In this episode of the 20 Minute VC, host Harry Stebbings interviews Anu Duggal, the founding partner of Female Founders Fund, an early-stage fund investing in female-led tech companies. Duggal shares her journey from being a female founder herself to starting a fund addressing the lack of diversity in investors and the challenges she faced raising capital for women-focused businesses. She emphasizes the importance of a strong female network in venture capital and how it has facilitated significant investments, such as those in Winky Lux and Maven Clinic. Duggal also discusses the importance of brand building for new funds and the evolution of the VC landscape to be more inclusive of female founders and investors. She stresses the potential for high returns by investing in women-led companies and the strategic approach to fund allocation and reserve management for follow-on investments.
We are back for another week in the world of the 20 minutes VC with me, Harry Stebbings and I would love to welcome you behind the scenes as we come to Christmas to see the festivities at the 20 minutes VC.
Harry Stebbings introduces the podcast and invites listeners to engage on social media.
So my foray into the world of venture capital was very much a result of my experience as a female founder.
Anu Duggal explains her transition into venture capital was influenced by her experiences and the challenges she faced as a female entrepreneur.
Sure. So exactly to your point, looking back in 2013 and 14, it was not an obvious investment thesis, but when you looked around for me, especially after our company got acquired, I started doing some angel investing in New York and got introduced to some great female founders.
Anu Duggal discusses the landscape of venture capital for female founders when she started Female Founders Fund, highlighting the non-obvious nature of the investment thesis at the time.
So by non obvious I mean opportunities that are not immediately apparent or mainstream but have substantial potential for growth and success.
Anu Duggal clarifies what she means by "non-obvious opportunities" and emphasizes the importance of recognizing and investing in these types of ventures.## Rise of Alternate Communities
"We have a thesis that we've been excited about around the rise of alternate communities linked to the decline of organized religion, particularly amongst the millennial audience."
This quote explains the investment thesis that focuses on the trend of declining organized religion and the resulting rise of alternate communities, which is particularly relevant among millennials.
"So a few examples of companies in our portfolio that we've invested in that follow the thesis include CoStar, which is an astrology app, Peanut, which is a social network for modern motherhood, and Hip Sobriety, a holistic alternative for Alcoholics Anonymous."
The quote provides specific examples of companies that align with the investment thesis, highlighting the types of alternate community-focused businesses that are being funded.
"So we look to invest early at valuations that really allow us to generate significant returns at scale."
This quote underscores the fund's strategy of early investment with the goal of achieving high returns, emphasizing the focus on valuation and scalability.
"We think it's an exciting category for a few reasons. So healthy SaaS like margins, repeat purchase behavior and really strong exit multiples."
Anu Duggal explains the rationale behind investing in the beauty industry, highlighting the financial metrics that make it an attractive sector for venture capital investment.
"I think that for us, we want to see high margins, we want to see repeat purchase behavior, and we really want to see brand differentiation from an exit."
Anu Duggal emphasizes the importance of certain financial and brand metrics that the fund looks for in consumer businesses, which are indicative of a company's potential for a successful exit.
"What we're really looking for is a founder that has a very clear point of view, particularly from a brand perspective, number one."
The quote highlights the importance of a founder's vision and brand perspective as a key factor in investment decisions, especially for companies that are pre-launch.
"I think what we've seen over the past two or three years is really a strong shift that's happening in terms of how male VCs are thinking about opportunities that speak to a female market."
Anu Duggal observes a positive trend in male VCs' attitudes towards investments in female market-oriented businesses, which is a shift from previous years.
"I think that as you see more of the traditional Silicon Valley funds backing female founders, seeing those founders scale, there tends to be kind of an awareness that female founders can go on to build interesting businesses."
Anu Duggal suggests that the success of female founders backed by traditional VC funds is leading to greater recognition of their potential to build significant businesses, thereby enhancing diversity in the industry.## Diversity in Venture Capital
"A fund with a website that's full of all men partners, that tends to really signify a certain culture within that firm."
This quote by Anu Duggal highlights the perception and implications of gender homogeneity in VC firms and suggests that diversity can lead to new opportunities.
"So we really feel strongly that there's tremendous opportunity around the power of the female network as a fund."
Anu Duggal emphasizes the strategic importance of the female network in sourcing deals and moving capital within the venture ecosystem.
"So I think for us it's really been about building a brand via that content and event strategy."
Anu Duggal explains how Female Founders Fund has focused on building a strong brand through events and content, crucial for standing out in the venture capital industry.
"Unlike my experience as a founder, there's no product or deck that really shows the vision for the fund."
Anu Duggal contrasts the tangible aspects of fundraising as a founder with the intangible aspects of raising a venture fund, emphasizing the challenges of conveying vision and potential to LPs.
"The recent focus over the last twelve to 18 months on female founders, on women in tech, on female fund managers, has really given us momentum with foundations and some of the newer institutions, particularly funda funds, that are looking to back more diverse managers."
Anu Duggal discusses how the increased attention on diversity within the tech industry has positively influenced the fundraising process for their second fund.## Investment Strategy and Fund Size
"The size of seed round in New York has grown from a million in 2014 to two to two and a half million in 2018." "With a larger fund, we're now leading, co-leading or participating in seed deals with an average check size of about what we've seen with these larger two to two and a half million dollar rounds."
These quotes indicate the growth in seed round sizes in New York and the fund's strategy to participate in these larger rounds, either by leading or collaborating with others.
"As a smaller fund, we're definitely more price sensitive than some of our larger fund peers." "We invest primarily in New York with 30 out of 35 of our current investments actually based here, and we definitely see more favorable pricing here in New York."
The quotes reflect the fund's approach to investment, focusing on favorable pricing and the strategic use of Prorata to maintain significant ownership.
"We've allocated at least 50% of the fund for follow on investments." "Through fpvs, we've actually invested more in follow on rounds than through the fund directly."
These quotes outline the fund's strategy for reserve allocation, emphasizing the importance of follow-on investments and the use of SPVs.
"I went through a year of having bad health issues right after graduating from business school, where I wasn't able to work for over twelve months." "Important it is to spend time building relationships with institutional investors, particularly when you're not actively fundraising." "You can get great returns by investing in technology companies built by women." "Time management and email management."
These quotes provide personal insights into Anu's experiences and beliefs, as well as the operational challenges she faces within her role at Female Founders Fund.
"We led, as mentioned, a pre-seed round in a company called Costar in the astrology space."
This quote highlights the fund's recent investment in Costar and the rationale behind it, focusing on the growing trend of astrology among the youth.
"What a phenomenal guest to have on the show." "If you'd like to see more from Anu, you can find her on Twitter at anU. Dougalnyc, that's at anudouglenyc." "Carter simplifies how startups and investors manage equity, fund admin, and valuations."
These quotes conclude the podcast with gratitude towards the guest and provide listeners with resources and recommendations for services beneficial to startups and investors.