30. The Dark Side of VC | Predatory Investor Practices (Joanne Wilson)

Due Diligence Podcast DownloadNick Moran Angel List

Joanne Wilson joins Nick on The Full Ratchet to discuss predatory investor practices and the dark side of venure, including:

  • Predatory_Investors_Joanne_WilsonOn the founder-side…  What are some of the activities you’ve seen from early-stage investors, that are predatory toward founders?
  • What are some of the major differences between investor practices of the mid-90’s and today?
  • What actionable measures would you recommend founders take in order to help prevent getting taken advantage of?
  • Moving to the investor-side.  What are some of the things that later-stage VCs will do to eliminate or water-out an angel’s equity position?
  • What can early-stage angels do to prevent this from happening?
  • How has your approach evolved throughout your investing history to position you and your portfolio companies for success?
  • Generally, what is your take on the gender balance in venture, how has it changed and what specific things are you involved in to help promote the role of women?

Itunes:  http://bit.ly/1E07t7N

Direct-audio:  http://bit.ly/1CeW7e2

Guest Links:

Key Takeaways:


1- Stacked Notes


 Joanne talked about this emerging occurence of startups that raise a convertible, at a certain cap, and subsequently proceed to raise additional convertibles at higher and higher caps instead of doing a traditional priced round.  The challenge for early investors is that, upon conversion, the original terms are no longer fixed and the cap does not apply as initially laid out.  Depending on the number of convertibles, in the stack, and the valuation cap amounts and/or discounts at each, the riskiest capital may not be rewarded for the risk taken.  And it’s often not the founders that are trying to hurt their early investors but rather the lead VC that comes in at a subsequent round.  If they see an opportunity to lower the eventual equity of other investors, they may structure the round as such.  All angels should be very wary of this as the stacked convertible seems to be becoming more and more common.  As Joanne advised, a side note or document that protects the seed-investor from cap dilution at a subsequent convertible raise can be a great way to protect against this.


2- How much to sell?


Joanne had a simple recommendation for founders, when it comes to the amount of equity sold at each round…  she said:  you only want to sell 20% of your company at each round.”  We’ve talked about this in the past but Joanne’s perspective was unique.  If you think about it, every startup that doesn’t exit fails b/c it runs out of money.  There are myriad reasons why a startup runs out of money, but why let an over-inflated valuation be one?  I wish there was a study on this so that I could site some data but I’d love to see figures on the number of startups that have product-market fit, a viable business model, a compelling growth trajectory but have to wind the business down due to an inability to raise b/c of a previous inflated valuation.  Of course, the alternative to setting too high a valuation to get more money, is to set the appropriate valuation but to give away more equity for more cash.  So in this case the founders are going to sell a higher percentage of equity in the round at hand.  Again, if there’s not enough equity in later rounds for investors, they will pass.  And if the founder’s continue to give away too much, the cap table may be unfixable, if they don’t have enough of the business to stay motivated and/or there’s nothing left to sell in exchange for equity.


3- The Role of Women as a Consumer


I’ve have seen some stats on this now from a few startups about the % of online transactions completed by women vs. men.  Joanne mentioned that about 85% of all online transactions are completed or influenced by women.  This not a recommendation to ignore men when it comes e-commerce.  But whether your target user is an adult woman, man or a child, you’d be neglecting a major aspect of user acquisition to ignore the role of women as a purchaser.  In the tip of the week on episode six, we discussed the importance of startups that know the difference between users and purchasers.  Clearly, if you are reviewing a startup in e-commerce, it is evident that regardless of target market, the role of women as a purchaser must be well understood.


Tip of the Week:   The Value-Added Investor

Below is the “Tip of the Week” transcript from the Podcast Episode 30: The Dark Side of VC- Predatory Investor Practices (Joanne Wilson):
Joanne mentioned this point about creating a Google Group for all of the entreprenuers that she has invested in.  And this group has evolved into a nation-wide, collaborative atmosphere for it's constituents.  In previous episodes, we've talked about the benefits of accelerator and incubator communities, but we haven't addressed the offline, unformalized embodiments of incubators.  As much as an investor can help a startup, other founders, maybe even moreso, can benefit from a community of like-minded driven, individuals.  When I think of an investor's post-investment, contribution to a startup, I don't think of an investor as the difference between success and failure, but I do see three areas where they contribute:
  1. Speed:  Speed in accessing additional capital, customers or partners
  2. Cost:  Identifying suppliers, service providers and capital contributers at a competitive fair rate
  3. Support:  Coaching, mentoring and listening throughout the many challenges that founders face
(more…)

*Please excuse any errors in the below transcript

Nick:      Today Joanne Wilson joins us from New York City. Many of you know here as the Gotham Gal as she is an avid producer of content over at gothamgal.com. And she is an active early stage investor with angel investments in more than 50 different startups. Joanne, can you start us off with a little background on how you became involved in startup investing?

