson. But I gotta learn it every time.

Yeah. Just to round this out, you already mentioned this once, so I'd love to end on this note. I think someone can be watching, and they're like, "Great, I'm fired up … although I'm not a woman founder, I'm not going to start my own business." And [then they] kind of move on with their life. I'd love for you to reiterate why the everyday woman should care about there being more businesses started by women?

Think of all the problems that need to be solved for us women, Alexandra. Think about how we just scratched the surface. Think about the fact that, as the noted sociologist Jessica Calarco said, "What we learned during the pandemic is that other countries have social safety nets. The US has women." Within that, there are a lot of problems for women to be solved, right? Not the least of which is, you can [only] go to the dentist between 9:00 and 5:00, or the pediatrician between 9:00 and 5:00, or the vet between — maybe they stay up until 6:00. All kinds of child care problems, fintech, health tech for women, we are the top fintech for women, certainly past the budgeting stage. There is just an enormous amount of opportunity to bring women into the start-up ecosystem as founders to solve problems for us.

And by the way, do you have to be a woman? It helps. Pre-Ellevest, those who tried to do what we did, they just marketed to women, marketed at women. We really serve women. We change the underlying product, right? For women. Before Bumble, before Whitney Wolf, who saw that women wanted to [message] first? Well, she did. I mean, I could go on and on with these women-run businesses that are solving problems for women, but there is so much innovation to be had. And there's so much economic growth to be had. If we can bring women back into the workforce through starting businesses, as we recover from the pandemic, that's a win for every single one of us.

And our communities, our society.

Well, Alexandra, you know the answer to this question. Name some bad things that happen when women have more money.

I don't have any.

Because it's nothing. Nothing bad happens.

Fun fact. OK, well, Sallie, this has been super fun. I also want to add, if anyone's tuning in, if you're not an Ellevest member right now, you can join us. So if you were looking for a sign to invest and be a part of this community, and, I would say, the most powerful community of women investors —

Ever.

What are you waiting for? Come hang out with us.

Come join us. Alexandra, thank you. Take care, everybody.

Thanks, Sallie.


Disclosures

As of March 2022. Estimate calculated based on third-party data of the percentage of startups that raise venture capital dollars, the percentage of venture capital dollars raised by fintech companies, the percentage of women entrepreneurs in fintech, and the percentage of startups that go from seed to Series B.

It was 360, to be exact!

© 2022 Ellevest, Inc. All Rights Reserved.

*As of March 2022. Estimate calculated based on third-party data of the percentage of startups that raise venture capital dollars, the percentage of venture capital dollars raised by fintech companies, the percentage of women entrepreneurs in fintech, and the percentage of startups that go from seed to Series B.

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The Ellevest team is working to help women reach their financial and professional goals.