Reign Ventures is an early stage investment firm that focuses on women and minority-led startups, investing at the Seed and Series A Stage in promising technology and tech-enabled startups with high-potential founders.
Monique Idlett is the Founder and Managing Partner, Erica Duignan Minnihan is Founder and General Partner.
Monique is a globally recognized entertainment pioneer. Prior to founding Reign Venture Capital she served as CEO to Mosley Brands and Mosley Music Group, home to a multi-platinum roster of artists, including iconic producer Timbaland, One Republic, Nelly Furtado, and others. She brings over two decades of unprecedented success as a CEO working in entertainment, marketing, press, and entrepreneurship.
Erica has been an active investor in and advisor to early-stage companies for over 15 years. Before launching Reign, she was Founding Partner of 1000 Angels, Managing Director at DreamIt Ventures and Executive Director at both STAR Angel Network and Golden Seeds. Prior to beginning a career in venture, she practiced Investment Banking at Citigroup, Credit Suisse and Cantor Fitzgerald.
Follow Will Lucas on Instagram at @willlucas
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I'm Well, Lucas and this is black Tech, Green Money.
RAIN Ventures is an early stage investment firm that focuses
on women and minority led startups, investing at the seed
and Series a stage in promising technology and tech enable
startups with high potential founders. Moniquide let as the founder
and managing partner. Erica Diagno Miineon is founder and general partner.
(00:20):
Monique is a globally recognized entertainment pioneer. Prior to founding
Rain Venture Capital, she served as CEO the Mosey Brands
and Mosly Music Group, home to a multi platinum roster
of artists including iconic producer Timberland, One Republic, Nellie Fortado,
and others. She brings over two decades of unprecedented success
as a CEO working in entertainment, marketing, press and entrepreneurship.
(00:41):
Eric has been an active investor and advised to early
stage companies for over fifteen years. Before launching Rain, she
was founding partner of One Thousand Angels, managing director at
Dream Adventures, and executive director at both Star Angel Network
and Golden Seeds. Before she began a career in venture,
she practiced investment banking at City Group Credit Sweets in Cantor,
fitz jailed.
Speaker 2 (01:02):
So beginning with.
Speaker 1 (01:03):
You Heremonique, like, you know, when we're growing up, you know,
we have these ideas of what we're going to do
when we become big adults, you know, and I imagine
you did not imagine that you would be an investor,
you know, as a child, Like what what in your
career started to open up this the awareness of the
(01:23):
opportunity of investing, and what got you interested in it?
Speaker 3 (01:27):
I mean, I think it was it was like a
lot of things, I think just my journey in general,
not coming from a finance background. But then, you know,
being an entrepreneur, you're so focused on what you love
doing that I don't know that the proper education ever
went into to feed me personally on what does this
(01:51):
look like? What does this look like investing? What does
this look like? You know, from a legacy perspective, and
not so much like just only understanding the work that
I did or the work that my family did. And
I think that I started getting curious and it just
so happened that when my curiosity was being piqued, I
(02:13):
met Erica. I was a part of an Executive MBA
program and they brought her in to teach alternative investing
and it kind of just to be honest, it was
frustrating to me to be the CEO and co founder
of a successful company but never really have too many
financial options. And also, we're doing all the work, but
(02:35):
what was what was our model based on and how
much ownership did we really have of you know, from
equity and equality perspective of the work.
Speaker 4 (02:43):
That we were doing.
Speaker 3 (02:45):
And so I just started asking a lot of these
questions and I couldn't get the answers from a lot
of people, and Erica really took the time to start
talking to me about things.
Speaker 1 (02:53):
So, Erica, I wanted to pass this to you also
because you know, in reading your story, you know you
were incredibly academically intelligent. You know, you had that academic chops.
You know, I think you graduated from high school at sixteen,
so you wanted to go into the medical field for
a little while and find yourself in finance.
Speaker 3 (03:12):
Oh my goodness, do you know that That's the first
time I ever like see, even almost thirteen years later,
I just learned something new about her.
Speaker 4 (03:19):
I did not graduated at sixteen.
Speaker 5 (03:21):
Yeah, Well, really yes, yes, yeah, she's never talked about
that will.
Speaker 1 (03:28):
So, yeah, like, how did you how did you start here?
Because I want to I want to talk about you
guys as you know, the couple story and how you
became partners, but I wanted to talk first about what
got you into this world. I know, investment banking came
after your medical journey or you know, foray into that world.
What got you here?
Speaker 6 (03:45):
Yeah?
Speaker 5 (03:46):
Thanks, Well, I appreciate that you've clearly listened to some
previous interviews, and you know, it's great to see you
at the last afro tegument. So, you know, I would
say that I've always been interest in entrepreneurship. You know,
I was the fifth grade president of the Young Entrepreneurs Society,
(04:07):
so was.
Speaker 6 (04:08):
Clearly thinking about it from a really young age.
Speaker 5 (04:10):
I think we sold frontship bracelets, which you know are
proving back into fashion. But my mom is a physician,
and so I was pre med and undergrad and you know,
very seriously considered going to medical school.
Speaker 6 (04:27):
Although I loved sort.
Speaker 5 (04:29):
Of studying the sciences, I really didn't love doing sort
of the labs, which are you know, where you have
to throw on the glasses and sit in the laboratory
for three hours in a row and ty trate chemicals,
and I actually also worked I did my undergrad at UCLA,
so I took the opportunity to work on the Cardiothoracic
(04:51):
transplant unit at the UCLA Medical Center to support myself
while I was in college. And it was there that
I started developing, you know a lot of relationships the
surgeons that worked there and talking about the day to
day life, and they were all like, oh, you know,
there there are more exciting things for you to do
out here than be stuck in this you know scenario
that we're in. So I started really considering looking at finance,
(05:13):
you know, largely based on their suggestion, ended up changing
my major to business economics, and you know, really loved it,
and you know, was fortunate enough to get a job
on Wall Street doing investment banking at Solomon S. McCartney
which is now City Group out of college. Really fell
(05:34):
in love with, you know, all the various aspects of finance,
starting off in corporate finance, but then spent a few
years in asset management, did my MBA in finance at
Columbia Business School, and then I was a fixed income
trader for a couple of years out of business school.
But it wasn't until I got into early State Trenchure
Capital that I really found my you know what I
(05:57):
call my forever home asset class because it's such a
wonderful combination of you know, sort of relationship building and
investing in and nurturing people and sort of the interesting,
uh you know, sort of security analysis side of that.
We work in what's called a gray market, so you know,
(06:18):
having a good understanding of securities that don't have a
lot of kind of publicly available information for pricing them.
And you know, when I met Monique, probably I guess
about twelve years ago, I thought, wow, you know, she
is so passionate about this and so knowledgeable around, you know,
sort of the strategy and operations of really growing a company,
(06:42):
and really was just bringing that incredible kind of energy
that I think you need to really nurture and support
founders when they're at that most difficult period, which is
you know, sort of taking something from zero to you know,
maybe the first few million dollars in revenue. So we
(07:02):
decided to link up together, and you know, I think
that it's really been you know, a match made in
heaven for us, and you know, we've been really fortunate
to work with some really talented and amazing portfolio companies
that have done the impossible of you know, as I
like to call it, spinning gold out.
Speaker 3 (07:23):
Of straw, you know, and we'll just you know, just
like Erica, both of us coming from entrepreneurial backgrounds, I
think was really important to both of us and finding
like a complementary skill set as a partner. I have
a completely different background and spending you know, twenty five
(07:44):
plus years in entertainment, dealing with talent, dealing with creativity.
I identifying talent and creativity. I saw it as a
very similar lane transitioning to founders and write the founding
team there's a special talent there, there's a special factor.
They have something special that they want to build, but
they need kind of like that bumper system. So that's
(08:07):
the way Erica and I really really where we kind
of like just blended on what our idea of supporting
an early stage founding team looked like. And so we
both were in a grants on that we both had
different skill sets, which kind of just is like, Okay,
this is what venture needs right now?
Speaker 1 (08:25):
Yeah, I want you to talk more about that, you know,
because there's there's something to be said for you know,
coming together as a puzzle piece, like Okay, you fit.
Speaker 2 (08:33):
Me here and you fit me there.
Speaker 1 (08:34):
There's a difference in being able to work together though
you know, there's more to it than you have things
that I need. How did you guys know, or maybe
you didn't know in the beginning, you know if this
will work out like that we could actually be in
the office together, we could travel together and do deals together.
Speaker 2 (08:50):
How did you know?
Speaker 4 (08:52):
I know?
Speaker 3 (08:52):
For me when I looked at Erica, like coming from
a family business and coming from entrepreneurship, and even when
I started my career still having being a business person
and still being surrounded by my family, these things were
really important to me, Like how I choose to spend
my time, who I choose to spend it with. It
really does matter to me, even in business. I actually
(09:14):
think people don't think enough about that. And so I
asked myself, is this someone that if I was upset
with or I didn't agree with, could I see myself
still wanting the relationship? And the answer was yes for me,
And that is the way I measured it is because
you're not always going to agree. You know, business is hard.
