- Aileen Lee, founder of Cowboy Ventures, spoke at Y Combinator about her decision to start her own fund and her focus on seed stage companies.
- She wanted to have a more hands-on approach with founders and provide them with advice and help on hiring, financial planning, customer introductions, and strategic messaging.
- Aileen looks for founders with high integrity, intelligence, hustle, and a clear plan for their company.
- She acknowledges the challenges that female entrepreneurs face in raising money and emphasizes the importance of storytelling in pitching to investors.
- While the majority of investors are men, Aileen believes that it is still possible to pitch to them effectively by focusing on the mission, market size, problem-solving, team, product, financial model, and the personal narrative.

- The speaker emphasizes the importance of storytelling and personal narrative in attracting investors.
- Confidence is key when pitching to investors.
- There is a growing awareness of the challenges faced by women in the industry and a desire for change.
- The speaker encourages entrepreneurs to seek feedback and iterate on their pitches.
- Seed stage investors are focused on helping companies succeed and can provide assistance with pitching.
- The recent news about inappropriate behavior in the industry should be used as an opportunity for constructive change.
- The speaker urges entrepreneurs to build inclusive cultures and diverse teams.
- It is important to choose investors who have integrity and a positive culture.
- The speaker encourages women to come forward and name names of investors who have behaved badly.
- The speaker's portfolio includes a mix of consumer-oriented and technology-oriented startups.
- Seed investors often collaborate and work as a team to support startups.

- The speaker believes that having a diverse group of people supporting a company is beneficial.
- Series A funding requires one investor on the board, while seed stage funding requires a team effort.
- It is important to choose the right Series A board member, as it is difficult to separate from them.
- Women entrepreneurs face challenges when pitching to male investors and need to be confident but not arrogant.
- Women are often judged differently than men and need to be prepared with quantitative data.
- Follow-up and being conscientious is important in impressing investors.
- Some women are seen as "killers" in a positive way, and VC firms are more open to backing diverse entrepreneurs.

Aileen Lee, founder of Cowboy Ventures, discussed her decision to start her own fund and focus on seed stage companies. She emphasized the importance of hands-on support for founders, including advice on hiring, financial planning, and strategic messaging. Lee acknowledged the challenges faced by female entrepreneurs in fundraising and highlighted the significance of storytelling in pitching to investors. She encouraged entrepreneurs to seek feedback, build inclusive cultures, and choose investors with integrity. Lee also discussed the benefits of having a diverse group of people supporting a company.

Aileen Lee is the founder of Cowboy Ventures.

Kirsty Nathoo is CFO and a Partner at Y Combinator.

I'm Kirsty Nathoo, partner at Y Combinator and the CFO.

She's the founder of Cowboy Ventures, a fund that invests in seed stage companies.

Before starting Cowboy, she was at Kleiner Perkins and spent time at Gap and Morgan Stanley.

Aileen is also famous for coining the term unicorn, which you're probably sick to death of hearing about now.

And we actually invite Aileen to talk to our founders at YC every batch.

And the reason why is that we just love that she gives this amazing no-nonsense advice to our female founders about talking to investors.

So I'm excited to be able to chat with her today and in front of everybody.

Okay, so Aileen, I gave a little bit of your history there, but why don't you go into a little bit more detail and about how you, what made you decide to go off on your own and start Cowboy?

So Cowboy Ventures is still kind of a startup.

We started 5 years ago, and I had been a client for a long time, actually almost 13 years.

And I, part of the time, from 07 to 09, I actually kind of left part-time and went to go run 1 of our portfolio companies as CEO.

And when I came back, I just had a different feeling about the firm and the work and I found that I was fortunate to be a senior partner at Kleiner at the time.

And as you, for these large firms, just like large companies, as you kind of get into senior management, you spend more and more of your time in meetings, less kind of doing the functional work and more around kind of trying to help run the firm a bit.

And I've just really loved working hands-on with founders and with portfolio companies.

And I just felt like our firm had kind of grown quite large and I was spending more time on internal meetings than actually just spending time with Companies and the industry had changed a lot too.

I mean as you all probably know There are a lot more funds now.

