What Women Founders Still Have to Prove

Summary

From the Ground Up: Episode Summary – "What Women Founders Still Have to Prove"

Release Date: September 23, 2024

Hosts: Diana Ransom, Inc. Executive Editor & Christine Lagorio-Chafkin, Editor-at-Large
Guest: Anu Dugal, Founding Partner at Female Founders Fund

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Introduction

In this compelling episode of From the Ground Up, hosts Diana Ransom and Christine Lagorio-Chafkin engage in an insightful conversation with Anu Dugal, the founding partner of Female Founders Fund. The discussion delves into the persistent challenges women founders face, the evolving funding ecosystem, and the strategies necessary to foster a more inclusive and supportive environment for female-led startups.

Guest Introduction: Anu Dugal and Female Founders Fund

Christine begins by introducing Anu Dugal and her prominent role at Female Founders Fund, a seed-stage fund dedicated to investing in women-led companies. Anu highlights the fund's impressive portfolio, which includes notable companies like Zola—a wedding registry platform, Billie—a direct-to-consumer razor company for women, and Maven Clinic, a leader in women's healthcare.

Notable Quote:

"We’ve invested in companies that address critical needs in women’s health and personal care, ensuring that these businesses not only thrive but also make a meaningful impact."
— Anu Dugal [02:35]

Transition from Founder to Funder

Anu shares her personal journey from being an entrepreneur to becoming a fund manager. She candidly discusses the hurdles she faced, particularly the daunting task of starting a fund without an extensive track record. Her approach was persistent and strategic, securing over 700 meetings to raise her initial capital of $5.85 million.

Notable Quote:

"I had no idea how hard it was to start a fund, especially as a first-time fund manager without a previous track record. Persistence was key."
— Anu Dugal [03:39]

Funding Ecosystem for Women-Led Companies

The conversation illuminates the stark disparities in funding, emphasizing that only 2% of venture capital goes to women-led startups, with a significant 79% of diversity-focused funding directed towards white women. Anu underscores the necessity of demonstrating strong financial returns to encourage broader investor participation.

Notable Quote:

"Our goal is to prove that you can generate top-tier returns by investing in women-led companies, thereby incentivizing more investors to think openly."
— Anu Dugal [05:23]

Pressure on Female Founders

Anu addresses the dual expectations placed on female founders: not only to build successful companies but also to pave the way for future women entrepreneurs. She emphasizes that the pressure is not about additional stress but about making a statement that can catalyze systemic change in the funding landscape.

Notable Quote:

"We are really trying to make more of a statement than your typical VC fund that's only looking for returns."
— Anu Dugal [07:07]

Importance of Community

Community building is highlighted as a cornerstone of Female Founders Fund's strategy. Anu explains how fostering a robust ecosystem through events and networking has been instrumental in the growth and success of their portfolio companies.

Notable Quote:

"Community has been very much at the core of the fund's ethos from day one. It's about building an ecosystem, not just investing money."
— Anu Dugal [07:52]

Shifts in Investment Practices

Despite progress, Anu acknowledges that significant funding disparities persist. She points out that while more women are present both as founders and on the funding side, the overall percentage of funding for women-led startups remains stagnant.

Notable Quote:

"There's still so much work to be done, and we are committed to continuing that effort."
— Anu Dugal [05:23]

Facing the Funding Drought

The episode delves into the current funding drought affecting startups, exacerbated by a recalibration of venture investments and shifting market conditions. Anu shares strategies for supporting founders during these challenging times, emphasizing the importance of profitability and sustainable growth over rapid scaling.

Notable Quote:

"It's been incredibly tough, but we're here to support founders in managing burn and navigating layoffs."
— Anu Dugal [10:04]

Advising on Profitability

Christine and Anu discuss the difficult transition for companies moving from growth-focused models to prioritizing profitability. Anu advises founders to reassess their business fundamentals, distinguishing between essential needs and nice-to-haves to ensure sustainable operations.