(09:35):
You're doing one of the riskiest concepts investing in founding
teams at their earliest stage, right, So everyone is overwhelmed
with how do we make sure and ensure the success
of something, and so you want to make sure that
you're in partnership with someone that for me anyways that
it felt like family.
Speaker 2 (09:53):
I would love you to chime in on this here.
Speaker 6 (09:55):
Yeah. Absolutely, so.
Speaker 5 (09:56):
I think that we are really lucky because one of
the most important factors to being successful as a venture
capital investor.
Speaker 4 (10:07):
Is that you have to do two things.
Speaker 6 (10:08):
You have to be.
Speaker 5 (10:10):
Contrarian and you have to be right. And really on
the contrarian portion, that's very difficult, right, because you know,
you need to be able to see value in things
that other people are potentially overlooking. And one of the
tools that has helped us do that successfully is the
(10:30):
fact that we come from very different professional backgrounds and
so we actually have very different outlooks on what's important
in an investment and how to kind of identify risk
and also identify potential for reward. So I felt, you know,
very lucky to meet Monique because you know, in my circles.
Speaker 6 (10:51):
Given my background is you know, largely.
Speaker 5 (10:54):
Financed and business school and all that, most of the
people that were kind of in my you know, work
to have a very similar perspective to things that I do.
So you know, if I were to come together with them,
you know, it would kind of be.
Speaker 6 (11:07):
You know, just two lenses over each other.
Speaker 5 (11:09):
Whereas with Monique and I, you know, we're able to
create between the two of us a really unique viewpoint
on not only how to select companies to go into
the portfolio, but also how to support founders in very
different ways. So I think, you know, that is a
big part of why, you know, we're both so committed
to working together. You know, one thing that I think
(11:33):
a lot of folks you know, don't understand is that,
you know, GP partnerships are kind of like more intense
than even marriages.
Speaker 6 (11:43):
Just get into.
Speaker 5 (11:45):
And you know you're going to be questioned a million
times more before you know. LPs make significant capital commitments
to you about the quality of your relationship and your
commitment to staying together than you would buy. You know,
a priest who's doing marriage counseling before you It's.
Speaker 4 (12:04):
Pretty and I have to tell you that's that's a
true statement.
Speaker 3 (12:07):
I think that is probably one of the number one
questions we get asked is about the partnership.
Speaker 1 (12:12):
Yeah, I mean, how do you answer that? Because I mean, again,
I was thinking about a quote I heard from you,
Monique in a previous interview where you said, you know,
fundraising is not fun. A lot of people don't realize
investors have to fundraise just like founders have to fundrais.
Speaker 3 (12:25):
You know, it's interesting will I was, I personally was
actually really surprised that. First of all, mostly you know
how deeply I'm in the founder community, you know, how
honest they all speak to me and transparent, and like
one of the biggest things was the offense of the
no and oh you know, they took me through this
(12:45):
process and it was still a know And one of
the things that we implement it at rain Ventures is
like this onboarding process where there's like a two hour
session that we do with the entire team. It's mandatory,
like all of that teammates and it's like what does
it mean to be a venture back company?
Speaker 4 (13:04):
And a few of the.
Speaker 3 (13:05):
Slides I really do deal with, like the fact that
we're we actually fundraise to then deploy capital to the
selected companies. Just like we're asking you all questions and
we're getting updates and we're talking to you about the business.
We actually have an accountability to our investors.
Speaker 4 (13:24):
You know.
Speaker 3 (13:24):
Yeah, there's the traditional like okay Karta, but it's it's
not very you know, unlikely for us to hear from
LPs who contact us directly and on the spot. They
want a deep dive and you know, it's our obligation
to do that for them. And so trying to get
this for me and rain Ventures, and what Eric and
(13:44):
I decided is that it is important not just to
do the deployment, but also to educate the founders and
the teams on what type of accountability, what type of
portfolio are you even sitting in? Who what other you know,
who are your colleagues in the rain venturesorfolio?
Speaker 4 (14:00):
What do they look like? What does this concept look like?
Speaker 3 (14:04):
And then here's the follow on capital that has come
can you all meet that standard? And these are tough
conversations sometimes.
Speaker 1 (14:11):
So to not enjoy fundraising, which a lot of people
don't like fundraising, you still got to get good at it, though,
How do you get good at it?
Speaker 4 (14:20):
Yeah?
Speaker 6 (14:21):
I mean I actually I don't mind fundraising.
Speaker 4 (14:23):
I'll say, Erica loves fundraising.
Speaker 1 (14:26):
I know you though, but yeah, for the person who
does you know, Erica.
Speaker 3 (14:30):
Go ahead, so you know, for me, I'll just say
this and I'll let Erica talk. But for me, my
whole career was built on not selling. Even when I
was in the position of having to be accountable for revenue,
et cetera, I always felt it easier and it made
more sense to align yourself with like minded people. It
(14:52):
doesn't mean that questions don't come. It's a different type
of question that comes, and that's always been my perspective.
Speaker 4 (14:58):
So but Erica, it's a challenge for her. She loves it.
My energy.
Speaker 6 (15:06):
So I'll just first start by saying, raising money. You know, raising.
Speaker 5 (15:11):
Institutional capital for a venture fund is very very hard.
In fact, estay, I had an in person sort of
meeting with a new potential founder and you know, I
was telling him a little bit about some of our LPs.
Speaker 4 (15:24):
And he was like, oh my god, how did you
get this people.
Speaker 6 (15:26):
I was like, I don't know it, did you know?
Speaker 5 (15:29):
So the truth is it's very very difficult, and that's
probably why I actually enjoy it. It's one of those
things that is just really challenging, and there's no like
real playbook for you know, it just sort of you
just have to keep you know, sort of a brute
force approach and you know, keep working on it. But
you know the most important thing is that I have
(15:52):
learned and one of the things that I think made
me more excited, you know, as we raised our first
fund about understanding what we're at actually doing and actually
have this really fun book right here how to have
a buck even though I've already done one before, I
just like keep it right next to me. So one
of the most important things is to realize that it's
(16:15):
not like a lot of people go into it as
though it's kind of like a judgment of you and
your capability and you know, whether you're a good person
or not or successful, But really it's about creating a
financial product that people need.
Speaker 4 (16:31):
Right.
Speaker 5 (16:31):
So if you're just raising from high net worth individuals,
ure is it like can you get them excited? Can
they feel like they're going to do cool things? You know,
that's one thing. But for us when you're raising institutionally backed,
is where does this fit within their portfolio?
Speaker 4 (16:44):
Right?
Speaker 5 (16:45):
What's their you know, sort of portfolio construction. Right now,
what's their asset allocation model? You know, how are things changing,
you know, how are things expected to change in the
future in terms of you know, current venture valuations compared
to public equity valueations compared to fixed income and you
know where our interest rate's going, and how are we
going to help them solve problems around meeting their target
(17:08):
return for their portfolio through the financial product that we're
offering and our ability to generate returns and generate cash flow.
Speaker 6 (17:16):
So I think once you kind of.
Speaker 5 (17:17):
Understand it a little bit more from that perspective, it
does become a little bit more interesting because for you
it does, right, you know, this is about me personally too.
Can I sell a really high quality financial product that
has you know, expected returns of hopefully you know, thirty
(17:38):
percent and then you know, that makes it I think
a lot more interesting of a challenge is how do
you provide the data points and should you know, give
people confidence that you can achieve that, and you know,
within that to also show that, hey, we're also people
that are taking very seriously the resonse stability of using
(18:01):
this capital to invest in things that are going to
create a better world. And a better future for everybody
as long term investors.
Speaker 2 (18:10):
For the people listening and not watching, can you tell
what book that was?
Speaker 5 (18:17):
It is just called how to raise a Venture capital funds?
The author Winter What Winter Need. So if you're thinking
about one, maybe that would be your first The first
thing on your to do list is to read that
of money.
Speaker 2 (18:36):
I want to go back to something.
Speaker 1 (18:37):
You said, because so I have a social club that
I also run, and one of the things you said
about you know, not selling, like if this is for you,
is for you, Like I don't sell memberships. If you
want to be a member based on what we provide,
this is probably the place for you. If I have
to sell you a membership, you're probably not the kind
of person we want and you probably don't want to
be part of this. And specifically coming from creative and endeavors,
(19:01):
you probably are not in a position to sell. Either
you want it or you don't. From the consumer side,
but that's still for some firms, some VC firms which
we don't have to talk about them specifically, but in
general terms, they don't have to sell. They open up
a fund. That fund is closed, you know, because you
know they've been able to prove something or have some
(19:22):
sort of you know, attraction for whatever reasons. And the
reasons are. What I want to talk about is how
does a fund at your stage become one of those funds?
Like what does the trajectory look like so that you
and others you know who want to raise funds are like, look,
this is a fund. I'm gott to sell it. It's
(19:42):
open as closed over subscribers.
Speaker 3 (19:45):
Here's the thing, Will, is that this like instant gratification,
this instant thing, this idea. I love how much access
we have the technology and information. But there's also the
downside of it. Right, there's like this narrative that's been
amplified that in sixty seconds of a video that literally
(20:07):
overnight you have success. And here's the harsh fact in entrepreneurship.