There are a lot more startups They can be all around the country And so venture investors really have to be kind of open for business and available to meet with companies all the time Because you just don't really you know You never really know what's under the hood unless you have a meeting and you need to meet people and so I just I felt like Having a job where all I really did was just meet with companies, get to know talented people who might start companies, who might want to work at portfolio companies, and helping portfolio companies is really all I wanted to do with less overhead.

And Seed was this new category that was still pretty small in terms of the number of firms and also the number of well-respected brands in the seed category that were known for giving hands-on help.

And yet it was it's the biggest it's kind of the the biggest part of the funnel and so it seemed like a great opportunity to both start something new, make it more personal, make it very small with very little overhead, where really all we do is very pure and very focused.

And so what did you see at Kleiner and places like that that you decided you were going to do differently with your fund?

It did get quite large, and I think this isn't specific to Kleiner but in general, the math of venture capital is such that venture capitalists make money through a combination of fee income and what is called carried interest, which is basically profit sharing with their investors once you've returned the capital.

And when you do the math on funds, if you have a 500, 800 billion dollar, 800 million or billion dollar fund, the number of multi-billion dollar companies that you have to be an investor in per fund is quite large.

When you do the math, it seems very unlikely that most venture capital firms will be able to generate the kinds of returns to investors and to themselves that they have in the past.

And so the math, I think, just works much better.

And it's much more aligned with entrepreneurs if the funds are smaller.

But I won't, I mean, having the chance to be a female founder and to hopefully build a brand that gets very, hopefully well respected by entrepreneurs and investors for being a blue chip top tier firm in terms of the quality of work, the quality of relationships, the integrity and the outcomes and helping to put numbers on the board and move the needle for women in tech is something that really motivates me.

And you mentioned that 1 of the things was that you wanted to have more of a hands-on approach with helping the founders that you invested in.

What kind of things do founders ask you for help with and how can you help them?

Well, At seed stage, I know it's hard for us to see, but how many of you out there are founders?

So it's, and how many of you are seed stage or pre-seed founders?

So at seed stage, as you know, you're, you know, you have not enough time, not enough money, not enough people.

And so founders generally want advice or help or guidance on multiple fronts.

Many times a founder has never hired certain types of people before.

They've never hired a head of sales or they've never hired a UX designer and things like that.

So they like advice and both introductions and help filtering and knowing kind of where to set the bar in terms of who to hire when and how to know that the right people.

On the financial plan, as many of you may know, the bar has kind of been raised in terms of how much Series A investors want to see you accomplish from seed stage before you raise an A, and then from A to B and B to C.

Because a lot of these funds have gotten bigger, they have more money, so they can kind of wait and write a bigger check at a higher valuation for more traction.

And so I think at Seed, or even pre-Seed, getting good advice from experienced folks on what you really need to prioritize and accomplish with the money and the time that you have at Seed can be important.

And customer introductions, feedback on roadmaps, help with positioning and strategic messaging and PR.

So just kind of across the board, that's the way we like to help.

And so, you know, if 1 of the things that you're doing is working so closely with the founders, What kind of, what traits are you looking for in the founders?

What really attracts you to the companies that you invest in?

Because at this stage it is all about the people.

And so, you know, high integrity, high intelligence people who have also shown a certain amount of hustle and scrappiness in figuring stuff out before they've raised money and then having kind of an aggressive but doable plan for what they're gonna do with the money and within a reasonable period of time.

So we usually suggest that your seed round last you at least 18 months, if not 24 months or more than that.

Going a big mission and vision that's quite ambitious that can be backed up by here's where we wanna be and here's how we're gonna get there over time.

This is what we wanna get done the next 12 months or the next 18 months.

Relevant backgrounds if possible, or at least a personal connection to the problem that the person and the team is trying to solve.

We'd love to see ideally some kind of a technical angle or a technical solution.

And we also talk sometimes when we meet with the women in each class, so I will just say it.

I do think it can be harder for women to raise money than men.

And so I think kind of that kind of sucks and we will fix it over time.

But for now, the thing we have to do is know what you're up against being a woman entrepreneur, raising money in a largely male industry of VCs and understanding then kind of where you are and what you need to work on, because a lot of pitching, well, the other thing I'd say is storytelling is really important.

And being a great storyteller is important.