Notable Quote:

"It requires a change in mindset and a step back to understand the fundamentals of your business."
— Anu Dugal [11:15]

DE&I Backlash and Political Pressures

Addressing the backlash against Diversity, Equity, and Inclusion (DE&I) initiatives, Anu expresses resilience and a steadfast commitment to supporting female founders despite external pressures. She emphasizes that the fund's focus remains unwavering, prioritizing the advancement of women in entrepreneurship.

Notable Quote:

"We've taken a step back from certain areas, but our dedication to funding female founders remains unchanged."
— Anu Dugal [12:11]

Investment Focus Areas

Anu outlines the fund’s key investment sectors, including:

1. Healthcare: With a strong emphasis on digital health and women's health, exemplified by investments in Maven Clinic and Oola.
2. Beauty and Personal Care: Focused on companies that offer high margins and repeat customer rates.
3. Climate Tech: Investing in both hardware and software solutions, such as Beyond Aero, a hydrogen-powered private plane company.
4. Software: Supporting vertical software solutions like Bento Box.

She also discusses a cautious approach toward AI investments, recognizing both the potential and the speculative risks in the current market.

Notable Quote:

"We are taking a really cautious approach to AI. It’s a bubble, but we see enormous value creation within our portfolio companies."
— Anu Dugal [24:10]

Leadership and Culture

Anu shares her leadership philosophy, emphasizing collaboration, transparency, and empathy as the foundational values of Female Founders Fund. She reflects on the importance of building a team aligned with these values to drive long-term success and industry change.

Notable Quote:

"Collaboration, transparency, and empathy are the three values that we bring to work every day."
— Anu Dugal [27:48]

Future Outlook

Looking ahead, Anu expresses optimism that the reopening of the IPO market will alleviate the current funding drought, providing necessary liquidity for startups. She remains committed to the fund’s mission, confident in its ability to navigate future challenges and continue supporting women founders.

Notable Quote:

"Once the IPO market opens again, it will be a huge catalyst for getting the wheels turning in the funding landscape."
— Anu Dugal [20:34]

Conclusion

Anu Dugal’s unwavering dedication to empowering women founders is both inspiring and instructive. Her insights highlight the critical need for persistent advocacy, strategic investment, and community building to address the longstanding funding disparities in the entrepreneurial ecosystem. As From the Ground Up wraps up, listeners are left with a renewed understanding of the challenges and opportunities that lie ahead for women-led startups.

Final Reflections:

"Even after a decade of funding women-led companies, the percentage of total funding remains unchanged. But with continued success and strategic efforts, we can change that narrative."
— Anu Dugal [29:46]

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Be sure to subscribe to From the Ground Up on Apple Podcasts, Spotify, or your preferred platform to stay updated on future episodes that continue to explore the dynamic world of entrepreneurship.

Transcript

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[Diana Ransom]

Diana Christine.

[Christine Ligorio Chavkin]

If you were a venture capitalist, what type of business would you invest in?

[Diana Ransom]

I'm not sure. I might. It might have something to do with an AI.

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Sorry.

[Diana Ransom]

Christine, I am an AI. This is from the ground up. I'm Inc. Executive Editor Diana Ransom.

[Christine Ligorio Chavkin]

And I'm Editor at Large Christine Ligorio Chavkin. Today's episode what Women Founders still have to Prove so Diana, for today's episode I spoke with Anu Dugal, who is the founding partner at Female Founders Fund. How familiar are you with Female Founders Fund?

[Diana Ransom]

Well, with Female Funders fund, fairly. I know it's a seed stage fund that primarily invests in women led companies. Anu Duggle is a very prominent entrepreneur and founder and about as much as I know about her, to be honest. Any prominent companies?

[Christine Ligorio Chavkin]

Yeah, there's a few that you've heard of, I'm sure. She's invested in Zola, you know the wedding registry site. There's Billie, which did D2C razors for women. Maven Clinic is another prominent one, which is one of several women's health care investments they've made.

[Diana Ransom]

Oh, nice. It sounds like a lot of healthcare Focus.

[Christine Ligorio Chavkin]

There are some, yeah.

[Diana Ransom]

Yeah. Any big exits?

[Christine Ligorio Chavkin]

Sure, there are a couple that were more than $100 million, I believe. Bento Box was one and Eloqui Eloqui. Eloqui Eloqui was another.