Most companies close down period end of story. I don't
care what vertical you're in. I don't you know, I
don't care what it is. The majority of companies shut down.
So when you actually start thinking about what this is
and what we're doing, it's super difficult. This is really
(20:30):
hard to have a fund to select companies. And we
and rain ventures, we do fewer investments right than the
traditional vcs. But at the end of the day, the
reality is that all of this is hard. This is
hard work. Most fun ones don't even do well. We're
really really blessed and fortunate that we are doing well
(20:53):
at rain Ventures, but the reality is that most people don't.
Most founders have to shut their business down. Most BC
firms shut down. I mean, if we even look at
how many funds were open during COVID post George Floyd
and how many of them are gone, the majority of
them are actually gone, and.
Speaker 4 (21:12):
That is because this is really hard work.
Speaker 3 (21:15):
And so I think that this idea that it's gonna
look pretty. And by the way, anyone who owns an
early stage venture fund and they're building it from the
ground up, like Erica and I, we're making sacrifices right now.
Speaker 4 (21:29):
It's just very plain and simple.
Speaker 3 (21:32):
We're sacrificing now for later and so that we can
give some type of viewpoint to founders that would not
necessarily have access to pitch to traditional BC firms.
Speaker 4 (21:45):
Right, So none of this is easy.
Speaker 3 (21:47):
I just that is the thing I can only say
is it's just we're choosing to not give up, and
this is what we chose to do.
Speaker 4 (21:53):
Over the last twelve years.
Speaker 5 (21:55):
Yeah, and you know, I also just want to really
dispel the myth that you know, there are firms out
there where it's like, oh, we opened our fund and boom,
it's fully subscribed, and so it actually takes like the
most successful firms, Like when I think about people where
I'm like, oh, wow, you know you actually were pretty
successful at raising capital, it generally takes the eighteen.
Speaker 4 (22:18):
Months to get the fund.
Speaker 5 (22:19):
So eighteen months is actually like okay, great, you did
it on a good time print.
Speaker 6 (22:24):
So it takes a very long time.
Speaker 5 (22:27):
Number two, LPs institutional peas generally want to know you
for a really long time before they even contemplate making
a commitment. And when I see a really long time,
no joke, many endowment fund you know, endowment managers who
we've had conversations with will say okay, great, once we've
(22:50):
known each other for five years, then I will think
about making a commitment to the fund. So you have
to have known them and they're kind of following you
for before they're even going to think about making their
first commitment. So any of the funds where it seems
like oh, you know, let's say it's I don't know
Andrew's and Horowitz or Sequoia, you know, re sell where
(23:13):
it seems like, okay, well they opened the fund, it
was fully subscribed. It's because they have existing relationships with
super massive endowments who need to deploy capital on a
regular schedule. But they have built those relationships with those
managers over the course of you know, probably twenty years,
I would say two decades. Actually that's that's the reality.
(23:37):
And those you know, asset managers, right, I'm talking about
the endowments and the institutional managers who are investing in
the fund. You know, they had to re up their
commitments there because they don't want to take the time
to like get to know a whole new manager. So,
you know, I think I explained this a little bit
in the you know, in person interview that we were
(24:00):
which is that, you know, it's really an exceptionally long
term investment. And you know, as I told you, I mean,
Monique and I started investing together in like twenty thirteen,
we started building a track record, you know, decided that
we were interested in potentially being partners in a venture
(24:23):
fund in twenty fifteen, really went to market in twenty nineteen,
closed our first fund in twenty twenty one and are
just now raising a second fund because we have, you know,
sort of proven track record results. But you know that's
taken over ten years, and we're still considered emerging managers.
Speaker 2 (24:45):
Wow. You know before.
Speaker 5 (24:47):
That both of us had decades long experience in our
respective industries.
Speaker 4 (24:52):
So none of this happens overnight.
Speaker 1 (24:55):
So I love that take, and I wonder, and this
is a question for you. Erica Casishi brought this up on.
Even the big ones still have to, you know, go
through these stages. There was an organization that was part
of that. I learned where they're they were going through
a fundraising campaign and there's called a quiet period to
where they don't have to publicly announce they're going through
a fundraising but they can announce at a certain stage.
(25:17):
And let's say it's a five hundred million dollar campaign,
they can announce after they've already raised two fifty of
that five hundred. So by the time they announce, oh,
we're on a trajectory were we already got two fifty
in the bank. And you think, as the reader, oh
my god, they're moving amazingly fast. And so what I
hear you saying and you can translate for me if
I'm not doing this right is don't be fooled by
(25:37):
the show. Don't be fooled by the headline.
Speaker 5 (25:40):
Yeah, I mean, I'm not sure exactly like what you're
referring to, but you know, certainly I say that on average,
most venture funds take eighteen months or so toer raise,
unless you are you know, one of the pre existing,
you know, top tier funds that's been around forever and
you already have LP relationships because you're not really raising money,
(26:02):
you're just going back to the same people. Like, think
about it this way, right, when we make when we
have LPs and they.
Speaker 6 (26:10):
Invest in us, and then we give them back money.
Speaker 5 (26:13):
Right, So let's say they make a ten million dollar
commitment to our fund, you know, and then we return
you know, fifteen million. It's not like they can go
out and spend the money, you know, they have to
reinvest it.
Speaker 4 (26:26):
So Okay, Now it's a few years later they're like.
Speaker 5 (26:28):
Okay, great, take the fifteen million and keep joy what
you're doing. So it kind of creates like a built
in system of recycling as especially if you're if you're
priding returns, right, because endowments need to grow. And so
for these very successful larger funds, as long as they've
consistently you know, returned substantial capital to those LPs, those
(26:51):
LPs are going to continue to reinvest it and make
it very easy for them to raise subsequent funds.
Speaker 1 (26:56):
What's different We'll start with you, Monique. What's different about
raising money now for founders than it was two years ago?
Speaker 2 (27:04):
Five years ago?
Speaker 3 (27:07):
Well, I mean five years ago. Like Erica said, you know,
in twenty nineteen, we were out talking to institutions and
I think the I think the majority of the feedback
was just not really positive. Just to be honest and transparent,
I think I even heard a couple of times we
should start a charity, like why don't we just do
(27:28):
this as a charity, you know. And so then post
COVID and post all of the George Floyd and just
all of the you know, equity conversations and the commitment
right to the to the capital of underfunded or you know,
whichever however they wanted to coin it or term it.
(27:48):
You know, for me, I understand that business is cyclical,
concerns are cyclical, and so you know, that didn't last
very long, and so for me, I just feel like
we're pre COVID, right.
Speaker 2 (28:00):
Wow, would you add anything at that area.
Speaker 5 (28:02):
Yeah, So, you know, the funding environment is much different
for founders than it was a few years ago. For one,
you know, the M and A environment for the last
two years has been close to zero. So the issue
is there's not a lot of money coming out of
venture capital firms in the form of distributions, right, that
(28:25):
would then be reinvested, as I was saying, you know,
sort of in the last segment, and that's you know,
putting a little bit more constraint on new capital new
capital available to new portfolio companies. Right. So what we're
still seeing is kind of this crunch, which is that
you know, for companies where you thought, okay, you know,
(28:46):
maybe you're going to invest through the Series A and
then there's going to be you know, a Series B
capital that'll come and you know, support the company down
the road, you're seeing that, you know, there's less of that, right.
More people are saving their drive path for their existing
portfolio companies to make sure that they can get them
through what's a bit of a difficult time. We're also
(29:07):
just seeing you know, valuations as a whole coming down substantially.
Speaker 6 (29:12):
I'd say that.
Speaker 5 (29:14):
What we call like revenue multiples, and that's how you know,
we value companies that are actually generating revenue on the
sort of software side are down from you know, most
companies five years you know, four, five years ago, especially
during the pandemic, would have been valued at twenty plus
times revenue. Now things are being valued at maybe like
ten times revenue if you're lucky. We're seeing in certain
(29:37):
sectors as low as you know, two to three times revenue,
and people are much more focused on, you know, as
far as more mature companies on are you generating positive EPADA, right,
So people want to see companies generating positive free cash
flow that don't have high burn rates. Nobody's paying up
for fast growth, you know, while you're burning a lot
(29:59):
of cash anymore. And you know that just really changes, uh,
the valuation scenario all the way down to you know,
the pre seed round because you know, generally people are
hoping that the value of the company is kind of
going to like double between rounds. So you know, if
(30:20):
valuations are kind of half as much now at exit,
they're going to be pretty much half as much. All
the way down to the pre seed and we're seeing
you know, sort of pre seed and seed valuations happening
more in the you know, five to ten million dollar
post money range, whereas you know, during the peak, it
was more like ten to twenty million dollar post money.
(30:43):
And I think founders, you know, are a little bit
surprised by that, and you know, it's been hard for
people to digest that they're just not going to get
the valuations they used to.
Speaker 3 (30:53):
And by the way, you know, in my personal opinion,
the valuation should have never been what they were, right, Like,
you know, a lot of a lot of times we
do here founders in conversation complain about investors, you know, oh,
I want it like one hundred million dollar valuation and
they only gave me a sixty million or a fifty million.
