VC Fireside: Lindsay Lee of Authentic Ventures

Lindsay Lee founded Authentic Ventures in 2016, after nearly 20 years as a founder and investor in Silicon Valley. Authentic Ventures invests in and supports seed and early stage companies through a highly diverse network, which over-indexes to women and people of color.

Lindsay recently sat down with Pilot CEO and co-founder Waseem Daher to talk about Authentic’s focus on inclusion, what he looks for in early-stage companies, and more.

Read excerpts from the discussion below, and watch the entire 45-minute interview here.

On Authentic Ventures and Diverse Founders

Lindsay Lee:
Nine tenths of what you’re underwriting with that first check is about the people. And networks can play a really effective role in qualifying the people, but if it isn’t inclusive, I think you just end up with the same kinds of people that end up getting funded. So we had this idea of building a network that was intentionally inclusive, and that over-indexes to women and people of color. And we’re excited about executing on that vision. We built a large network of over 1,000 people and just a lot of really smart, talented folks who may be one degree separated from someone like you, and Jessica and Jeff who are extremely well connected. We want to make that network or that universe of valuable relationships just a little smaller for our founders whenever we can.

Waseem Daher:
Yeah. That’s awesome. It makes a ton of sense, too, from an idea generation perspective, one of the things I’ve always been taken with is ‘let’s focus where other people aren’t focusing,’ because there’s clearly opportunity that other people are missing out on, and it seems like you’re kind of applying that same lens to a different angle. Which is, to your point, there’s a ton of extremely talented people here who happen to not be in particular network A, B, C; can we build and strengthen that, and what interesting properties emerge when we do?

Lindsay Lee:
Exactly. I mean if you look at the sort of funding universe today, I think it’s about just under two and a half percent of all venture capital dollars go into companies that are led by black folks and Latino folks. I guess it gets a little higher with women depending on the statistics you’re looking at, it’s anywhere between 3% and 9% if you include a woman on the founding team. But that’s still a long way to go, right? African Americans represent 13% of the overall population.

Waseem Daher:
Right.

Lindsay Lee:
Women over 50%. So you just sort of think to yourself there’s something wrong there. There’s a lot of opportunity and capacity for great innovation that’s just not being focused on for these structural reasons. So yeah, we’re excited about just finding people who are leaning into that. Not all the founders we back are diverse, but we’re really proud of the fact that two thirds of the teams that we’ve backed so far have included at least a woman or an underrepresented minority on the team, which we’re excited about. We also sort of have this view that we can affect change in other ways too. Maybe if the founders aren’t diverse or female, [but] if they really care passionately about building their company that way, we want to be a partner to them and help them do that, because that’s the other way we win here.

On What He Looks For in Early-Stage Companies

Waseem Daher:
As you think about how you evaluate companies and founders at the early stages, what do you look for or what are the attributes that tend to stand out?

Lindsay Lee:
Yeah. My good friend John Callahan at True Ventures has this saying, people, people, product. And I do, I subscribe to that view, man. I remember when I first met you, I walked out of the meeting and just thought, ‘that’s a guy I want to be in business with.’

Waseem Daher:
Thank you.

Lindsay Lee:
The company and sort of the exact go-to-market, it was still pretty early, you guys had just raised your seed, a lot of things were still kind of coming together, but you just have that feeling about people and I just feel like as an early stage investor, you’re an idiot if you don’t recognize that 80% of your hypothesis about what’s going to happen on the business and the unit economics and the order of operations, that shit is just going to be wrong.

Waseem Daher:
Right.

Lindsay Lee:
What’s the one thing you’ve got to get right? You’ve got to get the people side right, because if you invest in great people, I think you’ve got a good chance at being able to adapt to all the things that are going to come at you because it’s not going to be a linear path of success, right? You’re going to have all kinds of unanticipated things that happen. So we look for amazing people. It’s great when they’ve got a background that’s well suited for the problem that they’re going to solve, but that’s not a hard requirement. You, Jessica, and Jeff didn’t know much about accounting.

Waseem Daher:
Certainly we weren’t accountants, that’s definitely true.