[Diana Ransom]

Yeah, that one. That one was acquired by Walmart. That's awesome. So why were you interested in speaking.

[Christine Ligorio Chavkin]

With Innu now, well, she did just hit a milestone. She hit a decade of running Female Founders fund. Simultaneously, she's raising a fourth fund of $75 million to fund even more women led companies. So I wanted to talk to her about today's ecosystem of financing for women led companies and have her look back at this past decade. But I started our conversation by asking her about her own transition from founder to funder.

[Anu Dugal]

I had no idea how hard it was to start a fund, especially as a first time fund manager, without a previous track record. And really my approach was quite simple in the sense that you know, every single person I met, I asked for another introduction. And that led over a two year period to over 700 meetings, which ultimately got to my goal of 5.85 million of capital under management. And so that first fund was very much proof of concept. And I was lucky enough to work with an incredible group of investors. The founders of Gilt Birchbox, Stitch Fix and investors like Josh Koppelman, Brad Feld, Albert Winger, David Bonderman. And we have, from a Fund 1 perspective, had multiple exits over the course of the last 10 years. So really exciting to see the development over time.

[Christine Ligorio Chavkin]

I love that you would just get a no and say, but who else should I talk to? Who should I meet with next? And 700 meetings is, wow, kind of mind boggling. But so, you know, you mentioned there's, there's been some changes to the ecosystem. There are more women at the table, both on the funding side and as founders of companies. But you know, there's those, these disturbing numbers kind of keep staying kind of stagnant. There's 2% of funding goes to women led companies with, you know, especially those without a male co founder. And you know, a 2023 analysis found that 79% of funding aimed at diverse founders went to white women. So there's still so much work to be done and you are doing the work. So tell me now, like what, where are we and what is yet to be done?

[Anu Dugal]

So I think there's different ways of looking at the picture as it relates to funding for female founders. You know, for us we're, our goal is to prove that you can generate top tier returns by investing in this demographic. And so looking at, you know, the past 10 years and the exits that we've been able to achieve, you know, whether it's bento box or Eloquii Billi, you know, I think ultimately we have been able to really demonstrate that there is really strong traction and that, you know, founders can really find that product market fit and also generate the types of returns that our LPs are looking for.

[Christine Ligorio Chavkin]

Yeah, so. And you definitely demonstrated that there's a market and female founders have been proven to be sort of more successful in general, and yet those numbers are still sort of haunting the ecosystem.

[Anu Dugal]

But, yeah, I mean, I think, listen, we. We still have a long way to go, but I think the thing that really drives the industry and hopefully over time will impact real change is financial returns. And so the way that, you know, we look at it, the more that we can prove that, you know, you're missing out on great returns, I think ultimately the more investors on a broader level will be incentivized to think more openly.

[Christine Ligorio Chavkin]

Yeah, absolutely. You've said in the past, and I just love this a lot, that you put a little extra pressure on your founders, the founders that you back, because they're not only just trying to create successful individual companies, and I'm sorry, I'm probably not using your exact words here, but also like a wave with momentum. Right. These. These women are setting kind of a foundation for the future of funding women, too. Tell me a little bit more about that.

[Anu Dugal]

Yeah, I mean, I think ultimately, I wouldn't say additional pressure, but, you know, I think what we are trying to do as a fund is to really prove a system is wrong and that, you know, we as a whole can go on to identify back and work with the country's leading female founders. And so I think our founders know that, and they know that we're really trying to make more of a statement than your typical VC fund that's only looking for returns.

[Christine Ligorio Chavkin]

And tell me about the power of community there. You just had a mass gathering of a lot of really incredible female CEOs this summer just recently. And what's the power of getting folks together? And also what was on their. What are the top things on their minds right now?

[Anu Dugal]

So, I mean, community has been very much at the core of the fund's ethos from day one. You know, we weren't with a $5.85 billion fund. We weren't really able to compete on AUM. And so instead of that, you know, we really focused on the developing an ecosystem and a brand in a way that I think not that many venture funds focus on. And I think we've been really successful in that strategy because it's not just about building an ecosystem, but ultimate. The rewards and the impact of that has led to some of our most exciting portfolio companies. Founders who've attended those events or introductions that have been made through those events. And so I think that strategy of building the brand has both led to founders reaching out to us, as well as introductions from folks that are part of our ecosystem. Great.