(31:14):
And I think it's you know, one of the educational
pieces for founders is that just because someone gives you
a large number, can you get to that number? Because
if you can't, you're going to have a down round,
And you know, that is not a healthy thing for
the founder or for the investors. And so I think
like having this understanding between founder and investor of kind
(31:38):
of what does the valuation even mean? You know, I
think that that is something that has to be have
a little more time spent on with the team.
Speaker 2 (31:46):
Yeah.
Speaker 1 (31:47):
I'm glad you bring that up because you know, there
was a quote I found from you Erica where you said,
you know, your team has to be amazing. We do
not invest in founders who are one person shows no
one will get anything done by themselves. The team is
just as important as the idea and the business model.
And going back to something you talked about earlier in
this conversation, you know, you bring these founding teams in
(32:09):
for to our session and you talk about the dynamics
of the team and et cetera. What are you looking
for in the co founder dynamic? To me, that's the
money because it was the Money's quote.
Speaker 3 (32:19):
Oh oh okay, yeah, no, no, oh no, And it
is in fact in our diligence process. Founder and founding
team fit is one of our heavy focuses, right. I
think that especially for women, especially for women who have
(32:39):
experienced anything in corporate America before actually like coming and
building their own thing. I think that a lot of
times we have been taught that we have to know everything.
I know, for myself, I was pretty much the only
female and definitely the only person of color in most
of the meetings during my career. And this idea of
(33:01):
I have to know everything, I have to be perfect,
I have to do everything. That notion I'm trying to
help founding teams undo. And so when we're talking to
founders and we're looking we're not asking normal questions. In fact,
a lot of times we get the founding team saying, oh,
we've never been asked that.
Speaker 4 (33:17):
You know, we don't.
Speaker 3 (33:18):
Want the pretty stuff. What are the dynamics? What happens
when there is a disagreement? How is your problem solving
skills as co founders? You know, do you all equally
respect each other? That's really important and so you know,
not just the skill set and the talent side, but
also personally, how do you all view what it means
(33:39):
to be founders together and part of a founding team?
I mean, they have to build this, you know, in
the days when it doesn't feel good, How are you
all looking at each other?
Speaker 4 (33:49):
Do you shut down?
Speaker 3 (33:51):
Okay, if that is your personality profile, what do we
how do we do to prevent shut down? You know,
there's just a lot of things I think to act
like these things don't exist. I think it's just not healthy.
These things do exist. I mean in family. Think about it.
In family, you have dynamics of disagreeance. Of course you're
going to have that in a new company, a young
(34:13):
company that's stressed out every day. So it's not we
don't want them to avoid it. We want them to
understand how will you conflict resolve?
Speaker 2 (34:22):
Finally, I want to pose this to both of you guys,
and we'll start with you, Erica.
Speaker 1 (34:26):
There was something I saw you had said before when
somebod you were asked about your legacy, Erica, and you said,
all I care about is helping female founders and founders
of color build billion dollar companies that are creating great
technology products and solutions in the market. As far as
I'm concerned, I think that's what my legacy is going
to be.
Speaker 2 (34:46):
That was your quote there.
Speaker 1 (34:48):
And when you think about the dynamics that are currently
at play in this market where it's tough to you know,
Moniqu's point like it's kind of like pre COVID again,
when you think about how hard it is to do
this work. You know there's some wins obviously, but what
do you think about when you think about this is
what I'm going to be doing for the next ten,
(35:09):
twenty thirty years.
Speaker 5 (35:11):
Yeah, I mean, so don't I don't actually think it's
hard right now, you know, I'm actually happy. As I
was talking about this last night, there were so many people,
you know, who just got overly excited about this industry.
You know, people who didn't really like at all even
understand how it works, who just kind of thought anybody can.
Speaker 6 (35:32):
Be a VC and let me just jump in here.
Speaker 5 (35:34):
And just because there was a lot of like momentum,
so it kind of made it seem like, you know,
just like when the stock market's always going up or
crypto's always going up.
Speaker 6 (35:43):
You know, these people seem like, oh, I'm.
Speaker 5 (35:44):
A genius, right, But it's like, well, you know, it's
just because we're in this sort of interesting place in
the market. So to be honest, you know, just sort
of following up on what Monique said, this kind.
Speaker 6 (35:56):
Of market correction is actually really good for the market.
Speaker 5 (35:58):
You know, it's not good for or things to be
in sort of very overheated and you know, sort of
irresponsible deployment of capital type of market where you're just
like throwing money at companies and they're just you know,
spending it on all sorts of nonsense and not.
Speaker 6 (36:14):
Really creating value. And then the worst is that they're like.
Speaker 5 (36:17):
Ponning these things off on you know, the public markets,
right or you know, larger companies that you know have
more sort of diverse investor bases of you know, people's
pension funds.
Speaker 6 (36:30):
And you know all of that.
Speaker 5 (36:32):
Like, the people who end up losing in that scenario
are sort of the average hardworking people who you know,
are trying to invest their retirement savings while a lot
of wealth transfer goes to you know, mainly private equity folks.
You know, in some dcs, we're able to you know,
convince them that just because the company is you know,
(36:53):
growing fifty percent year over year, even though it's you know,
losing a billion dollars a year, it's some great asset
to purchase. So, you know, I mean from just sort
of like a fundamental overall viewpoint of the economy, like
I think we're in a better place.
Speaker 6 (37:09):
You know.
Speaker 5 (37:10):
Monique and I have always had an incredibly disciplined approach
in our investing, probably because I am a New.
Speaker 6 (37:17):
Yorker actually I originally grew up in California.
Speaker 5 (37:20):
But you know, I spent my whole career in New
York doing investment banking, like actually doing discounted cash flow analysis,
you know, sort of understanding very much how to value
a variety of different asset classes. And so we've always
been really focused on fundamentals.
Speaker 6 (37:38):
You know, and for that reason, we never.
Speaker 5 (37:40):
Got caught up in kind of like the hype and
the overpaying and the investing in companies that needed to
burn through one hundred million dollars to get to profitability.
So you know, we've actually been rewarded for that really
diligent approach. But you know, it's based on many decades
of experience in the market, understanding market cycles and understanding
(38:03):
like where true value is created, you know, And for
that reason, you know, we're our fund one is you know,
performing in you know, the top five percent of funds
of our vintage. But it's because you know, the market
is correcting to a more sensible approach that we've consistently kept,
(38:24):
and we've you know, buy and large, you know, focused
on building healthy companies that are healthy not only for
the investors but also for the founders and the employees. Right,
We're not looking to you know, greater fool theory our
way to returns on you know, a crappy business. But
(38:44):
what we are hoping is to build great product, to
have founders that are going to see you know, substantial
personal and financial reward from what they've done, and to
build you know, great jobs for the amazing people in
our community.
Speaker 2 (39:00):
It's fantastic Monique talk about.
Speaker 3 (39:03):
Legacy, legacy when I look at when I think about
my like, just who I am as a person, just
as a human being. I feel like, you know, even
in high school for this national business program, you know,
I was nominated and served as the officer of civic Affairs,
(39:24):
and you know, and so when I think of who
I am, I'm just of service. That's always been my mindset.
I've always wanted to get somewhere so I can gather information,
share it, or help someone else get there.
Speaker 4 (39:39):
That is just who I am.
Speaker 3 (39:41):
I'm not going to change that about myself and for
me personally, I felt like that the heart, right, the
non paperwork side, is what was missing from venture.
Speaker 4 (39:51):
Being able to have the ability to see people, to
see what we are.
Speaker 3 (39:55):
And know that one small thing can help change the
trajectory of their business, of their mindset of an entire
economy in a community, so like impacting consciously, that's always
been important to me. Meeting with some type of ability
to empathetically see someone and create a solution out of
(40:17):
that is who I am.
Speaker 4 (40:20):
High vision, big vision.
Speaker 3 (40:21):
I'm very grateful that my skill set has always had
me a part of something before anyone else was. That's
something I take a lot of pride in. It's something
I try to teach to our founding community. It's something
Erica and I tried to like diligently focus on the
future that we're building right how we want to see
the future. We have an inclusive portfolio because that's how
(40:43):
venture should have always been done.
Speaker 4 (40:44):
Inclusively.
Speaker 3 (40:46):
Being able to see the world for exactly what it
should be is who I'm always going to be and
always fight for that to create that world that we
want because we're all creators at the end of the day.
Speaker 2 (40:59):
I agree, he Lonig, It's just so much fun. Thank
you guys so much spending time with me.
Speaker 3 (41:05):
We appreciate you, will thank you for all your diligence.
You pulled out quotes that man I haven't reached that
reminded of a minute.
Speaker 1 (41:13):
It's a pleasure it's a pleasure doing this work, and
it's a pleasure to spend time.
Speaker 2 (41:17):
With people like you. Guys.
Speaker 4 (41:18):
No, thank you. We're excited about afro tech this.
Speaker 5 (41:20):
Yeeah, I see you there, I see okay than good guys.
