As we reflect on the close of Women’s History Futures[!] Month, Good Scout Capital (GSC) recently convened a group of emerging female BIPOC fund managers focused on a future of capital markets that fully includes women and leverages their unique talents and perspectives to generate even greater results and returns. Highlights of this conversation are excerpted below.
This piece has been excerpted and edited for clarity.
Moderator:
Lindsay Schrupp, General Partner, Sabacica Capital
Participants:
Rachel ten Brink, Founder and General Partner, Red Bike Capital
Winnie Sabbat, Founder and Managing Partner, Sabacica Capital
Rupal Patel, Founder and General Partner, Good Scout Capital
Discussion Excerpt:
LINDSAY [MODERATOR]: Can you tell us about the moment you decided to join the private capital space?
RACHEL: My firm, Red Bike Capital, started very organically talking to founders and advising. But what I realized is I had incredible deal flow and I could really help entrepreneurs beyond just advice. So we started with just small checks, angel investing. We did 18 angel investments, which have done very well. And we saw the opportunity to create something bigger and thus Red Bike Capital was born. So we’re very new. We did our first close last November and are a seed stage fund that invests in new startups that improve people’s lives and power the economy. So specifically we focus on FinTech particularly around consumer facing FinTech credit, financial education, financial access. We also look at a lot of B to2, B to C, so think commerce infrastructure marketplaces. And then we look at consumer technology really with the focus on wellness and how to make people live better lives. Our team is myself and my partner, Herman Goihman. We met at Columbia business school, and Herman’s background is all in asset management. He was an investment banker at Bear Stearns, then he was at a couple of large funds where he was portfolio manager at Bank of America and Taconic Capital. Now we’re off to the races.
RUPAL: Through my experience in private equity, there was a recognition for me that the ability to take risk in this country is not equally afforded to everyone. I kept running into a number of diverse entrepreneurs and specifically female entrepreneurs that had really great products or services to offer consumers and corporations at scale, but never trusted the capital stack that approached them for investment, because there’s not a lot of experience among women, for example, in private capital. And the experiences that women hear from other entrepreneurs are not great experiences. I’ve seen a lot of women hesitate to take capital to scale their businesses. And for me, it was unfair and a complete market failure. We should be taking risks with more of these entrepreneurs but for a trusted capital facilitator that can help give them comfort that there’s somebody that’s not looking to extract from you, but is actually looking to empower you and has aligned values. There was a clear gap in the availability of capital that met those underrepresented entrepreneurs’ needs. And so I really wanted to fill that gap around financial inclusion.
I also recognized the acceleration of change that capital can provide around issues like climate change. I spent three years building one of the largest solar PV energy projects in the world, with union jobs, it was amazing how quickly that could happen. Especially when you watch how slow the government is to respond to the crises that we’re facing today and how quickly capital has been able to accelerate change. It has a long way to go, but it’s just very clear that capital is so important. I believe capital can similarly accelerate change in addressing wealth and income inequality and that’s why I started Good Scout Capital.
WINNIE: I went from working on private equity-backed companies to deciding to go fight for the little guys and pivot to VC-backed companies. In all of my experience, it’s clear that the investment space is incredibly male and white dominated. So you have someone like me, who’s a Black woman and an immigrant. You have other people on our team like Lindsay, who’s a white woman. You have Christie, who’s a Latina woman. You have Grace, who’s a Korean woman and you have Helen who’s also a Black woman and an immigrant. Together, we’re able to tell stories and represent the women and people we actually want to invest in.
Unfortunately, last year 0.0006% of black women were able to raise any sort of capital, let alone anything over a million dollars. And our fund is looking to change that. I had a call with a potential LP recently, and he said to me, ‘Oh, you’re actually looking to make money’. And I told him, ‘Yes, this isn’t a non-profit, or feel-good type of investment — we have a real strategy and it is going to make you money.’ And, he nods as he realizes okay, these women have a legitimate strategy.
We know what we’re doing, and we’ve actually put in the work so we can say, look what happens when you give us a chance to share with you who we are and what we’re about — you may end up finding out that we actually can make a difference.
LINDSAY [MODERATOR]: I think one of the things that kind of gets left out of these conversations, not just about gender, but about identity and the many different aspects of our identities, is the question of how do those actually serve as assets to this space? How are our identities going to really add value to private capital and to the industry in general?
RUPAL: What’s been great about the last few years is the rise of this language around intersectionality and intersectional identities. When I was in college, as a woman of color, we always felt like we had to choose between gender or race when we were talking about issues that were impacting our communities. And there wasn’t even space to discuss queer identity. What I’m relieved about is that this generation isn’t necessarily forced to make those choices. This is where, in private equity, as a queer woman of color, as a child of immigrants, I was able to bring forward a lens to persistent labor shortages in the agricultural sector that said we can’t just throw money at these problems. We need to demonstrate some creativity and understanding of people for who they are, where they are coming from, and what they want out of their future. The intersection of my identities really enabled me to be creative in thinking about how to solve these problems and our farm labor cooperative, California Harvesters, was born out of that perspective.
WINNIE: In our own firm’s Slack channel Grace shared this article about, essentially, con artists who were able to just raise so much money off of nothing very quickly and make a lot of money. There’s a certain level of innocence that is attributed to people, very quickly, who just don’t look like us. And then you hear just how quickly their scheme falls, meanwhile, people who look like me are getting into a room with investors and getting questions from every direction. We’re basically told that we need to be happy for scraps of capital. But my hope is that there’s a lot more opportunity for women-led funds who are also investing in women, specifically FemTech and FemHealth, because that’s also a huge market that men do not understand from a consumer experience and product perspective.
LINDSAY [MODERATOR]: I would love to know what everyone expects to see a year from now, or five years from now, in private markets.
RACHEL: If we want to make this vision of having more women investors and more diverse investors more than just a hope but a long-term reality, we have to deliver results as fund managers. I need to make the best returns for my investors, but I also have a competitive advantage. I can see things that others don’t. I get to sit in rooms that others don’t get to sit in. I have founders come to me because of who I am and the experience that I have. I feel a huge responsibility to deliver results and deliver returns, but I know we can do it because I think that diverse founders are one of the biggest undervalued assets in the U.S. economy. They are just pure profit potential.
The way we talk about it for our fund is we don’t have a gender lens. We don’t have an ethnic lens. We invest in the best founders – period. Having said that, 79% of the companies we’ve invested in have a female or minority founder. Why? Because they’re the best founders. And that’s how I look at the world through that lens of opportunity of untapped potential that others haven’t looked at.
LINDSAY [MODERATOR]: What is the best advice you have gotten about starting your firm? What is the best advice you have gotten in capital markets, particularly as a woman in leadership positions?
RACHEL: Just start building. Just start doing. When I look at another fund, I look at the “say to do ratio:” how much people talk versus what they actually do is incredibly important. I hold myself accountable to that ratio. That’s why I think it is so important that you just start going, start doing, and start building. Do it in whatever way you can, as best as you can, but just keep going.
RUPAL: Yeah, absolutely, Rachel. I was also given that same advice and it came from two female entrepreneurs. It’s very true. Just start.
WINNIE: Most of my mentors, ironically, are really high-powered men. One of them is a high-powered woman. They’ve consistently advised me that I don’t give myself enough credit and I don’t value myself enough. One of them told me, ‘You are the unicorn’s unicorn. Don’t ever forget that!’ That’s what motivates me to keep pushing. It’s not all talk. You have to keep working for the returns, not for the clout. The only way that will happen is if I own my own value and take ownership over what I contribute.
Stay tuned to our website and social media channels for more perspectives from these brilliant and dynamic women.