Joanne:                Yes. So I was involved in the first generation of the web which I, you know, would say in the mid 90’s when we though this Internet was going to change our world as, and obviously has. And so when I was in that generation of the web, and saw some startups of friends that I knew, I did invest in them and got involved in them. And then I sort-of got off the frag and got out of the business for a while because everyone got out of the business for a while, because the entire industry sort-of imploded and then came back as, you know, as Web 2.0. And so in that next generation as I was watching really new companies that were launching on the web that I personally was like reading every single day, so more content-oriented. I knew of one of them which was [00:00:58.07] that was raising money and I decided, you know what… My husband came home one day and said they’re raising money, and he said, “You know, you should invest in them. You’d be really good at this.” And so I called and I did and then that was the beginnings of a very long career in investing.

Nick:      And what was the date on that?

Joanne:                That was in 2006.

Nick:      2006. So over 50 investments in the past, I guess call it 8 years?

Joanne:                Seventy, yes.

Nick:      Seventy now? Wow!

Joanne:                Yeah.

Nick:      That’s great. So, you know, a number of times on the podcast I’ve had various investors on and this topic of predatory investing has come up, whether it be previous angel investors that are getting watered out of cap tables or founders that are really taken advantage of by some of these shadier characters in the business. So I want to touch on this today with you, and let’s start out with the founder side. So what are some of the activities that you’ve seen from early stage investors that are predatory toward founders?

Joanne:                You know, it’s a mix, right? I mean I’m in a bunch of different businesses, so I see it in a variety of different businesses, but sometimes you have no choice. So you start a business and you can’t raise money and you talk to millions of people and you’re very frustrated. No one wants to give you any money. And then all of a sudden, you know, someone shows up out of nowhere and says, “I’ll give you funding.” And it’s not the terms that you want, and it’s maybe not the investors you want, but you decide to take it anyhow because you have no other choice but to move your business forward.

Nick:      Sure.

Joanne:                So it’s really to say to a founder, “Maybe there’s a reason no one’s giving you money. Maybe no one’s giving you money because you’re the only person that believes in this business.”

Nick:      Yup.

Joanne:                That would mean that, you know, they evolve or they pivot or something happens and all of a sudden becomes this huge business. You know, you hear that very, very, very rarely. But I do think that there is a way that people raised money 15 years ago, which is very different than how they raise money now. I do think it’s more entrepreneur friendly. I still only see term sheets from people that have been in the business for a very long time and I think to myself, “Wow, that’s a very mid-90’s term sheet.” And I’m a big believer and a big supporter of entrepreneurs, and I really believe that when you invest in a company, if you think that there is this opportunity and it’s going to be big, then we should all do it right together. Don’t overvalue yourself. Don’t take advantage of anyone. Everyone is, “I’m taking a risk. I want to help you. You’re going to grow the business. And so, you know, we’re all in this together.” And I think that that’s the best way to think about it. Lawyers tend to not do that. Today for example, I was back and forth with an entrepreneur. Lawyer redid the side letter I had and I’m just like, “No, I’m not signing this. This is basically why I have a side note. You’re basically now putting in all this things to make the side note absolutely worthless. So I have no interest in that. Either, you know… I took all the risk. I’m putting in the money in the beginning. I’m helping you think through your business and the platform. I will not be taken out of the next round by a VC because I’m not putting a minimal $100 000 in, and I won’t be taken out in the next round because I don’t get to keep my pro-rata share.” That’s not my thesis, although a lot of angel investors say we put money in the first round and then I’m out.

Nick:      Right.

Joanne:                And so, I’m being honest from the very get-go. Either I get to follow you continually and decide when I opt out, or I’m not interested in putting money in your company.

Nick:      Yeah. I’ve read on your blog before, you talk about this side note. Is that a pro-rata that is sort-of a side document with your investment?