Speaker 1 (41:25):
Black Tech Green Money is a production of Blavity afro
Tech on the Black Effect podcast Networking Night, Hiartmedia. It's
produced by Morgan Debonne and me Well Lucas, with the
additional production support by Kate McDonald, Sayah Ergan and Jada McGee.
Special thank you to Michael Davis in Love Beach, Learn
More about My Guess and other technis is an innovator's
at afrotech dot com. The video version of this episode
(41:46):
will drop to Black Tech Green Money on YouTube, So
tap in, enjoy your Black Tech Green Money, share us
to somebody go get your money.
Speaker 2 (41:54):
Peace and love,
I'm Well, Lucas and this is black Tech, Green Money.
RAIN Ventures is an early stage investment firm that focuses
on women and minority led startups, investing at the seed
and Series a stage in promising technology and tech enable
startups with high potential founders. Moniquide let as the founder
and managing partner. Erica Diagno Miineon is founder and general partner.
(00:20):
Monique is a globally recognized entertainment pioneer. Prior to founding
Rain Venture Capital, she served as CEO the Mosey Brands
and Mosly Music Group, home to a multi platinum roster
of artists including iconic producer Timberland, One Republic, Nellie Fortado,
and others. She brings over two decades of unprecedented success
as a CEO working in entertainment, marketing, press and entrepreneurship.
(00:41):
Eric has been an active investor and advised to early
stage companies for over fifteen years. Before launching Rain, she
was founding partner of One Thousand Angels, managing director at
Dream Adventures, and executive director at both Star Angel Network
and Golden Seeds. Before she began a career in venture,
she practiced investment banking at City Group Credit Sweets in Cantor,
fitz jailed.
Speaker 2 (01:02):
So beginning with.
Speaker 1 (01:03):
You Heremonique, like, you know, when we're growing up, you know,
we have these ideas of what we're going to do
when we become big adults, you know, and I imagine
you did not imagine that you would be an investor,
you know, as a child, Like what what in your
career started to open up this the awareness of the
(01:23):
opportunity of investing, and what got you interested in it?
Speaker 3 (01:27):
I mean, I think it was it was like a
lot of things, I think just my journey in general,
not coming from a finance background. But then, you know,
being an entrepreneur, you're so focused on what you love
doing that I don't know that the proper education ever
went into to feed me personally on what does this
(01:51):
look like? What does this look like investing? What does
this look like? You know, from a legacy perspective, and
not so much like just only understanding the work that
I did or the work that my family did. And
I think that I started getting curious and it just
so happened that when my curiosity was being piqued, I
(02:13):
met Erica. I was a part of an Executive MBA
program and they brought her in to teach alternative investing
and it kind of just to be honest, it was
frustrating to me to be the CEO and co founder
of a successful company but never really have too many
financial options. And also, we're doing all the work, but
(02:35):
what was what was our model based on and how
much ownership did we really have of you know, from
equity and equality perspective of the work.
Speaker 4 (02:43):
That we were doing.
Speaker 3 (02:45):
And so I just started asking a lot of these
questions and I couldn't get the answers from a lot
of people, and Erica really took the time to start
talking to me about things.
Speaker 1 (02:53):
So, Erica, I wanted to pass this to you also
because you know, in reading your story, you know you
were incredibly academically intelligent. You know, you had that academic chops.
You know, I think you graduated from high school at sixteen,
so you wanted to go into the medical field for
a little while and find yourself in finance.
Speaker 3 (03:12):
Oh my goodness, do you know that That's the first
time I ever like see, even almost thirteen years later,
I just learned something new about her.
Speaker 4 (03:19):
I did not graduated at sixteen.
Speaker 5 (03:21):
Yeah, Well, really yes, yes, yeah, she's never talked about
that will.
Speaker 1 (03:28):
So, yeah, like, how did you how did you start here?
Because I want to I want to talk about you
guys as you know, the couple story and how you
became partners, but I wanted to talk first about what
got you into this world. I know, investment banking came
after your medical journey or you know, foray into that world.
What got you here?
Speaker 6 (03:45):
Yeah?
Speaker 5 (03:46):
Thanks, Well, I appreciate that you've clearly listened to some
previous interviews, and you know, it's great to see you
at the last afro tegument. So, you know, I would
say that I've always been interest in entrepreneurship. You know,
I was the fifth grade president of the Young Entrepreneurs Society,
(04:07):
so was.
Speaker 6 (04:08):
Clearly thinking about it from a really young age.
Speaker 5 (04:10):
I think we sold frontship bracelets, which you know are
proving back into fashion. But my mom is a physician,
and so I was pre med and undergrad and you know,
very seriously considered going to medical school.
Speaker 6 (04:27):
Although I loved sort.
Speaker 5 (04:29):
Of studying the sciences, I really didn't love doing sort
of the labs, which are you know, where you have
to throw on the glasses and sit in the laboratory
for three hours in a row and ty trate chemicals,
and I actually also worked I did my undergrad at UCLA,
so I took the opportunity to work on the Cardiothoracic
(04:51):
transplant unit at the UCLA Medical Center to support myself
while I was in college. And it was there that
I started developing, you know a lot of relationships the
surgeons that worked there and talking about the day to
day life, and they were all like, oh, you know,
there there are more exciting things for you to do
out here than be stuck in this you know scenario
that we're in. So I started really considering looking at finance,
(05:13):
you know, largely based on their suggestion, ended up changing
my major to business economics, and you know, really loved it,
and you know, was fortunate enough to get a job
on Wall Street doing investment banking at Solomon S. McCartney
which is now City Group out of college. Really fell
(05:34):
in love with, you know, all the various aspects of finance,
starting off in corporate finance, but then spent a few
years in asset management, did my MBA in finance at
Columbia Business School, and then I was a fixed income
trader for a couple of years out of business school.
But it wasn't until I got into early State Trenchure
Capital that I really found my you know what I
(05:57):
call my forever home asset class because it's such a
wonderful combination of you know, sort of relationship building and
investing in and nurturing people and sort of the interesting,
uh you know, sort of security analysis side of that.
We work in what's called a gray market, so you know,
(06:18):
having a good understanding of securities that don't have a
lot of kind of publicly available information for pricing them.
And you know, when I met Monique, probably I guess
about twelve years ago, I thought, wow, you know, she
is so passionate about this and so knowledgeable around, you know,
sort of the strategy and operations of really growing a company,
(06:42):
and really was just bringing that incredible kind of energy
that I think you need to really nurture and support
founders when they're at that most difficult period, which is
you know, sort of taking something from zero to you know,
maybe the first few million dollars in revenue. So we
(07:02):
decided to link up together, and you know, I think
that it's really been you know, a match made in
heaven for us, and you know, we've been really fortunate
to work with some really talented and amazing portfolio companies
that have done the impossible of you know, as I
like to call it, spinning gold out.
Speaker 3 (07:23):
Of straw, you know, and we'll just you know, just
like Erica, both of us coming from entrepreneurial backgrounds, I
think was really important to both of us and finding
like a complementary skill set as a partner. I have
a completely different background and spending you know, twenty five
(07:44):
plus years in entertainment, dealing with talent, dealing with creativity.
I identifying talent and creativity. I saw it as a
very similar lane transitioning to founders and write the founding
team there's a special talent there, there's a special factor.
They have something special that they want to build, but
they need kind of like that bumper system. So that's
(08:07):
the way Erica and I really really where we kind
of like just blended on what our idea of supporting
an early stage founding team looked like. And so we
both were in a grants on that we both had
different skill sets, which kind of just is like, Okay,
this is what venture needs right now?
Speaker 1 (08:25):
Yeah, I want you to talk more about that, you know,
because there's there's something to be said for you know,
coming together as a puzzle piece, like Okay, you fit.
Speaker 2 (08:33):
Me here and you fit me there.
Speaker 1 (08:34):
There's a difference in being able to work together though
you know, there's more to it than you have things
that I need. How did you guys know, or maybe
you didn't know in the beginning, you know if this
will work out like that we could actually be in
the office together, we could travel together and do deals together.
Speaker 2 (08:50):
How did you know?
Speaker 4 (08:52):
I know?
Speaker 3 (08:52):
For me when I looked at Erica, like coming from
a family business and coming from entrepreneurship, and even when
I started my career still having being a business person
and still being surrounded by my family, these things were
really important to me, Like how I choose to spend
my time, who I choose to spend it with. It
really does matter to me, even in business. I actually
(09:14):
think people don't think enough about that. And so I
asked myself, is this someone that if I was upset
with or I didn't agree with, could I see myself
still wanting the relationship? And the answer was yes for me,
And that is the way I measured it is because
you're not always going to agree. You know, business is hard.
(09:35):
You're doing one of the riskiest concepts investing in founding
teams at their earliest stage, right, So everyone is overwhelmed
with how do we make sure and ensure the success
of something, and so you want to make sure that
you're in partnership with someone that for me anyways that
it felt like family.
Speaker 2 (09:53):
I would love you to chime in on this here.
Speaker 6 (09:55):
Yeah. Absolutely, so.
Speaker 5 (09:56):
I think that we are really lucky because one of
the most important factors to being successful as a venture
capital investor.
Speaker 4 (10:07):
Is that you have to do two things.
