VC Theresia Gouw: Backing diversity is more than funding female founders (SVBJ)

VC Theresia Gouw: Backing diversity is more than funding female founders (SVBJ)

Fresh off of raising $150 million to invest at Aspect Ventures, co-founder Theresia Gouw laid out how she and Jennifer Fonstadt plan to use the money.

(Read on Silicon Valley Business Journal)

The veteran VCs from Accel Partners and Draper Fisher Jurvetson invested from their personal capital, amassed over more than 15 years in the business, in their first year with the new firm.

They have used that to do seed and Series A investments in Vida, Exabeam, The Muse, BaubleBar, ForeScout, Birchbox and UrbanSitter.

Some, but not all, of the companies Aspect has backed include female founders. So some of our discussion was about diversity and the firm’s goals to promote and take advantage of that.

The following Q&A is a transcript of our conversation, edited for length and clarity.

You just led a $10 million funding for The Muse. How does that investment illustrate what you are looking for in a portfolio company?

Well, they are a Series A company that’s high growth and has been very capital efficient to date. They have strong seed investors. In fact, they were referred to us through several of those angel investors. The two founders, Kathryn and Alex, are complementary to each other. They are deep domain experts and really understand their target audience.

It is a company that understands how to create content which draws in the audience and gets them to come back and back. At this point, one out of three millennials has used The Muse to get clearer inside information and advice. That’s pretty spectacular for a company as young as they are.

But they have been able to build on top of that a subscription model from the employers. They have companies like Facebook and Venmo and Squarespace who want to reach out and attract these millennials. It’s really all about the content, because the millennials want to understand what it would be like to work with those companies.

So I saw a really interesting transformative opportunity with a business model that I saw a lot of parallels to. It’s actually very similar to the Trulia business model, which started out with content and then added a marketplace where they get subscription revenue from real estate agents. Similarly, LearnVest did it in the personal financial space.

So it was a model that I saw lots of parallels to and have had success in investing in Series A companies that grew to successful outcomes. So it’s something that I kind of glommed onto right away.

Think about the opportunity in the career space. What Monster and HotJobs did to the newspaper job classifieds business, I think that opportunity is tenfold now for a site like The Muse to disrupt those first-generation disruptors.

Was it just coincidence that it’s a pair of female founders at Muse that you supported?

About 40 percent of our companies have female founders. About 60 percent are all men. Exabeam, for instance, isn’t just an all-male founding team. It’s an all-male company.

That’s very representative of the deal flow that we get. We definitely get great early first looks at female-led companies, by repeat entrepreneurs in the case of Stephanie Tilenius at Vida or in really high growth, high success Series A companies like The Muse.

Do you think that perhaps you are seeing more startups led by women than an all-male firm would?

Well, I would refer you to the Diana study that Babson did. There is good data in there about deal flow and the likelihood of firms that have no female partners to see female entrepreneurs. Quantitatively, it said that about 20 percent of founding teams in technology have a female founder or co-founder on it. We are clearly seeing deal flow that’s about double that.

You are an all-woman firm now, but you don’t expect to remain that way, right?

Definitely not. We’ve seen all the data that says that having diversity in a board room and in a founding team leads to increased success in financial outcomes. That is partially gender diversity, but it’s also other things. It also means having some tech and product people as well as sales and go-to-market expertise, and having a mix of investors and operators. Our goal with Aspect Ventures, just as with our portfolio, is to simply build the best early stage- and Series A-focused venture capital firm.

We will be growing and adding other investors. We will look to add the best investors out there that also fit with our strategy and our mission and our culture. We are looking to hire, and we are talking to several folks. It just happens that Jennifer and I happen to be two female co-founders. But that is not the way the firm will always look.

What areas is Aspect focused on?

We focus by stage and then on a few sectors. The main thing is we are focused on Series A and will do some seed rounds.

Series A and early stage investing in the United States didn’t use to be so differentiated. Our prior firms and others have become global and multi-stage. There has also been a lot of growth in earlier stage and seed stage. And there has been a lot of growth in the really large platforms, like NEA and others.

We think that there is a real opportunity to bridge from the seed stage to the larger later stage. So that’s been a focus. And we collaborate, trying to bring syndication to Series A deals. For example, we just announced our investment in The Muse, which is a Series A we led and syndicated with DBL and QED Investors.

Bringing syndication to Series A investments has been very well received both by the seed and investor community which have provided us with many, many leads. We have also been well-received by larger venture firms, who appreciate partnering with someone who is more flexible on writing potentially a $2 million to $5 million check, and not necessarily needing to be a $10 million investor. That is actually welcome by a lot of larger firms.

In terms of sectors, we focus on everything that mobility is disrupting. We particularly focus on three areas.

One is in health software and health IT — where Jennifer has a long history, dating back to athenahealth and Lumens — and then in our portfolio, Vida Health.

Security is a space where I have quite a bit of experience, going back to things like Imperva and ForeScout and Exabeam, which is a Series A venture in the Aspect portfolio.

Another area we are focused on is analytics, where we both have some experience. Jennifer was chair at Flurry, the leading mobile analytics company, which is now part of Yahoo and basically is now Yahoo Mobile Analytics.

Was $150 million how much you set out to raise, more or less?

Yes, we capped it at the high end of our target range.

How was the fundraising experience?

It was fairly straightforward. We were in a very good position in that both Jennifer and I had successful 15- to 17-year track records of investing and returning capital to our investors over the course of half a dozen IPOs and over 25 M&A transactions between the two of us.

And in the first year after we launched, we actually created a nice portfolio of about 10 or so companies between Jennifer and myself with our founder capital. So we went to market to raise funds with both our track records and the early part of the Aspect portfolio to show.

Are you taking board seats?

We are, in our Series A’s.

How long do you expect to be investing from this fund before you go out for another?

We think that given the current market environment and pricing environment, it’s wise to have a longer investment time horizon. So we are actually planning for more like three to four years.