Joanne:                That’s it. It’s two things. It’s one is, I want to be able to invest at every capital raise as long as I want to stay in the deal. I mean, obviously they get very expensive at one point. I might say, “You know what, I’m out. I got enough business and money in this thing and I have enough exposure, and I’m still there and I’m still helping you, and I hope that the amount of money I have in there is worth 5 or 10 or 20 or whatever it is times its worth as you move forward with your business. But I want to be able to continue to keep that 1% for as long as possible in the business.” That’s all it is. The second thing it does is, a lot of companies now do this thing – it’s very big in Silicon Valley – where it is, you do a note, and let’s say the note is at $5 million cap. And then you decide, “Oh my God, I need more money. Let us put more money on this note, and we’ll raise it to an $8 million cap. Oh my God, I need more money again. I’m going to raise more money on this note with the $10 million cap.”

Nick:      Notes on top of notes, right?

Joanne:                Well, it’s ridiculous, because then you go out and you raise your Series A. And everyone in the original note converts, but then you aren’t converting it what you thought you put money in that. So if you put money in and you thought $5 million cap total, I go on in 50, I own 1%. Oh, guess what, you don’t because it’s a blend. So now all of a sudden you don’t own 1%, you own 0.7%. And to me that’s absolute bull*** and you are screwing the original investors that gave you the money in the first place.

Nick:      Is there a way to write in clauses on your convertible so that the cap always applies in the event of a subsequent convertible?

Joanne:                Sure, that’s why I get a side note.

Nick:      Right, okay. Got it.

Joanne:                Nothing’s standard. It’s all about the legal documents.

Nick:      So you had mentioned earlier that there’s kind-of a big gap between the way things were done in the 90’s versus now. What are some of those key things that jump out at you as moving towards this more equitable, appropriate, and founder-friendly environment?

Nick:      Well, you know, I wasn’t doing really that kind of investing back then but I just know that it’s a little more… it’s less entrepreneur friendly and more investor friendly in regards to specific warrants, percentage of interest when you have to convert. I mean those kind of things, they’re really just different, and there’s a lot more money out there now. So in many way the entrepreneurs who have really great businesses do have more negotiating power, but I think that the deals… You didn’t see as many notes as you do now. It was much more equity-driven. It is equity-driven on a note, too, but it just takes the first really big rounds that everyone converts into equity. And the reality is either you move forward or you don’t, so with a note or it’s an equity round, it doesn’t really make any difference. But I just think it’s much more entrepreneur-friendly. And it should be. Everybody should come to the table and feel when they walk away, we feel good about the deal we’ve got.

Nick:      So aside from hiring a great attorney, what are some of the actionable measures that you would recommend founders take in order to prevent getting taken advantage of?

Joanne:                I think you only want to sell 20% of your company in each round. And you’ve seen more 25% and 30%, and it depends on the company. Hard goods needs a lot more capital in order to succeed and so it’s really hard to only raise and sell 20% of your company unless you are going through the roof. I think there’s those kind of things, as long as expectations are set for everyone. I mean, I really do believe at the beginning a lot of entrepreneurs get carried away with like, you know, their valuation. And if you don’t start it right at the beginning, you end up in a bad place very, very quickly if you can’t raise more, if you can’t raise money at a higher valuation than your first round.

Nick:      Right.

Joanne:                And so, you know, when I say to you, “Well, you should be between $3.5 million and $5 million on your first seed round,” you’re like, “Well, I want to be at $6 million.” It’s like, why? First of all, you’ve never ran a company. Second of all, you have no [00:08:18.23], and third of all, you’re not showing any massive traction that you deserve to be at $6 million.

Nick:      Right.

Joanne:                But if you’re at $6 million, that means you have to be at $7 million when you raise money on your next round. And so why put yourself in that position. If you really believe this is going to be $100 million – $200 million company, do it right. You know, a lot of people, I think, at the beginning are like, oh, they want to be really generous with all their employees, which is great. But you have to remember there’s a reason why many of these things are set up the way they are, why there’s an option pull for so much, why you see consistency among, you know, your CTO versus your first programmer versus your head of marketing versus your head of sales, what kind of percentages of the company they get at different time periods based on their seniority, because to people who don’t understand it, coming, “Well, I deserve 10% of the company.” Actually, here’s why. And so I think it’s an education.

