The video discusses key insights and advice for succeeding in the venture capital industry, including the importance of communication, storytelling, diversity, and delivering top quartile returns.

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  00:00

  💼 Aileen Lee, founder of Cowboy Ventures, shares her journey from marketing roles at Gap to venture capital and becoming a CEO of a digital media company.

  • Aileen Lee discusses her background and career leading up to founding Cowboy Ventures in a conversation with the speaker at Startup School.
  • The speaker, a first-generation immigrant from China, grew up in a traditional family that owned a Chinese restaurant and believes that immigrants are entrepreneurs who do more with less.
  • The speaker was interested in consumer brands and found companies like Odwalla and The North Face by reading magazines and looking them up in the phone book, eventually convincing them to hire her for the summer.
  • The speaker worked in marketing and various roles at Gap, including as chief of staff to the CEO, and was part of the team that launched the company's online store in 1999.
  • The speaker worked at Friendster and then moved to Kleiner Perkins where she worked with John Doar and was responsible for reading and evaluating business plans.
  • The speaker took a break from venture capital to become a CEO of a digital media company, gaining valuable operating experience and weathering the 2008 financial crisis.
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  08:42

  Managing people requires different communication styles for each individual, investors evaluate founder's ability to lead, and it's important to focus on accounts that are a good fit for long-term success.

  • Being a CEO taught the speaker that managing people requires different communication styles and rhythms for each individual.
  • Investors evaluate not only product market fit but also the founder's ability to attract and lead the right people for short-term and long-term success.
  • Compensating inexperienced people can lead to unintended consequences, and it's important to qualify leads effectively to focus on accounts that are a good fit and can actually close.
  • Don't waste time on customers who are not interested in solving a real heart problem, as it is not sustainable and will lead to short-term gains but not long-term success.
  • The discussion is about how startup founders should approach investors and the level of empathy that investors like Tyler Bosmen II bring to the table.
  • Venture capitalists at Cowboys are more empathetic and human than others, but it's too dumb to advertise it.
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  16:09

  Venture investors should focus on optimism, non-traditional hires, and storytelling to succeed in the industry.

  • As a venture investor, it's important to be an optimist and work with people and situations that are more raw and less figured out, focusing on what needs to go right rather than what could go wrong.
  • Belief in non-traditional hires and qualities like thoughtfulness, empathy, and investment in people's potential are key to success in the venture capital industry.
  • Choose whether you want to be a mercenary or a missionary in tech, as both can be successful, and it's important to find the right kind of support.
  • Startups should focus on storytelling to emotionally engage investors during fundraising, regardless of whether they are natural storytellers or not.
  • Storytelling is crucial for recruiting talent, convincing customers to take a bet on your company, and upgrading from free to paid versions.
  • Practicing and perfecting your pitch is critical for raising money, and it's important to start early, get feedback from friendly sources, and iterate like writing code and talking to customers.
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  23:40

  Startups need to deliver top quartile returns by having billion-dollar companies to attract professional investors, understand VC's motivations, and qualify leads to make fundraising more efficient.

  • To raise money from professional investors, startups need to deliver top quartile returns, which means having two to four companies worth a billion dollars or more, especially for larger venture firms, as they need to own 10% of an eight billion dollar company to be able to return the fund.
  • Founders need to understand venture capitalists' math and motivations, as they are looking for multi-billion dollar companies, not just 30 or 40 million dollar exits.
  • Having only angel investors may not provide the necessary guidance for scaling a company and institutional investors can be important for finding partners for future rounds.
  • Fundraising is a humbling experience for startup owners as they have to do everything themselves and face rejection, but it gives them motivation to make investors regret not investing in their company.
  • Following up is important in the investment industry, as many VCs are hesitant to give reasons for passing on opportunities.
  • Qualify leads before spending time with them to make the sales process more efficient in fundraising.
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  32:03

  Women face biases in business, as shown by a study where a male voice-over raised twice as much investment as a female voice-over for the same script, highlighting the need for change and organizations like All Raise to promote diversity.

  • Women are often treated differently than men in business, with men being perceived as more confident and capable, leading to biases and unfair judgments.
  • In a study, a male voice-over raised twice as much investment as a female voice-over for the same script, indicating a need for change.
  • We need to address biases at every stage of life to prevent unfair treatment, even in the startup industry where some unethical individuals may raise more money due to their likability.
  • All Raise is a non-profit organization that aims to accelerate success for women in the tech industry and promote diversity.
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  35:57

  Founders can join Founders for Change to promote diversity and inclusion in venture business, while startups need to focus on addressing billion-dollar problems with unique solutions and creating a solid financial plan.

  • Founders can sign up for Founders for Change to publicly commit to diversity and inclusion, and there are office hours and a matching service available to help women and people of color get into the venture business.
  • Belief is crucial and can be instilled in any community, as demonstrated by the thousands of world-changing companies in startup school.
  • A pitch should have fundamental elements including a team slide, problem statement, and why the founders are the right people to solve the problem.
  • Investors look for problems that are worth billions of dollars and want the addressable market to be at least five or ten billion, while also seeking unique solutions with a 10x difference.
  • To convince people to try something new, there must be a significant benefit and honesty and transparency about the competitive landscape is important for investors and board members.
  • Create a financial plan with a three-year outlook, including revenue, margins, costs, marketing expenses, technology development, and cash consumption, and have a summary slide to highlight the key points.
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  41:27

  Successful startup founders have pre-existing relationships and work experience, and consumer founders tend to be younger than enterprise founders.

  • Aileen Lee coined the term "unicorn" to describe startups valued at over $1 billion, and the term stuck because it was more relatable than other mythical creatures like dragons or diamonds.
  • The speaker analyzed data from successful startups to identify common traits such as co-founder relationships, education, and prior tech experience.
  • Successful founders in the prior decade were in their 30s when they started, contrary to the conventional wisdom of dropping out of college and starting at 20.
  • Analysis of successful startups shows that co-founders with pre-existing relationships and work experience are more likely to succeed, and consumer founders tend to be younger than enterprise founders.
  • The proper distribution of funds during a seed round largely depends on the type of company, with most software companies spending almost all their funds on people.
  • Seed stage investors are looking for non-traditional founders with grit and the right skill set to figure out, and it's a great time to be a non-traditional founder due to the diversity problem in venture.
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  50:13

  When raising funds, reference check investors and consider the market for convertible caps to avoid dilution and maintain healthy relationships.

  • When raising funds, it's important to reference check investors and consider the market when deciding on a convertible cap, as dilution is inevitable and it's best to avoid varying caps for different investors to maintain a healthy long-term relationship.
  • To reach out to VCs, it's recommended to get a warm intro, but cold intros can work if you provide a clear market focus and what you've figured out so far.
  • Getting a warm introduction is a test of hustle and networking ability, and using it as a filter is common in the small world of entrepreneurship.
  • Companies founded by women are evaluated 84% less than male founders, which can be partially attributed to bias and the lack of female co-founders in the most valuable companies in the industry.
  • Investors can reduce bias and women can improve their storytelling skills to increase their chances of raising money at high valuations in competitive situations.
  • How to balance high return for investors with enabling companies to compete in a price-sensitive market by aligning objectives and conserving cash.