VCs would do office hours with my companies and they had a certain bent towards some startups and not others...I had a very different idea of who were the best startups in my batches.
Below is an abridged audio transcript of Episode 60 from Season 4 of Rock The Boat: Making Waves, edited for clarity.
Elizabeth Yin is a former startup founder and currently works in venture capital as a co-founder and general partner at Hustle Fund. In this episode of the podcast, Lucia talks to Elizabeth about what it was like as a founder and also overseeing several batches of startups in accelerators. Elizabeth was a partner at 500 Startups, and previously founded the adtech startup LaunchBit.
Power in the investing world is concentrated in the hands of just a few people. And the money generally continues to support existing funds and the founders they support who are typically white male graduated from an Ivy league or MIT or Stanford, and worked at a top notch tech company like Facebook or Google.
Elizabeth talks about how she came to this revelation. She had a hunch that it was true, but when she was in charge of an accelerator she saw it in all her batches. Elizabeth also talks about her experience as an Asian American woman founder looking to raise money with investors.
I. Meet Elizabeth
Elizabeth: My name is Elizabeth and I'm from the Silicon Valley. I previously worked at large tech companies, but in 2008, I decided to leave my cushy job at Google to try to start my own company. And, after a lot of failed side projects, I ended up building out basically an advertising technology company called LaunchBit, grew that over the course of a few years, sold that in 2014.
And for the last five years I've been investing in early stage startups, full time in a few different capacities. Initially, as an angel investor. Later, I joined 500 Startups and became a partner there where I ran their accelerator program. And then in the last two years I've been working on my own VC fund called Hustle Fund.
Lucia: Thanks for being here. We always love to start the podcast with an origin story. So, Elizabeth, where did you grow up and what were you like as a child?
Elizabeth: Arguably, my entire career actually is very related to where I grew up. So I grew up here in the San Francisco Bay area and I grew up during the nineties, which as you know, in the late nineties became the dot com boom.
I was in high school at that time. And actually, you know, my parents, they are not engineers. They were never in tech or anything like that. And so tech had a lot of influence on me because of where I grew up. And I think there were basically two things that led me down this path. One is when I was 5 or 6 in first grade, my first grade teacher decided to buy an Apple Two GS with her own money.
She also didn't really care what we did in the class. She felt like children should be able to explore and learn whatever they wanted.
So I just spent all my time on her computer all day, every day. Later in high school, when I was in ninth grade in the fall of 1996, and things were starting to heat up in the internet world and my best friend from high school Jennifer asked me if I wanted to help out her cousin with his new startup during winter break. And I didn't know what a startup was, but I didn't have anything going on.
And for about a week during winter break, we went up to her cousin Tony's office and helped him with his startup, which really wasn't much help at all. I think we built some tables and chairs for him and maybe a small internal website. But that actually was sort of the pivotal moment where I realized, "Wow, this is what I want to do when I grow up."
II. Pattern matching
Lucia: How did you decide to join 500 Startups?
Elizabeth: We went through five hundred startups with my company LaunchBit. So initially I went there basically just to start mentoring startups and look around to see what are some interesting problems that I might like to address next.
Lucia: What was like the inflection point in which you decided, "Hey, I want to be a VC"?
Elizabeth: I think it was more gradual than anything. I initially joined 500 Startups to mentor companies and not even to invest out of their fund. And then they asked me to run their accelerator program. And so I did that and I ran four batches for them. I think over the course of those four batches, I just noticed batch after batch, after batch, VCs would do office hours with my companies and they had a certain bent towards some startups and not others.
But from my purview in running the accelerator, I had a very different idea of who were the best startups in my batches. And that this disconnect led me to think there may be something interesting here.
Like, is there a better way to invest in startups? And that's how I ended up starting to think about VC, but still I wasn't thinking about joining another VC.
Lucia: And what were the stark differences between the startups that VCs had a penchant for versus the startups in your batch that you kind of see on a day to day basis that you're like, "Now these are the winners."
Elizabeth: A lot of people say that Silicon Valley is a meritocracy and all of this. And I think, you know, certainly compared to many other industries or other regions, there's some truth to that.
But I would say we're very far from that. And I do think there's a lot of pattern matching in VC in particular. If you are, let's just call it out, if you're a white male went to an Ivy league school, worked at a Google or Facebook, it almost doesn't matter what you do. Somebody's going to fund you.
I had heard that. I had maybe had an inclination towards thinking that as well, but when I was at 500 Startups, I saw hundreds of companies go through my batches and that's when I could really see it, just from that data alone.
At this point, 500 Startups has invested in well over 2,000 companies in total. So you can just kind of see from like a massive cohort who gets funded, who doesn't. And then from my purview, as an accelerator manager, I could pick out the companies that were doing well.
Those people came from all walks of life, but not everyone fit that pattern. And those people would still struggle.
Lucia: But did you see startups that were actually doing a really great job from a numbers perspective, but didn't get funded because of the pedigree, because of the founders.
Elizabeth: Yup. For sure. Either a pedigree, race, gender location, any, and all of that, you know. All of those permutations definitely affect fundability.
500 Startups has always invested in a lot of different kinds of startups and a lot of different kinds of founders. So I think this is also how I was able to actually see this because I had a really diverse cohort. Every single batch, like people who came from everywhere, it looked like whatever.
That's how I could really see that. I think in terms of changing things up at 500 Startups, I really liked that ethos in that mission to fund all kinds of founders and startups. And we continue that today at Hustle Fund.
III. Bucking the stereotypes
Lucia: I kind of want to talk about, going back to being a female minority in a male dominated space. What is it like as a VC? I remember you told me a story once of someone giving you feedback.
Elizabeth: So when I was raising money for LaunchBit, I went into a meeting actually with an angel investor and at the end of the meeting, I asked the investor, "Oh, so what do you think?" And the angel investor said, "Well, I don't want to say the wrong thing and call you a meek Asian woman, but I questioned how you'll lead a company of a hundred people."
And I was just so shocked. Like, did I just hear this right? Like, who says that out loud? Just all of these questions were racing through my head at that time. And then my next thought was, "Well, I better come up with a good response soon because then he will think I'm a meek Asian woman," which he already did.
I also took away some very constructive feedback, which was, well, if he is thinking that and could actually articulate that out loud, that is a gift to me. Maybe there are many other people who think that, but won't say it out loud or don't even consciously know they're thinking that.
So I have to combat that stereotype. I have to go into every meeting louder. And I have to sit up and look people squarely in the eye and do everything it takes to combat the idea that I am a meek Asian woman. And you know what, actually, my fundraising went a lot better after that. I started closing checks.
Lucia: And you certainly give a lot of, advice on fundraising, a lot of advice on how to close deals. What's the favorite piece of advice that you received?
Elizabeth: I think with regard to raising money for Hustle Fund, Charles Hudson, who also runs a pre-seed fund called Precursor Ventures gave me some advice before I even started raising money for Hustle Fund. And basically it was very simple advice. He said, "Just don't run out of leads and you'll be fine."
And that is so true with regard to fundraising. If you never run out of leads, it doesn't really matter whether this investor is in or out. You just keep going and you just keep finding new leads.
People spend too much time trying to chase people and convince them. Don't try to convince people who are not already bought in after the first meeting. They're just not worth it. Find new leads.