Nick:      I’ve spoken with a number of founders out there that, they’re trying to justify these $8 million to $10 million valuations at the seed stage because the opportunity is so huge and because it’s, you know, multi-billion dollar unicorn potential, and you know, I got to break it to them. Every opportunity I’m looking at is a big opportunity, you know. That doesn’t differentiate you. What differentiates is product-market fit and traction and proof of concept and some of these other factors.

Joanne:                Right. I mean it takes time to get to there, and there’s more than a handful of companies that I’m invested in now that are going to have a $5 million raise with a $20 million pre, which is 20% of their business. And I’m thrilled for them. And it took a while to get there, but now that they’re there, the company is set, the foundation is set, the team is set, traction is set, and you just really are just multiplying on what you have built and grabbing real estate in a much healthier way, and bringing in a ridiculous amount of money early on with a set price that is not easy to realize. You’re just… you know, I think everyone can go to sleep at night.

Nick:      You know, speaking of which. This is a little off topic, but have you ever been in a scenario where a subsequent VC comes in and they offer to buy out your share, give you liquidity, and maybe you don’t like the direction that the terms are going or you have concerns about some of the downstream financing and you’ve exited early?

Joanne:                You know, I haven’t, but I have seen people do that. There is one company in particular that we had a friend that was in, and they were given the opportunity to get out. And my gut as well as my husband’s was like, sell now. So you know, I do think that, you know, at each turn you have to look at the valuation, where the company is at, what the industry is telling you, every single pinpoint, and make that decision based on what you were looking to do. I mean, I learned this way, way, way back in… I mean in college, you know. And I was in this class defying stocks, and someone said… This professor is like, “You should not hold on to your stock like long lost lovers.” You know, if it’s time, it’s time. And I really like that. You know, I just even think, even as, you know, my husband and I, you know, even though I’ve only been investing for like 9 years now, he’s been a venture capitalist for 25 – 30 years, is that we have been in the business of investing in startup companies and following them through, and when they get to a point where they go public or they’re sold, we slowly get out of those businesses because that’s not what we’re good at. We’re not stock traders. We are business growers. And so I think that it’s important to know what you’re looking for.

Nick:      Probably, pretty clear at this point to most of my listeners, but your husband is Fred Wilson. So quite a pair I’m sure you too must make, and it’s got to help trade notes. Alright, so let’s move over to the investor side. What are some of the things that later stage VC’s can do to either eliminate or water out an early stage angel’s equity position?

Joanne:                Well, you know, most of the time they come in and they say if the company is doing great, “We’re taking the whole round.” And that’s it. I used an analogy with someone the other day and I say, “Okay, I’m going to use that again,” which is, if you ever built property from scratch. The very beginning when you’re building that property and you’re sitting down with the architect and you’re figuring out how it’s going to look, what your rooms are going to look like and all that. You’ve been on the property, and then you decide on a contractor. And then you move from the architect really to the contractor. Even though the architect is still involved, the person to trust now is your contractor. They build places. Architects don’t build, they create. A very big difference. And so I think of it as the same way, if he’s an entrepreneur and all of a sudden some big VC comes in and says, “Hey, we’re going to give you this much. Here’s what we’re going to do for you. You know, now we’re on your board. We’re taking… We’re going to help you build this company.” Very hard for an entrepreneur to say, “Wait a second. I have 10 people from my original investment that want to bring in more money or the pro-rata rights. And I’m going to let them in. And it’s only, by the way, $250 000 of this $20 million round, and that’s the right thing to do. And they’ve been with me from the beginning, and I think that is the right thing to do if they want to invest.” Now I’ve seen this one company where someone came back in. He was so excited of what was going on. He wanted to put in 5 times his pro-rata share. And so the entrepreneur said to me, “What should I do?” And I said, “Screw him. You know what, he gets his pro-rata rights and that’s it. And by the way, it wasn’t like he helped you at all from there to now. You know, if someone who had been talking to you all the time – not that I want to boost myself – but I was on the board, I sat with her all the time, I talked to her all the time, was always available to her. If I said to her, “Oh my God, I want to triple what I put in, or quadruple, or 5 times,” you would want to take my money because I’ve done so right by you. So it’s a very… nothing is standard.

Nick:      Yeah, I’m always confused when there is a great marriage between a potential investor and founder, very well lined on experience, you know, access to customers, ability to help fundraise, and then the founder says, “You know what, I don’t want to give you a pro-rata right.” I just don’t understand why they would use that as a bargaining tool because I don’t see the negative impact it would be for a founder.