And if you are not a great storyteller, you can become 1.

I have seen so many people who started out not being great storytellers become excellent ones, and it's just a matter of feedback and practice.

Especially at that early stage where you're really selling a dream.

So you mentioned that it's potentially harder for female entrepreneurs to be pitching to male investors.

How does somebody pitch to somebody who is not necessarily their target market?

Well hopefully there are plenty of, I mean hopefully you can pitch women, and the more we can do to get more women into the venture industry, the more women you'll have to pitch.

So you're very likely to have many men in the room.

But look, if you look at Pinterest or House or Stitch Fix, I mean, the majority of the investors in those companies are men, so obviously there are men in the industry who understand problems that they may not personally relate to.

Right, I mean it goes to show doesn't it, if you have an enterprise startup then the people who you're pitching to aren't your users in that situation either.

So it is possible, it's just all about that storytelling.

And the folks at YC publish a lot of great things about like tips and tricks for how to go about doing it.

But I think For many of you, if you're going into a fundraising next, you know, generally starting out with what is the mission and vision of the company?

Venture investors are looking for large addressable markets.

What is the problem that you're trying to solve?

Who's on your team and how relevant is the team?

What is the product that you've built if you have built something, or what do the wireframes look like, what kind of traction or feedback have you gotten from the market in terms of whether people are gonna like the product or whether they do like the product, and what is the financial model and the economic model look like, and what are you gonna do with the money?

Like that's pretty much how I think those are the main elements of the story and just how you tell the story and the personal narrative that goes along with that I think is what investors are really looking for.

Yeah and I think a lot of it just comes with confidence as well, just walking into that room with confidence.

So how would you advise the women in the audience to be able to internalise that and project it in those meetings?

I mean, it's exactly what you said, Kirstie, which is, you all, there are some great examples of women founders out there who have raised a lot of money or building quite valuable companies.

And I think, especially with a lot of the news that's come out in the past week.

We hopefully have a better window than ever, more openness, more support than ever.

I think there is a gathering army of not just women but also men who realize that the deck has been somewhat stacked against women in the industry for since the beginning of the industry and that it needs to change.

And there's also just such an amazing ecosystem of people who have raised money, who you can friendly pitch your story to and get feedback and iterate.

I mean, nobody comes up with a perfect pitch right away.

Everybody iterates on it and gets feedback and practices and it gets better.

Yeah, and I think that's 1 of the things that people don't necessarily realise, that there's a lot of people that can help you with the pitch that have been there and seed stage investors are very much focused on helping their companies get to the next stage and will help with those pitches.

All this news that you just mentioned, you know, what anyone knows

Has anyone heard some stuff going on recently?

You know, as a female VC, what's your take on it?

I'm pretty pissed off, but I think we have to use it, you know, we can't just be mad, right?

We have to use this as an opportunity to come up with new ways of doing things, new solutions, using it as an opportunity.

It both is, I think, a carrot and a stick, right?

There's not going to be 1 answer, there's going to be multiple things that we can hopefully do to be constructive with what we've learned in the past week.

And I don't think that this is I don't think the story is over right I think more Sad Stories will come out over the coming weeks about behavior that shouldn't happen in the industry.

That's unacceptable that will piss us off even more.

And so we have to, you know, all of you, hopefully, you know, this will give you more motivation to be successful, to kick some major butt with your companies, to build modern, inclusive cultures, to bring, like to hire a diverse team, to nurture and develop a fantastic slate of lots of women and people of color on your management teams and in your ranks that will become the next generation of CEOs.

So something that I had the fortune of having breakfast this morning with a bunch of general partners at a bunch of women general partners at different firms and we talked about what can we do to help the associates and principals, the women and people of color at other firms so that we have more people becoming general partners faster so there are more people to call when we have a successful company that's going to have choices raising an A or a B or a C, we at Cowboy Ventures are going to try and steer those companies to modern firms that have women and people of color in the investing positions.

And if you all have only men at your firm and we and the founders, I mean it's their decision, but most of our founders feel this way.

If they have a choice, they would rather work with a modern firm.

Like, why should we make money for assholes?

And you know, if a VC misses a deal that turns into a hot deal because the founders have said, no I'm not going to work with you, that's how change can happen.