Lindsay Lee:
Yeah, you weren’t accountants. You were consumers of accounting services, and things are going pretty well so far. So we don’t think of that as being a hard constraint, but I think what we care about is that founders are really passionately committed to understanding all the dynamics of the industry and the problems they’re trying to solve for customers. At a character trait level, with founders we really look for self aware people because again that just speaks to this recognition that we don’t have it all, we don’t know everything there is to know. I certainly don’t as an investor. There’s a humility that’s at the core of lots of really self aware people which just sort of says, “Yeah I’ve got a vision, a view, I’ve got conviction that we should do this or that, but also it’s subject to change, and I can’t do everything myself, I need to hire great people because this is going to take a team.” Again, all sort of related to this really important characteristic.

To talk a little more brass tacks about what we look for, we love situations where there’s a great team of founders, maybe some people around them, depending on how much money they’ve raised. We like if there’s some early semblance of a product and some emerging traction around that product that tends to really get us to lean in. Having said that we’ve also backed teams where it’s just two people and an idea, so we try to be really flexible. We tend to invest anywhere from seed through series B, with an overweight to the early stage of things. But at bottom we really try to find people that are deeply intellectually curious and driven, people who inspire us. I guess that’s the other thing that I really tend to look for in people, because if you can inspire me about what you’re building, I have an easier time imagining you being able to inspire amazing people to grow the company there.

On Mistakes He Sees Founders Make

Waseem Daher:
So we talked a little bit about what you look for and maybe what you’re hoping the teams do well, are there kind of a frequent set of mistakes that you see early stage founders make or kind of common pitfalls that they kind of run into?

Lindsay Lee:
Yeah. I mean I’d say a pretty long list, but among those … because we all make mistakes, I make a ton of mistakes.

Waseem Daher:
Of course, yeah.

Lindsay Lee:
But not leaning into their own gaps from a hiring standpoint early enough. It gets back to the self awareness piece. You might be really, really amazing at product, and that’s going to get you far enough along the line, you hope, to get some early traction, but anticipating the need to build some commercial sensibilities and have that in the DNA of the company to kind of keep that growth going. If you’re not doing that then you get to some point and then things just kind of stall. So it’s just this dynamic mindset of again thinking about gee, what am I really good at, what are my gaps, and really forcing yourself to sort of revisit that and given where we are and where we’re trying to get in the next three, six, nine, twelve months, I’ve got to really have an eye towards building the team around those gaps.

One of my founders who’s a Facebook guy and a really successful product manager, he was telling me about a conversation he was having with Zuck about when he was leaving to start his thing and he said, “Look man, one thing I’ve learned is the highest ROI thing that I do as a leader is spend time on hiring.” And it totally makes sense, right? In the moment it’s often so unnatural, because you’re so busy with all this stuff that you’re trying to make happen, and sometimes you’ve got resource constraints too, you’re just like shit I can’t spend time on that, but it’s an important part of not only getting things done and building the foundation the right way, it’s also part of what you’re selling to investors. I mean they want to see a great team, and they want to see you thinking ahead in that regard.

I’d say order of operations is another thing. We have to be focused and have a view of what we’re trying to get done and what the priorities are, but again that dynamism is really important, and if you’re not doing that I think as a founder and leader, it’s going to be really hard for your team to be that way. So I’d say that’s another really important thing. And I guess just finally, trying to really stay focused on your customers and the problem you’re solving for them. Prioritizing that, because ultimately to build a great company you’ve got to create value for your customers and sort of trying to figure out ‘gee what do investors want and what metrics’ and this and that, you’re not building the company doing that. You’re building a company when you can go out and you’ve got a hypothesis about the problem, you engage around that, you do something that creates value for a customer, be that a consumer or an enterprise, and it’s happening over and over and over and over again.

Waseem Daher:
Yeah.

Lindsay Lee:
And so the more you can kind of stack that equation of value to your customers where they’re getting more and more and more money for the same kind of dollar as it were, the more likely it is you’re going to be super successful. And so I’d say sometimes that’s a thing that founders that I’ve worked with have lost sight of.

Watch the whole interview here!