Joanne:                I don’t get it. You know there was this one company that, she literally went out of her way to find me, and I decided to invest. I wanted her to sign my side letter. She was like, “You’ve got to put the money in now this week because I have a major VC coming into this thing.” And so I knew the VC so I could have gotten probably in on the second round, too. I mean, and I also am not your normal, in terms of getting my side letter, because I’m known in the industry. I know all the players. So, you know, I don’t think anyone’s been to screw me necessarily, although you never now. So she took my money, and then she didn’t sign the side letter a week later. I’m like, “Hey, you didn’t sign the side letter. I noticed, that’s why I’m coming in. I want to make sure you sign it.” And she said, “No, no, no. My lawyer says I can’t sign it because you can’t have it going forth. The next VC’s won’t like that.” And I thought to myself, “Wow. Red flag.” You are the entrepreneur of this company. You don’t have enough balls to say to your lawyer, “Hey, wait a second. I went out of my way to find this woman. I want her because I know she’s going to help me. There’s no other woman in this entire deal. It’s all a bunch of men. I need someone that I can fall back and have conversations with about different things.” And I said to her, “You know what, wire me back the money today. I’m out.” And she’s like, “Really? I can’t believe it. I so trust you. You know, I really want you to stay, but you have to understand.” I said, “Wire me the money by 5 o’clock today.”

Nick:      Wow! That will teach you a lesson.

Joanne:                I just feel like, you know, there’s always another great deal coming in the door these days. And that’s my thesis. And I don’t want to be involved in businesses where, here’s my money first round, see ya! That’s not how I operate.

Nick:      Wow! So I’m still new to this. I’ve been involved for about a year and a half, but recently I heard this story about an investor that… I can’t remember if they had common stock, no dilution protections, but a subsequent VC came in in a subsequent round, and they reduced the price per share down to something that diluted out all the previous investors, and then they covered the startup by granting a bunch more employee options. Have you ever heard of this happening? This was sort-of a strange scenario and it got me a little concerned about some sort-of later stage predatory VC’s.

Joanne:                That sounds like a really scumbag VC move. I mean, if it had to do with the fact that the business wasn’t doing well and they needed to bring in a lower valuation or they just wanted to get everyone out and take it all to themselves?

Nick:      I believe they were trying to take everything for themselves because the previous investors wanted to retain their percentage ownership, and they were watered out.

Joanne:                Shame on the VC and also shame on the entrepreneur.

Nick:      Good point.

Joanne:                You know, if that’s the kind of business you want to… is that how you want to do business with the people? I mean, you know, there’s a lot of dating that goes on before you put money into the company. And then once you put money into that company, you’re pretty much married to it. Nothing’s changing. It’s like buying a house. You can smash the house down and rebuild the house, but the house is never moving. And so I wouldn’t want to be in business with that kind of person.

Nick:      So from a term standpoint, are there any key things, whether it be in your side note or the equity or convertible note investment itself, that you would recommend early stage angels pay particular attention to, to make sure that they are protecting their position?

Joanne:                I think you have… First of all, you should have a lawyer. Number one, you should always have a lawyer to read your documents. And your lawyer you should think of as an early partner to say to your lawyer, “There are the things I care about. I care about pro-rata rights. I care about anti-dilution on a note that’s going to keep going on into eternity. I care about the interest rates that I’m going to get. I care about when this thing is going to be converted. If they don’t get more money in 18 months I want my money back.” I mean, there’s a million things that are important to you, right? And so I think it’s the same thing as an investor. I had a talk with someone about this today. What verticals do you want to invest in and what are you looking at in terms of building your own portfolio? What’s the importance? Are you interested in just putting in money once and calling it a day? Do you want to follow deals? You only have one to follow once? I mean, you have to know exactly what your thesis is in order to make a decision based on those documents. And so if it doesn’t fall into what makes sense to you, then you can say, “Okay, that’s not right because that’s not how I do business.”

Nick:      Yup. We are in the middle of a special series on best practices right now, and hammering home those points around, you know, develop the strategy, develop a thesis, understand if you’re going to do seed only and follow-on’s. So it’s great hearing that you also are supporting these points. But anyway, Joanne, how has your approach evolved throughout your investing history, and how has is changed in the recent years since you’ve gotten some experience?