Yeah, so I think, you know, if you have a company that's successful, for entrepreneurs and friends of yours who have successful companies, or If you're a great operating executive that is gonna have lots of opportunities to be recruited to be a VP at different companies, you're making a choice kind of with your feet or with your wallet by who you make successful.

And so I hope that you will use your leverage to steer people and steer yourself to firms and teams that are inclusive and diverse.

It's going to take a concerted effort, but we can get there.

So, you know, we've talked a bit there about choosing these modern firms to work with.

But how else does a founder, what should they be looking for in an investor?

How do they decide who they should be working with?

I do think being networked with other women and other entrepreneurs, there were a bunch of articles about how the information that came, from the information that came out has been kind of an open secret in Silicon Valley for years.

And some people knew about it and some people didn't, but you have to ask.

We investors do references on entrepreneurs before we invest.

Entrepreneurs and executives who are thinking about joining startups do references on the folks that you are considering joining.

And hopefully you'll figure out, are they people of integrity?

What do I need to know that I'm getting into?

And I'm hoping that we'll come up with some way.

I mean, I think the great thing is that women and other people are starting to come forward and name names and talk specifically about people or firms they've had bad experiences with.

And all this stuff has just been, I mean it's happened to probably most women in this room.

You know, it just makes this little pit in your stomach that causes you to doubt whether you're welcome in technology, whether that firm really wants you to be there.

I mean so there's so many microaggressions and little cuts that people people do because subconsciously they're trying to make you feel uncomfortable or they really just don't they don't have confidence in you but you should all have confidence in yourselves.

And I'm hoping that more people will be encouraged that you'll be a hero or a heroine by coming forward and being brave, because it's a hard thing to do, but factually and using data and evidence showing what's happened and that it's not okay.

Because there are many people that have your back because it's not okay.

We ask founders to tell us if investors have behaved badly because we have the power to be able to do something to help.

You know, we can stop them coming to Demo Day, or we can, you know, there's numerous things.

But it's so hard to get women to tell us who they are talking about, and it just requires so much bravery.

But the more that it happens, the less bravery it will require.

I think in the last batch that we talked to, a woman said something about a male VC who had said some very inappropriate things and you all found out his name and disinvited him to demo day.

So we haven't really talked much about your portfolio and the kinds of companies that you look at.

So being as being we are generalists you know there are some vertical specific funds like the only invest in health care or big data or robotics.

Our goal is to hopefully identify and work with the most promising startups at stage stage that are technology oriented startups every year, whether they're enterprise or consumer oriented.

And so we have a I think a really interesting mix of founders and companies that we've gotten to back.

Some of them are consumer-oriented, like Brit & Co, Brandless, which is a company that's launching on July 11th that we're super excited about, and both female CEOs and founders, and also security companies, infrastructure, Textio is an enterprise SaaS company that we've backed, also founded by a fantastic woman CEO.

So it's really, I think hopefully we can be helpful and hands-on in all the things that I mentioned like team building and go-to-market strategies and helping you get ready for your Series A regardless of what type of company you are.

And do you think that founders should consider, you know, how should they consider these funds that say that they're vertical specific versus the generalist approach?

I mean, the fun thing at Seed is, 1 of the reasons why I also decided to move earlier from being a Series A investor to a Seed investor is Seed is collaborative.

So at Series A, generally the way the industry works is you're gonna pick 1 Series A lead investor and that firm is gonna own 20 to 30 percent of your company going forward and and hopefully your prior seed investors will invest per rata, but you can't, you don't split your series a use usually between 2 different series a firms at seed we don't we always co-invest with other people so we can partner with a data-oriented firm or an enterprise focus firm or consumer oriented firm and we do that quite and also with with angels individuals who have special expertise or relationships with the founder so it's kind it's more of like a village and it's a team approach to trying to help the company because it's the riskiest time.

So we feel like having lots of good people around the table to help the company and support them is more fun for us and is going to help the company more.

Yeah, it's definitely different at Series A where you have 1 investor who's on your board and they're the ones that are driving it.

The seed stage, it just takes, Like you say, a village.

And I also think, hopefully, our village tries to help guide and advise the founders on who is the best Series A board member, because that is really a big decision.

