Aileen Lee’s Advice on Starting a Successful Company – How to Get Venture Capital and Join the Unicorn Club
In 2013, venture capitalist Aileen Lee famously coined the term “unicorn” to describe the rare handful of startups with billion-dollar valuations. Marie Claire caught up with Lee to talk about the Club Unicorn in this moment, and how female founders can win more funding dollars.
Marie Claire: What has changed since you first wrote about Unicorns in 2013?
Aileen Lee: There are more unicorn companies than ever, but there is more awareness and sensitivity to the idea of scale. Valuation is not the end. It’s a means to an end. It’s a nice milestone to show that you are making progress in terms of building a company to scale.
MC: Has the tech industry’s culture changed at all?
AL: More data has come out about how tech has not been a land of opportunity for everyone. We have data that shows that we are actually losing some ground in terms of women getting venture funding in 2017, which is pathetic. We have a long way to go.
But ten years ago when I was working in venture, we did not have this data. You were just supposed to ignore the fact that you were a woman or that you are part of an underrepresented group. If you called it out, people would look at you like you were a complainer or a squeaky wheel or pulling the gender card. Now there is a lot more sensitivity and awareness that it’s not okay, that it’s not women’s fault that there aren’t more women getting funding or women in venture firms. It’s the industry’s fault and the industry needs to fix itself.
Both men and women are rolling up their sleeves and trying to figure out what we should proactively do. How do we take bias out of our interview processes? How do we change the recruiting funnel for every open position? Should we put a Rooney Rule [a policy that mandates minority candidates are interviewed] in place? People have recognized that we have a problem in terms of number and in terms of behavior and biases. The women who are founders of unicorn companies probably had to be triple or quadruple as good as someone who is not coming from an underrepresented group to get to where they are. Their ideas, their vision, their ability to recruit, and their ability to fundraise deserves an inordinate amount of admiration.
MC: What solutions seem the most promising?
AL: We can definitely improve on our data tracking; most firms probably have not been tracking both the competition of their firms, and the competition of the people that they fund. But I’m hopeful that the industry will move to track more of their own leadership level data and if they’re not happy when they look in the mirror, they will make a commitment to improve. That said, there’s not a silver bullet. There’s no pill we can take to change the numbers magically.
We have a lot of more coming with All Raise, the women-in-VC organization we launched in early April. Our goal is to try and increase the number of Anne Wojcickis and Adi Tatarkos and Katrina Lakes and Michelle Zatlyns. We need way more of them at every level: CEO, VP, director, analyst, general partner.
MC: What else has changed the funding landscape?
AL: Technology trends have changed a ton. In 2018, the conversation has definitely been turned to blockchain and cryptocurrency, which is an area people in mainstream investment circles were not talking about at all five years ago. Back then, cryptocurrency was associated with Silk Road. We were like, “Bad things happen.” Things that institutional capital did not want to get behind. So that’s changed a lot.
Machine learning and AI-driven application software have become a really important reason why people are building new companies and customers are adopting new technologies, and that was really not a thing five years ago. And autonomous vehicles and the on-demand economy ecosystem at scale is something that, five years ago, people would have laughed about.
Technology has changed quite a bit. When these new spaces open up, nobody has experience in them. So it’s a great opportunity for women and minorities to get in on an important new wave of innovation because there aren’t 100,000 people who’ve been doing it for 20 years.
MC: Many of these spaces already seem to be extremely male-dominated, especially cryptocurrency. How do you get more women interested and onboard early?
AL: There’s potentially a lot of opportunity that’s going to be created through cryptocurrency and women cannot miss out. In February, Brit + Co created an event called Jenny From the Blockchain. It sold out in an hour. So women are getting it, you know?
A friend of mine on Facebook said, “Hey, I’m worried were going to miss out on cryptocurrency and block chain. Who’s in on that?” And within a week, she organized a group and the first meeting was held in someone’s house, in their living room, where they got a guy who’s been investing in cryptocurrency for five years to come be a speaker to give everyone the lowdown on what we need to know, how we should start thinking about it. In a week! It’s changing and it’s exciting.
MC: What’s your advice for entrepreneurial women who want to get into an area like cryptocurrency, but don’t have a deep expertise on the topic?
AL: Nowadays, to be honest, it really depends on what kind of a company they want to create. If it’s a robotics company, finding someone who has a technical background in robotics is helpful. But if I look at Rent The Runway, founders Jenn Hyman and Jenny Fleiss were both not technical. There are so many great contractors and people who have experience who want to help be a part of building something. As a founder, one of your most important skills is as a recruiter, as an identifier of talent and a curator of talent. If you hire the wrong developer or you hire the wrong UX person, you could run out of time and make a product that nobody likes to use. So it’s really about attracting a lot with very little resources.
There’s a saying that the definition of “entrepreneur” is being able to do more than anyone thought possible with less than anyone thought possible. That’s the ticket. You do not have to have a Ph.D. from MIT. It’s about what can you get done with the little you scrap together. Jenn and Jenny are a great example of that. I’m so proud of what they’ve built. It’s such a game-changing and visionary product. And that was the key. They had the insight to create something that would delight customers.
MC: Jenn Hyman has said in the past that, when pitching their ideas to investors, women need to assume their market is huge, that they’re tapping into a billion-dollar opportunity.
AL: She’s right, you know? It’s been quantitatively proven that women are judged more harshly when raising money than men, and that’s part of the reason why they only get two percent of the money and men get 98 percent.
Women who are looking to raise money need to have a big vision. Don’t play small ball. Communicate that you are trying to develop something big and important.
And when I was growing up, I was not taught to talk about money or to talk about making money, or to think that trying to make money was cool. Like it was distasteful for women to talk about money. That’s super wrong. Women should take control of their financial futures and feel confident and comfortable talking about money. And wanting to make money.
Want to learn more about the Unicorn Club? Hear from other billion-dollar female founders and venture capitalists here.
A version of this story appears in the April issue of Marie Claire, on newsstands now.