Joanne:                I hate to use the Malcolm Gladwell theory, but I will because it’s one that’s easily understood, which is if you do something for enough hours you become pretty good at it. I think at one point, you know, I went back and looked at some of the early investments I made and I wondered, “You know, if they walked in my door today, would I invest in them?” So I think that I’ve gotten better at looking at red flags. Sometimes I know there’s one and I just can’t figure out what it is. I’m just like, there’s something like… There’s a reason why I’m not saying yes here but I’ve got to… I just want to figure out what it is. And I think the more you do it you get better at it. I mean, the one thing that I love about this particular business is that to be able to spend all day talking to super-bright people that are trying to build something and change the way they live their lives or how we live our lives, is incredibly lucky to be able to do that. The other thing is that the more you do anything, the better you get at it. But in this particular business, even though every deal is different, every entrepreneur is different, certainly at the beginning they’re all similar. You’ve got to hire the right team, you’ve got to get the traction. But each of them take on a life of their own. And besides meeting a variety of supper smart people – very different entrepreneurs – they all have very different business models and cultures that have set the tone for their businesses. And I think to me that is really fascinating, and it’s just great to be able to be a part of that. I mean, I’ve created this Google group with all the investments I’ve made, and it has sort-of taken on a life of its own. They all talk to each other, they all meet with each other, they create… They just had a meeting in San Francisco, a handful of them. There was one in New York. One was going to use the group to do this market study and, you know, it’s super cool because, you know, I say I’m not a VC but I play one on TV but there is something about the community of all these people because they’re all coming at a very different angle, but they have a lot of the same issues. And as founders, they can have those conversations. So every day is different, and I think that’s what I think is the most interesting thing of this business.

Nick:      Sort-of the Joanne Wilson incubator accelerator, huh?

Joanne:                Right. Although, I will say I was in Berlin this week and someone is running one essentially, and the amount of percentage they take of that businesses at the very beginning is insane, because you can get away with it over there. Not much longer, but I said, “Damn, I’m in the wrong business. I should setup shop for everyone in my office.”

Nick:      Yeah, free equity, right?

Joanne:                Yeah, exactly.

Nick:      Alright, so we had Ann Winblad on the program and I sort-of missed my opportunity to talk about the role of women a little bit. So I wanted to quickly address the role of women, both on the investment and the founder side, as you do a great deal of work with women throughout the ecosystem. Generally, what is your take on the gender balance in venture, and how has it changed, and also what specific things are you involved in to help promote the role of women?

Joanne:                Yeah, there’s no doubt. It is a heavily male-oriented community, although each city is different. I see more women in New York and more women that are applauded in New York than I hear about out in the Valley. I was at an event in Berlin this week and there was not even a question. It was heavily male-influenced and evening event. But you know, remember that women tend to network differently than their male counterparts as well, and so if they’re married they usually go home, they go see their friends, and they’re not as much interested in spending after the close-shop at the end of the day. The go home and they might work but they’re not going to an event to spend more time on their business. So it’s a very different networking, and their businesses tend to be different as well. I mean, that’s a pure judgment. There are plenty of businesses that are run by and started by women that are in very heavily-tech male-dominated areas. It’s just not as many. But I think we are seeing the shift. I think the next revolution will really be run by women. You look at e-commerce or content, but e-commerce in particular, 85% of the decisions that are made on purchasing on the web are influenced by women.

Nick:      Right.

Joanne:                And so, you know, why you would want to invest in e-commerce business for a women who’s not involved at the very top is beyond me because women attempt to… it seems to me that women rule the web in regards to execution on e-commerce. So I do think that when more women who are being invested in in the past half 5 years, 10 years, become household names with household products that become public, that get purchased, and it’s not just the same few handful of women that we hear about. And many of those women aren’t entrepreneurs. You know, they came in, they are hired, they’re phenomenal COOs or they’re phenomenal CEOs but it wasn’t their business. They didn’t start that business. And we’ll see more of these women entrepreneurs rise to the point where, you know, wow. They have built a $100 million or $200 million business. I think that we will then see a shift in regards to what gets invested because it really has a lot to do with the investing and, only of the active VCs in the US, 4.4% of them are women. Very, very low. It’s very hard to get someone on the other side of the table, who’s a guy, to connect with you and believe in what you’re building. And I do think in the end of the day, if your business is fantastic and your numbers are there, you’ll find the right money. I just think it’s a lot more difficult. And one of the things that I’ve done is put on this conference every year at NYU called the Women’s Entrepreneur Festival which really highlights women entrepreneurs and what they’re doing, what they’re building. And the people on the panels are all women. The moderators are all women. The speakers are all women. And the women on the panels usually run from Series A to Series C, so I think because of that, the women in the audience can really connect to those women on the panels because they say to themselves, “Well damn. I could do that. That’s not like someone who is made a billion dollar exit. That’s someone that… they’re not that far ahead of me.” So the conference – we call it the festival – is very interactive. We charge $350 for a ticket and that means real entrepreneurs come to these events, not $1800, $2400 that is being paid by a company. And so I think that has been a real big movement, but I think we were ahead of the game, but I think we’re seeing more and more of that right now that we aren’t the only singular one doing stuff like that for women.