It's really hard to get divorced from your Series A board member.

Right, you should treat it like a marriage.

Yes, and that person is gonna help you grow as a CEO, and if you wanna be a CEO that lasts for the next 10 years running your company, making sure that you develop a relationship of trust with your series A investor who's really, who could try and get rid of you or could help you develop is a big deal.

And that's 1 of the things that we work with our founders on is trying to help them find that right person.

So we're running out of time, but so, you know, we have a room full of women here, so many of them, as we've seen, are founders.

What's the biggest piece of advice you can give to them to help them pitch to a seed investor and be successful?

So as I mentioned, I do think that women have to walk a finer line in today's environment of mostly male VCs than guys do.

As you may have heard me, I try and say this whenever I have the opportunity, what if my trigger phrase is, he's such a good guy?

The phrase good guy, people say it all the time and it doesn't really mean much other than like high 5, we love that bro.

Yeah, exactly and I see this all the time, you know, in meetings with VCs where if we have a company that's doing well and we're thinking about who we're gonna call for our series A, and it's mostly men around the table and myself, and we make a Google Doc of who are the target investors for the round?

And someone will be like, oh, what about Scott Jones?

And someone else will be like, oh, I love that dude.

And then someone else will say, oh, what about Brian Smith?

It's like, oh, love that dude, love that guy.

Like it doesn't mean that he's gonna be a great board member and that we should get married to him for 10 years, but then if I bring up a woman, what about Susie Smith?

They'll say, oh, does she invest in security?

Like there's no, oh, she's such a great girl, or she's such a great woman.

But that's kind of what, but the same thing happens to entrepreneurs.

Like if you pitch, or a group of guys pitch, in the closed session after you leave, the VCs will be like, I just love those guys.

And someone else will be like, yeah, such good guys.

But it's just not fair because they don't say, they can't say that about a woman.

Like it's such a, it's like what if I say something that's offensive or like I just love that woman, what does that mean?

But women don't say it's about women either.

But that's kind of the world that we live in, right?

So the advice I like to give women entrepreneurs is be confident, but don't stretch.

Like if you are a little too arrogant, or if you kind of puff things up a little bit too much, they will ding you for being an exaggerator.

But don't be too shy or underconfident, because to be honest, I think guys can get away with being, oh, he's just an introvert.

Whereas women, and there was an article recently that basically showed a quantitative study that showed that women and men get different judgments and they get different questions, depending on, basically, by investors.

We just have to know how the deck is stacked and work around it.

You come across as confident but not overconfident and not spinning, because they will ding women for overspinning.

Women are overly dinged for not being quantitative enough.

I have a friend who works at a unicorn company who her father is a math professor, she was a math major, she was the COO for a company doing a hundred million dollars in revenue and like in charge of quantitative acquisition, marketing, all these things.

When she interviewed at this unicorn company, first of all, all of her interviews were with men.

And every single person asked her, how do I get the confidence that you're quantitative enough?

Like, There's just no way that men get those kinds of questions.

So if someone asks you, what's the CAC, what's the LTV, what are the margins, what's the revenue plan for next year, just know it, just practise it.

And if those are things that you don't know about, or you're not sure how to calculate them.

These are the things that you can ask for help from from so many people around.

And yeah, you know, women really do have to know those numbers back to front because they will get pushed on them much more.

If people are asking you questions or there's some follow up things, take notes, send an email the next day and say, hey, here are the things that we discussed, I wanted to follow up on these points.

Like showing that you're super conscientious and that you're on it.

Well actually, I think there are some women who get put into this category of like, she's a killer.

Like that's kind of category that you wanna be in.

That's how men think about, there's like women and there's like women killers.

Like she just like was all over her shit and she just knew her numbers.

Like VC firms that are mostly male do want to, they want to show the world that they are, that they get it, that there's with it.

And if they don't attract women founders, they are going to be leaving a lot on the table.

And it's going to be harder for their firm and for their portfolio companies to attract women or people of color if they don't walk the talk in some way.

And so I think they are more open for business than ever to back a more diverse set of entrepreneurs.

You just need to know what you need to do.

See all Y Combinator transcripts on Youtube

Aileen Lee and Kirsty Nathoo at the Female Founders Conference