Speaker 6 (10:08):
You have to be.
Speaker 5 (10:10):
Contrarian and you have to be right. And really on
the contrarian portion, that's very difficult, right, because you know,
you need to be able to see value in things
that other people are potentially overlooking. And one of the
tools that has helped us do that successfully is the
(10:30):
fact that we come from very different professional backgrounds and
so we actually have very different outlooks on what's important
in an investment and how to kind of identify risk
and also identify potential for reward. So I felt, you know,
very lucky to meet Monique because you know, in my circles.
Speaker 6 (10:51):
Given my background is you know, largely.
Speaker 5 (10:54):
Financed and business school and all that, most of the
people that were kind of in my you know, work
to have a very similar perspective to things that I do.
So you know, if I were to come together with them,
you know, it would kind of be.
Speaker 6 (11:07):
You know, just two lenses over each other.
Speaker 5 (11:09):
Whereas with Monique and I, you know, we're able to
create between the two of us a really unique viewpoint
on not only how to select companies to go into
the portfolio, but also how to support founders in very
different ways. So I think, you know, that is a
big part of why, you know, we're both so committed
to working together. You know, one thing that I think
(11:33):
a lot of folks you know, don't understand is that,
you know, GP partnerships are kind of like more intense
than even marriages.
Speaker 6 (11:43):
Just get into.
Speaker 5 (11:45):
And you know you're going to be questioned a million
times more before you know. LPs make significant capital commitments
to you about the quality of your relationship and your
commitment to staying together than you would buy. You know,
a priest who's doing marriage counseling before you It's.
Speaker 4 (12:04):
Pretty and I have to tell you that's that's a
true statement.
Speaker 3 (12:07):
I think that is probably one of the number one
questions we get asked is about the partnership.
Speaker 1 (12:12):
Yeah, I mean, how do you answer that? Because I mean, again,
I was thinking about a quote I heard from you,
Monique in a previous interview where you said, you know,
fundraising is not fun. A lot of people don't realize
investors have to fundraise just like founders have to fundrais.
Speaker 3 (12:25):
You know, it's interesting will I was, I personally was
actually really surprised that. First of all, mostly you know
how deeply I'm in the founder community, you know, how
honest they all speak to me and transparent, and like
one of the biggest things was the offense of the
no and oh you know, they took me through this
(12:45):
process and it was still a know And one of
the things that we implement it at rain Ventures is
like this onboarding process where there's like a two hour
session that we do with the entire team. It's mandatory,
like all of that teammates and it's like what does
it mean to be a venture back company?
Speaker 4 (13:04):
And a few of the.
Speaker 3 (13:05):
Slides I really do deal with, like the fact that
we're we actually fundraise to then deploy capital to the
selected companies. Just like we're asking you all questions and
we're getting updates and we're talking to you about the business.
We actually have an accountability to our investors.
Speaker 4 (13:24):
You know.
Speaker 3 (13:24):
Yeah, there's the traditional like okay Karta, but it's it's
not very you know, unlikely for us to hear from
LPs who contact us directly and on the spot. They
want a deep dive and you know, it's our obligation
to do that for them. And so trying to get
this for me and rain Ventures, and what Eric and
(13:44):
I decided is that it is important not just to
do the deployment, but also to educate the founders and
the teams on what type of accountability, what type of
portfolio are you even sitting in? Who what other you know,
who are your colleagues in the rain venturesorfolio?
Speaker 4 (14:00):
What do they look like? What does this concept look like?
Speaker 3 (14:04):
And then here's the follow on capital that has come
can you all meet that standard? And these are tough
conversations sometimes.
Speaker 1 (14:11):
So to not enjoy fundraising, which a lot of people
don't like fundraising, you still got to get good at it, though,
How do you get good at it?
Speaker 4 (14:20):
Yeah?
Speaker 6 (14:21):
I mean I actually I don't mind fundraising.
Speaker 4 (14:23):
I'll say, Erica loves fundraising.
Speaker 1 (14:26):
I know you though, but yeah, for the person who
does you know, Erica.
Speaker 3 (14:30):
Go ahead, so you know, for me, I'll just say
this and I'll let Erica talk. But for me, my
whole career was built on not selling. Even when I
was in the position of having to be accountable for revenue,
et cetera, I always felt it easier and it made
more sense to align yourself with like minded people. It
(14:52):
doesn't mean that questions don't come. It's a different type
of question that comes, and that's always been my perspective.
Speaker 4 (14:58):
So but Erica, it's a challenge for her. She loves it.
My energy.
Speaker 6 (15:06):
So I'll just first start by saying, raising money. You know, raising.
Speaker 5 (15:11):
Institutional capital for a venture fund is very very hard.
In fact, estay, I had an in person sort of
meeting with a new potential founder and you know, I
was telling him a little bit about some of our LPs.
Speaker 4 (15:24):
And he was like, oh my god, how did you
get this people.
Speaker 6 (15:26):
I was like, I don't know it, did you know?
Speaker 5 (15:29):
So the truth is it's very very difficult, and that's
probably why I actually enjoy it. It's one of those
things that is just really challenging, and there's no like
real playbook for you know, it just sort of you
just have to keep you know, sort of a brute
force approach and you know, keep working on it. But
you know the most important thing is that I have
(15:52):
learned and one of the things that I think made
me more excited, you know, as we raised our first
fund about understanding what we're at actually doing and actually
have this really fun book right here how to have
a buck even though I've already done one before, I
just like keep it right next to me. So one
of the most important things is to realize that it's
(16:15):
not like a lot of people go into it as
though it's kind of like a judgment of you and
your capability and you know, whether you're a good person
or not or successful, But really it's about creating a
financial product that people need.
Speaker 4 (16:31):
Right.
Speaker 5 (16:31):
So if you're just raising from high net worth individuals,
ure is it like can you get them excited? Can
they feel like they're going to do cool things? You know,
that's one thing. But for us when you're raising institutionally backed,
is where does this fit within their portfolio?
Speaker 4 (16:44):
Right?
Speaker 5 (16:45):
What's their you know, sort of portfolio construction. Right now,
what's their asset allocation model? You know, how are things changing,
you know, how are things expected to change in the
future in terms of you know, current venture valuations compared
to public equity valueations compared to fixed income and you
know where our interest rate's going, and how are we
going to help them solve problems around meeting their target
(17:08):
return for their portfolio through the financial product that we're
offering and our ability to generate returns and generate cash flow.
Speaker 6 (17:16):
So I think once you kind of.
Speaker 5 (17:17):
Understand it a little bit more from that perspective, it
does become a little bit more interesting because for you
it does, right, you know, this is about me personally too.
Can I sell a really high quality financial product that
has you know, expected returns of hopefully you know, thirty
(17:38):
percent and then you know, that makes it I think
a lot more interesting of a challenge is how do
you provide the data points and should you know, give
people confidence that you can achieve that, and you know,
within that to also show that, hey, we're also people
that are taking very seriously the resonse stability of using
(18:01):
this capital to invest in things that are going to
create a better world. And a better future for everybody
as long term investors.
Speaker 2 (18:10):
For the people listening and not watching, can you tell
what book that was?
Speaker 5 (18:17):
It is just called how to raise a Venture capital funds?
The author Winter What Winter Need. So if you're thinking
about one, maybe that would be your first The first
thing on your to do list is to read that
of money.
Speaker 2 (18:36):
I want to go back to something.
Speaker 1 (18:37):
You said, because so I have a social club that
I also run, and one of the things you said
about you know, not selling, like if this is for you,
is for you, Like I don't sell memberships. If you
want to be a member based on what we provide,
this is probably the place for you. If I have
to sell you a membership, you're probably not the kind
of person we want and you probably don't want to
be part of this. And specifically coming from creative and endeavors,
(19:01):
you probably are not in a position to sell. Either
you want it or you don't. From the consumer side,
but that's still for some firms, some VC firms which
we don't have to talk about them specifically, but in
general terms, they don't have to sell. They open up
a fund. That fund is closed, you know, because you
know they've been able to prove something or have some
(19:22):
sort of you know, attraction for whatever reasons. And the
reasons are. What I want to talk about is how
does a fund at your stage become one of those funds?
Like what does the trajectory look like so that you
and others you know who want to raise funds are like, look,
this is a fund. I'm gott to sell it. It's
(19:42):
open as closed over subscribers.
Speaker 3 (19:45):
Here's the thing, Will, is that this like instant gratification,
this instant thing, this idea. I love how much access
we have the technology and information. But there's also the
downside of it. Right, there's like this narrative that's been
amplified that in sixty seconds of a video that literally
(20:07):
overnight you have success. And here's the harsh fact in entrepreneurship.
Most companies close down period end of story. I don't
care what vertical you're in. I don't you know, I
don't care what it is. The majority of companies shut down.
So when you actually start thinking about what this is
and what we're doing, it's super difficult. This is really
(20:30):
hard to have a fund to select companies. And we
and rain ventures, we do fewer investments right than the
traditional vcs. But at the end of the day, the
reality is that all of this is hard. This is
hard work. Most fun ones don't even do well. We're
really really blessed and fortunate that we are doing well
(20:53):
at rain Ventures, but the reality is that most people don't.