Nick:      Any other organizations outside of New York or suggestions on ways that we all can help sort-of promote an appropriate gender balance for this industry?

Joanne:                You know, there’s a lot of groups out there around the country that are angel investors or meet-ups, for they’re meeting young entrepreneurs, but I really think that if you… It’s like, when colleges were forced to bring in so many people that didn’t have money or came from different socio-economic backgrounds or, you know, religions or whatever it may be, they were forced to bring in people to their schools, not a bunch or rich white kids. That was a really good thing because it made them think about the diversity of every single class and what is this class going to look like 5 years, 10 years, 20 years, 30 years from now. And it made an impact in our country. I think it’s the same thing with a business. When you start a business, you need to say to yourself, “Okay, how are we going to get to 50-50 gender balance in this business. Let’s make sure… We don’t have enough women now or we don’t have enough men.” I mean, I’ve made a conscious decision to invest in women. I’ve made a conscious decision to seek out African Americans. I’ve made a conscious decision to seek out other people beside white men. And you know, when you go to one of the meet-ups among all of the companies I’m invested in, you can tell. It’s very easy to just create a panel and put a bunch of men on it that you see on the internet, you know they’re names. It takes an extra step of effort to find the other people out there that are probably just as qualified, if not more that would create more interesting conversation, to put at these events. But you’ve got to work at it.

Nick:      Sure. So to round things out, we’ve got a few minutes left here. Joanne, what are you currently most focused on?

Joanne:                Too much. You know, I’m very ramped up and I have a bunch of also personal projects in the fire, and I always talk about balance and how difficult it is. Obviously I like being on balance because now that my kids are all gone, I mean, I’m all business all the time. And the nice thing is, is that because we’re in this business, we can take our business on the road. We can do it wherever we are. So I think that is what we’re trying to figure out – what that’s going to look like.

Nick:      If we could cover any topic in venture investing, what topic do you think we should address and who would you like to hear speak on it?

Joanne:                Good question. I’ve been very interested in hearing what the philosophies are behind different funds. You know, every fund is so different, and the way that they vote is so different. You know, you have some VC firms that they all have to agree on the deal. You have others where, you know, you just need one other person to support you. If you’re a micro fund, what do you do? Do you follow-on free rounds? Do you only do one round? You know, how do you go about it? I think that will be really interesting to kind-of know what goes behind the walls. I do think that there is a tremendous opportunity for the $30 million funds because it takes less money to start and build businesses. I think a lot of these companies that we’re building now are way overvalued. And it concerns me that we’re building these humongous companies with tons of people that are not all really doing a full job. They’re doing like half jobs because they have to hire so many people. And that means that we’re going back to what we tried to disrupt in the first place, was, do you really need like millions of people working for one company to make it a really successful, profitable business. And it does concern me about how much money is out there and what these valuations are at.

Nick:      So I’m a big fan of Gotham Gal, but what’s the best way for listeners to connect with you?

Joanne:                You know, my email is right there on my site. I pretty much answer every email. I really do. And I’ll say, you know, “Thanks for sharing. I read. I looked. It’s not for me. Best of luck,” or even advice. I mean, I’ve heard from someone warming the other way because like, you know, “You’re perfect for me.” And I was just like, “Great. But you have no business yet. You just have the idea. I don’t have the time to talk to you. But I am going to give you some advice which you can take or leave. Get rid of your AOL email and get a Gmail account.” Or no one’s going to take you seriously. So I do think that… You know, I do answer every email and I have certainly invested in businesses that have called me and I felt it was interesting and I met with them.

Nick:      Well, thank you so much for taking the time out of your busy schedule. I know you’ve just returned from Europe and we really appreciate you making the time for us today.

Joanne:                My pleasure. Thanks for asking.