Female Founders Fund partners Anu Duggal and Sutian Dong tell Moneyish what they look for in a founder — and share tips on how to raise money
For funds’ sake.
Anu Duggal and Sutian Dong are banking on woman power with their New York-based Female Founders Fund (aka F3), an early-stage fund investing in companies led by women. And F3 — whose portfolio companies have included the plus-size brand Eloquii, Arianna Huffington’s Thrive Global, women’s health app Maven, microlending platform Tala and wedding company Zola — connects its founders with more than just cash.
“My view was that we were going to start to see more and more women start to build really interesting technology companies, and there was an opportunity to build a fund that was really at the center of that ecosystem — providing not just capital, but access to more than that through a community, through events, and just through a broader network of other like-minded women who were doing similar things,” Duggal, the fund’s 38-year-old founding partner, told Moneyish.
Duggal, a London Business School-educated entrepreneur who launched India’s first wine bar and the India-based e-commerce company Exclusively.in, started F3 in 2014 after recognizing that female-fueled startups were underfunded. The stats back up her mission: Companies with women CEOs raised only 3% of total venture capital — about $1.5 billion out of $50.8 billion — between 2011 and 2013, a study last year in the journal Venture Capital found. And male-led startups are nearly twice as likely to snag funding from male investors than female-led companies are, according to a 2017 CalTech analysis.
F3’s first fund raised around $5.85 million in 2014, Duggal said, powered by “strategic” investors: female founders who could contribute their experience, and male VCs who were supportive and excited about the vision. Thirty-year-old Dong, a former senior associate at the early-stage VC firm FirstMark Capital and an NYU Stern School of Business alum, joined as a second partner in January of 2016 after meeting Duggal the previous year through a funds’ limited partner.
The two count 31 active companies within their portfolio today, focusing on women-led startups in the areas of e-commerce, marketplaces, web-enabled services and platforms. Duggal and Dong pride themselves on being able to spot consumer trends that the average fund partner might not — and also put stock in companies serving customers who look, think and live differently than they do.
“As potential customers of something, we’re like, ‘Oh, we get it; we know why women would want to subscribe to a razor subscription,’ in a way that’s far more personal than probably the rest of the market — which most decision makers at funds are still, to this day, all men,” Dong said, referencing the women’s shave and body brand Billie, part of F3’s portfolio.
“But what we realize as well is that we live and work in New York, which is a microcosm and not really representative of this big fat middle of the country,” she added. “It’s important for us to make sure that we’re really understanding the market as well — not just from our personal experience, but from a more macro perspective.”
As for what they look for in a company, Dong says the magic word is “team.” “When we think about investing in companies, we’re investing in people,” she said. There’s also the entrepreneur, her unique point of view about a particular market, her clarity of thought and her ability to share that thinking — plus a demonstrated ability to execute. “How has she done something where it signals to us that she is the person, and she’s going to create the team to tackle this problem?” Dong said, adding there can be an “aha moment” with founders: “Like, ‘Yes, you are the ones to build this business.’”
Founders also need to be able to sell, Duggal said. “As a CEO, you’re selling all day long — you’re selling to your customers, you’re selling to potential employees, you’re selling to potential investors, potential advisory board members,” she said. “I think it’s a really important indicator of success, because you could have a great product, but if you can’t get it to the market and you can’t hire people, it’s irrelevant.” Duggal and Dong suss out this strength by interacting with a founder, talking to early employees and understanding why the consumer is passionate about the product.
For female founders trying to raise money, here’s sage wisdom from the funders themselves:
Figure out which angel investors or funds are a good fit for you. After all, Dong argued, “money carries different value depending on who it’s coming from.” “As a founder, I think it’s super important to pick — to the extent that you can — the best investors for you and for your business,” she said. Use databases like Crunchbase, look on the fund’s website for its portfolio and thesis, and scroll through the fund’s Twitter feed for real-time insight on what partners are thinking, she added.
When you land that first meeting, ask: “What are you looking for? What size check do you write? What stage do you like investing in?” Dong said. “Asking those questions early means that you can get a very clear sense of whether or not this fund or this angel would be the right fit for your company.”
Develop a network early on of not just investors, but other founders. “Getting warm intros to those investors that you want to target is much more fruitful than going to them cold,” Dong said. Fellow founders can also share off-the-record insights into what it’s like to work with certain investors or pitch certain funds, Duggal said.
Understand the economics behind your business. “It’s great to have a good idea and be able to put together a great (pitch) deck, but if you have a solid understanding of the math behind ‘This is what will get me from a million dollars in revenue to 10 to 20 to 50,’ I think it’s something that investors are looking for, because that basic understanding is key to just building a business,” Duggal said. If you lack that understanding, she added, spend some time getting advice, mentorship or coaching on the topic.
Be authentic. “What’s driving you to build this business?” Duggal said. “It’s really hard to start a company and to scale it and spend the next 10 years of your life growing it. … What we look for is not just the story around ‘Why I’m excited about this business,’ but what’s driving you to leave your job or your startup and really invest all of your time and energy into this.”
Remember: It’s a conversation. “You’re talking to a human on the other side of the table, and it’s important to remember that and to treat it as a more organic interaction than something where ‘I’m here pitching you, and I’m going to go through my pitch step by step,’” Dong said. “That can feel really rote, and as investors — especially as early-stage investors — we’re investing in humans. We’re investing in you, and we want to get to know you and how you think, not how you take us through a slide deck.”
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