Most founders have to shut their business down. Most BC
firms shut down. I mean, if we even look at
how many funds were open during COVID post George Floyd
and how many of them are gone, the majority of
them are actually gone, and.
Speaker 4 (21:12):
That is because this is really hard work.
Speaker 3 (21:15):
And so I think that this idea that it's gonna
look pretty. And by the way, anyone who owns an
early stage venture fund and they're building it from the
ground up, like Erica and I, we're making sacrifices right now.
Speaker 4 (21:29):
It's just very plain and simple.
Speaker 3 (21:32):
We're sacrificing now for later and so that we can
give some type of viewpoint to founders that would not
necessarily have access to pitch to traditional BC firms.
Speaker 4 (21:45):
Right, So none of this is easy.
Speaker 3 (21:47):
I just that is the thing I can only say
is it's just we're choosing to not give up, and
this is what we chose to do.
Speaker 4 (21:53):
Over the last twelve years.
Speaker 5 (21:55):
Yeah, and you know, I also just want to really
dispel the myth that you know, there are firms out
there where it's like, oh, we opened our fund and boom,
it's fully subscribed, and so it actually takes like the
most successful firms, Like when I think about people where
I'm like, oh, wow, you know you actually were pretty
successful at raising capital, it generally takes the eighteen.
Speaker 4 (22:18):
Months to get the fund.
Speaker 5 (22:19):
So eighteen months is actually like okay, great, you did
it on a good time print.
Speaker 6 (22:24):
So it takes a very long time.
Speaker 5 (22:27):
Number two, LPs institutional peas generally want to know you
for a really long time before they even contemplate making
a commitment. And when I see a really long time,
no joke, many endowment fund you know, endowment managers who
we've had conversations with will say okay, great, once we've
(22:50):
known each other for five years, then I will think
about making a commitment to the fund. So you have
to have known them and they're kind of following you
for before they're even going to think about making their
first commitment. So any of the funds where it seems
like oh, you know, let's say it's I don't know
Andrew's and Horowitz or Sequoia, you know, re sell where
(23:13):
it seems like, okay, well they opened the fund, it
was fully subscribed. It's because they have existing relationships with
super massive endowments who need to deploy capital on a
regular schedule. But they have built those relationships with those
managers over the course of you know, probably twenty years,
I would say two decades. Actually that's that's the reality.
(23:37):
And those you know, asset managers, right, I'm talking about
the endowments and the institutional managers who are investing in
the fund. You know, they had to re up their
commitments there because they don't want to take the time
to like get to know a whole new manager. So,
you know, I think I explained this a little bit
in the you know, in person interview that we were
(24:00):
which is that, you know, it's really an exceptionally long
term investment. And you know, as I told you, I mean,
Monique and I started investing together in like twenty thirteen,
we started building a track record, you know, decided that
we were interested in potentially being partners in a venture
(24:23):
fund in twenty fifteen, really went to market in twenty nineteen,
closed our first fund in twenty twenty one and are
just now raising a second fund because we have, you know,
sort of proven track record results. But you know that's
taken over ten years, and we're still considered emerging managers.
Speaker 2 (24:45):
Wow. You know before.
Speaker 5 (24:47):
That both of us had decades long experience in our
respective industries.
Speaker 4 (24:52):
So none of this happens overnight.
Speaker 1 (24:55):
So I love that take, and I wonder, and this
is a question for you. Erica Casishi brought this up on.
Even the big ones still have to, you know, go
through these stages. There was an organization that was part
of that. I learned where they're they were going through
a fundraising campaign and there's called a quiet period to
where they don't have to publicly announce they're going through
a fundraising but they can announce at a certain stage.
(25:17):
And let's say it's a five hundred million dollar campaign,
they can announce after they've already raised two fifty of
that five hundred. So by the time they announce, oh,
we're on a trajectory were we already got two fifty
in the bank. And you think, as the reader, oh
my god, they're moving amazingly fast. And so what I
hear you saying and you can translate for me if
I'm not doing this right is don't be fooled by
(25:37):
the show. Don't be fooled by the headline.
Speaker 5 (25:40):
Yeah, I mean, I'm not sure exactly like what you're
referring to, but you know, certainly I say that on average,
most venture funds take eighteen months or so toer raise,
unless you are you know, one of the pre existing,
you know, top tier funds that's been around forever and
you already have LP relationships because you're not really raising money,
(26:02):
you're just going back to the same people. Like, think
about it this way, right, when we make when we
have LPs and they.
Speaker 6 (26:10):
Invest in us, and then we give them back money.
Speaker 5 (26:13):
Right, So let's say they make a ten million dollar
commitment to our fund, you know, and then we return
you know, fifteen million. It's not like they can go
out and spend the money, you know, they have to
reinvest it.
Speaker 4 (26:26):
So Okay, Now it's a few years later they're like.
Speaker 5 (26:28):
Okay, great, take the fifteen million and keep joy what
you're doing. So it kind of creates like a built
in system of recycling as especially if you're if you're
priding returns, right, because endowments need to grow. And so
for these very successful larger funds, as long as they've
consistently you know, returned substantial capital to those LPs, those
(26:51):
LPs are going to continue to reinvest it and make
it very easy for them to raise subsequent funds.
Speaker 1 (26:56):
What's different We'll start with you, Monique. What's different about
raising money now for founders than it was two years ago?
Speaker 2 (27:04):
Five years ago?
Speaker 3 (27:07):
Well, I mean five years ago. Like Erica said, you know,
in twenty nineteen, we were out talking to institutions and
I think the I think the majority of the feedback
was just not really positive. Just to be honest and transparent,
I think I even heard a couple of times we
should start a charity, like why don't we just do
(27:28):
this as a charity, you know. And so then post
COVID and post all of the George Floyd and just
all of the you know, equity conversations and the commitment
right to the to the capital of underfunded or you know,
whichever however they wanted to coin it or term it.
(27:48):
You know, for me, I understand that business is cyclical,
concerns are cyclical, and so you know, that didn't last
very long, and so for me, I just feel like
we're pre COVID, right.
Speaker 2 (28:00):
Wow, would you add anything at that area.
Speaker 5 (28:02):
Yeah, So, you know, the funding environment is much different
for founders than it was a few years ago. For one,
you know, the M and A environment for the last
two years has been close to zero. So the issue
is there's not a lot of money coming out of
venture capital firms in the form of distributions, right, that
(28:25):
would then be reinvested, as I was saying, you know,
sort of in the last segment, and that's you know,
putting a little bit more constraint on new capital new
capital available to new portfolio companies. Right. So what we're
still seeing is kind of this crunch, which is that
you know, for companies where you thought, okay, you know,
(28:46):
maybe you're going to invest through the Series A and
then there's going to be you know, a Series B
capital that'll come and you know, support the company down
the road, you're seeing that, you know, there's less of that, right.
More people are saving their drive path for their existing
portfolio companies to make sure that they can get them
through what's a bit of a difficult time. We're also
(29:07):
just seeing you know, valuations as a whole coming down substantially.
Speaker 6 (29:12):
I'd say that.
Speaker 5 (29:14):
What we call like revenue multiples, and that's how you know,
we value companies that are actually generating revenue on the
sort of software side are down from you know, most
companies five years you know, four, five years ago, especially
during the pandemic, would have been valued at twenty plus
times revenue. Now things are being valued at maybe like
ten times revenue if you're lucky. We're seeing in certain
(29:37):
sectors as low as you know, two to three times revenue,
and people are much more focused on, you know, as
far as more mature companies on are you generating positive EPADA, right,
So people want to see companies generating positive free cash
flow that don't have high burn rates. Nobody's paying up
for fast growth, you know, while you're burning a lot
(29:59):
of cash anymore. And you know that just really changes, uh,
the valuation scenario all the way down to you know,
the pre seed round because you know, generally people are
hoping that the value of the company is kind of
going to like double between rounds. So you know, if
(30:20):
valuations are kind of half as much now at exit,
they're going to be pretty much half as much. All
the way down to the pre seed and we're seeing
you know, sort of pre seed and seed valuations happening
more in the you know, five to ten million dollar
post money range, whereas you know, during the peak, it
was more like ten to twenty million dollar post money.
(30:43):
And I think founders, you know, are a little bit
surprised by that, and you know, it's been hard for
people to digest that they're just not going to get
the valuations they used to.
Speaker 3 (30:53):
And by the way, you know, in my personal opinion,
the valuation should have never been what they were, right, Like,
you know, a lot of a lot of times we
do here founders in conversation complain about investors, you know, oh,
I want it like one hundred million dollar valuation and
they only gave me a sixty million or a fifty million.
(31:14):
And I think it's you know, one of the educational
pieces for founders is that just because someone gives you
a large number, can you get to that number? Because
if you can't, you're going to have a down round,
And you know, that is not a healthy thing for
the founder or for the investors. And so I think
like having this understanding between founder and investor of kind
(31:38):
of what does the valuation even mean? You know, I
think that that is something that has to be have
a little more time spent on with the team.
Speaker 2 (31:46):
Yeah.
Speaker 1 (31:47):
I'm glad you bring that up because you know, there
was a quote I found from you Erica where you said,
you know, your team has to be amazing. We do
not invest in founders who are one person shows no
one will get anything done by themselves. The team is
just as important as the idea and the business model.
And going back to something you talked about earlier in
this conversation, you know, you bring these founding teams in
(32:09):
for to our session and you talk about the dynamics
of the team and et cetera. What are you looking
for in the co founder dynamic? To me, that's the
money because it was the Money's quote.
Speaker 3 (32:19):
Oh oh okay, yeah, no, no, oh no, And it
is in fact in our diligence process. Founder and founding
team fit is one of our heavy focuses, right. I
think that especially for women, especially for women who have
(32:39):
experienced anything in corporate America before actually like coming and
building their own thing. I think that a lot of
times we have been taught that we have to know everything.
I know, for myself, I was pretty much the only
female and definitely the only person of color in most
of the meetings during my career. And this idea of
(33:01):
I have to know everything, I have to be perfect,
I have to do everything. That notion I'm trying to
help founding teams undo. And so when we're talking to
founders and we're looking we're not asking normal questions. In fact,
a lot of times we get the founding team saying, oh,
we've never been asked that.
Speaker 4 (33:17):
You know, we don't.
Speaker 3 (33:18):
Want the pretty stuff. What are the dynamics? What happens
when there is a disagreement? How is your problem solving
skills as co founders? You know, do you all equally
respect each other? That's really important and so you know,
not just the skill set and the talent side, but
also personally, how do you all view what it means
(33:39):
to be founders together and part of a founding team?
I mean, they have to build this, you know, in
the days when it doesn't feel good, How are you
all looking at each other?
Speaker 4 (33:49):
Do you shut down?
Speaker 3 (33:51):
Okay, if that is your personality profile, what do we
how do we do to prevent shut down? You know,
there's just a lot of things I think to act
like these things don't exist. I think it's just not healthy.
These things do exist. I mean in family. Think about it.
In family, you have dynamics of disagreeance. Of course you're
going to have that in a new company, a young
(34:13):
company that's stressed out every day. So it's not we
don't want them to avoid it. We want them to
understand how will you conflict resolve?
Speaker 2 (34:22):
Finally, I want to pose this to both of you guys,
and we'll start with you, Erica.
Speaker 1 (34:26):
There was something I saw you had said before when
somebod you were asked about your legacy, Erica, and you said,
all I care about is helping female founders and founders
of color build billion dollar companies that are creating great
technology products and solutions in the market. As far as
I'm concerned, I think that's what my legacy is going
to be.
Speaker 2 (34:46):
That was your quote there.
Speaker 1 (34:48):
And when you think about the dynamics that are currently
at play in this market where it's tough to you know,
Moniqu's point like it's kind of like pre COVID again,
when you think about how hard it is to do
this work. You know there's some wins obviously, but what
do you think about when you think about this is
what I'm going to be doing for the next ten,
(35:09):
twenty thirty years.
Speaker 5 (35:11):
Yeah, I mean, so don't I don't actually think it's
hard right now, you know, I'm actually happy. As I
was talking about this last night, there were so many people,
you know, who just got overly excited about this industry.
You know, people who didn't really like at all even
understand how it works, who just kind of thought anybody can.
Speaker 6 (35:32):
Be a VC and let me just jump in here.
Speaker 5 (35:34):
And just because there was a lot of like momentum,
so it kind of made it seem like, you know,
just like when the stock market's always going up or
crypto's always going up.
Speaker 6 (35:43):
You know, these people seem like, oh, I'm.
Speaker 5 (35:44):
A genius, right, But it's like, well, you know, it's
just because we're in this sort of interesting place in
the market. So to be honest, you know, just sort
of following up on what Monique said, this kind.
Speaker 6 (35:56):
Of market correction is actually really good for the market.
Speaker 5 (35:58):
You know, it's not good for or things to be
in sort of very overheated and you know, sort of
irresponsible deployment of capital type of market where you're just
like throwing money at companies and they're just you know,
spending it on all sorts of nonsense and not.
Speaker 6 (36:14):
Really creating value. And then the worst is that they're like.
Speaker 5 (36:17):
Ponning these things off on you know, the public markets,
right or you know, larger companies that you know have
more sort of diverse investor bases of you know, people's
pension funds.
Speaker 6 (36:30):
And you know all of that.
Speaker 5 (36:32):
Like, the people who end up losing in that scenario
are sort of the average hardworking people who you know,
are trying to invest their retirement savings while a lot
of wealth transfer goes to you know, mainly private equity folks.
You know, in some dcs, we're able to you know,
convince them that just because the company is you know,
(36:53):
growing fifty percent year over year, even though it's you know,
losing a billion dollars a year, it's some great asset
to purchase. So, you know, I mean from just sort
of like a fundamental overall viewpoint of the economy, like
I think we're in a better place.
Speaker 6 (37:09):
You know.
Speaker 5 (37:10):
Monique and I have always had an incredibly disciplined approach
in our investing, probably because I am a New.
Speaker 6 (37:17):
Yorker actually I originally grew up in California.
Speaker 5 (37:20):
But you know, I spent my whole career in New
York doing investment banking, like actually doing discounted cash flow analysis,
you know, sort of understanding very much how to value
a variety of different asset classes. And so we've always
been really focused on fundamentals.
Speaker 6 (37:38):
You know, and for that reason, we never.
Speaker 5 (37:40):
Got caught up in kind of like the hype and
the overpaying and the investing in companies that needed to
burn through one hundred million dollars to get to profitability.
So you know, we've actually been rewarded for that really
diligent approach. But you know, it's based on many decades
of experience in the market, understanding market cycles and understanding
(38:03):
like where true value is created, you know, And for
that reason, you know, we're our fund one is you know,
performing in you know, the top five percent of funds
of our vintage. But it's because you know, the market
is correcting to a more sensible approach that we've consistently kept,
(38:24):
and we've you know, buy and large, you know, focused
on building healthy companies that are healthy not only for
the investors but also for the founders and the employees. Right,
We're not looking to you know, greater fool theory our
way to returns on you know, a crappy business. But
(38:44):
what we are hoping is to build great product, to
have founders that are going to see you know, substantial
personal and financial reward from what they've done, and to
build you know, great jobs for the amazing people in
our community.
Speaker 2 (39:00):
It's fantastic Monique talk about.
Speaker 3 (39:03):
Legacy, legacy when I look at when I think about
my like, just who I am as a person, just
as a human being. I feel like, you know, even
in high school for this national business program, you know,
I was nominated and served as the officer of civic Affairs,
(39:24):
and you know, and so when I think of who
I am, I'm just of service. That's always been my mindset.
I've always wanted to get somewhere so I can gather information,
share it, or help someone else get there.
Speaker 4 (39:39):
That is just who I am.
Speaker 3 (39:41):
I'm not going to change that about myself and for
me personally, I felt like that the heart, right, the
non paperwork side, is what was missing from venture.
Speaker 4 (39:51):
Being able to have the ability to see people, to
see what we are.
Speaker 3 (39:55):
And know that one small thing can help change the
trajectory of their business, of their mindset of an entire
economy in a community, so like impacting consciously, that's always
been important to me. Meeting with some type of ability
to empathetically see someone and create a solution out of
(40:17):
that is who I am.
Speaker 4 (40:20):
High vision, big vision.
Speaker 3 (40:21):
I'm very grateful that my skill set has always had
me a part of something before anyone else was. That's
something I take a lot of pride in. It's something
I try to teach to our founding community. It's something
Erica and I tried to like diligently focus on the
future that we're building right how we want to see
the future. We have an inclusive portfolio because that's how
(40:43):
venture should have always been done.
Speaker 4 (40:44):
Inclusively.
Speaker 3 (40:46):
Being able to see the world for exactly what it
should be is who I'm always going to be and
always fight for that to create that world that we
want because we're all creators at the end of the day.
Speaker 2 (40:59):
I agree, he Lonig, It's just so much fun. Thank
you guys so much spending time with me.
Speaker 3 (41:05):
We appreciate you, will thank you for all your diligence.
You pulled out quotes that man I haven't reached that
reminded of a minute.
Speaker 1 (41:13):
It's a pleasure it's a pleasure doing this work, and
it's a pleasure to spend time.
Speaker 2 (41:17):
With people like you. Guys.
Speaker 4 (41:18):
No, thank you. We're excited about afro tech this.
Speaker 5 (41:20):
Yeeah, I see you there, I see okay than good guys.
Speaker 1 (41:25):
Black Tech Green Money is a production of Blavity afro
Tech on the Black Effect podcast Networking Night, Hiartmedia. It's
produced by Morgan Debonne and me Well Lucas, with the
additional production support by Kate McDonald, Sayah Ergan and Jada McGee.
Special thank you to Michael Davis in Love Beach, Learn
More about My Guess and other technis is an innovator's
at afrotech dot com. The video version of this episode
(41:46):
will drop to Black Tech Green Money on YouTube, So
tap in, enjoy your Black Tech Green Money, share us
to somebody go get your money.
Speaker 2 (41:54):
Peace and love,
Host
Will Lucas
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