[Christine Ligorio Chavkin]

I'd like to stay on the topic of this past 10 years just for another moment. I've been thinking that another thing that seems to have shifted just a little bit is the role of an investor, or at least certain investors who kind of go a lot deeper with the companies they invest in. You know, you're mostly a seed investor, but you're there for these founders pretty consistently. So do you think that role has actually shifted or is that. Is it more of an individual investor decision or is it kind of cultural as well?

[Anu Dugal]

Yeah, I mean, I think ultimately the role of an investor is to support founders in. In the best way that they can. Where I think we've had the impact has definitely been in helping accelerate, I think, the knowledge and connectivity to the broader investor community. And so, you know, once we make an investment in a company, we then work pretty closely with them to identify, you know, who would be a great fit for the next round of funding. We make those introductions. We do backchanneling. And so I think that acceleration of developing a network has been tremendously valuable for our founders.

[Christine Ligorio Chavkin]

Yeah. So tell me, how are folks feeling in terms of this latest funding drought right now?

[Anu Dugal]

Yeah, I mean, I think, listen, it's an incredibly tough time, both for founders as well as for investors, you know, venture investors. There's been a big recalibration as it relates to funding, as it relates to valuations, as it relates to LP capital going towards venture as an asset class. So it's a tough time. And, you know, I think we are doing the best we can to support founders through this. You know, obviously much more of an emphasis on profitability and healthy growth. But, yeah, not going to lie, you know, I think that particularly at camp, it was really, I think, helpful for founders to understand that they're not the only ones going through this challenging period. We had facilitated kind of conversations too, around managing burn and dealing with layoffs and things like that, and I think the founders really responded well to it.

[Christine Ligorio Chavkin]

Yeah, making a change from just being purely like growth funded to aiming for profitability is really tough for a company sometimes to turn that rudder. You know, what advice do you give founders who are working toward that?

[Anu Dugal]

I mean, I think it really requires a change in mindset and taking a step back to understand the fundamentals of your business. And ultimately, what do you need? What's A nice to have versus a need to have. And it's been interesting, honestly to see founders on the other side because I think they not only develop a closer understanding of the most important elements of their business, but they realize that they can actually get a lot done without the team that they had previously had.

[Christine Ligorio Chavkin]

So there's been a lot of talk lately about the backlash against so many, you know, women specific or bipoc specific funding and programs and the spate of lawsuits against DEI programs by conservative interest groups as a seed stage fund. These might not directly affect you, but do you feel like a cultural pressure there? Is it real? And like, if so, how do you react to that?

[Anu Dugal]

So, I mean, we haven't honestly felt any impact from some of the more recent kind of rulings. Ultimately, just given the broader macro environment we're in, my focus and the team's focus has really been twofold to support our portfolio companies and to, from an LP perspective, continue kind of building towards Fund 4. I think we've definitely taken a step back from consumer, whether it's direct to consumer, social marketplaces, but nothing kind of outward that we've done.

[Christine Ligorio Chavkin]

I mean, that's like the greater funding environment. Right? And consumer behavior. Yeah, absolutely. I mean, we've seen like so much this year. We're in this amazing historic election cycle. Right. And we've seen so much, especially from the conservative side, about like the play between Silicon Valley VCs and who's backing who this year. I'm curious, your take on it. What are you seeing amongst your community and in terms of involvement this year? Is it like, is it, is it greater? Is it.

[Anu Dugal]

Yeah, it's definitely. People are excited.

[Christine Ligorio Chavkin]

Absolutely. You have this super powerful group of women in your network and they're growing these fast growing businesses. I imagine that it's definitely like on their mind and, you know, the elections front and center in discourse. Can you be more specific about how they're feeling or what they're working on, what you're working on?

[Anu Dugal]

I think there may be individual efforts. You know, I'm sure you saw the South Asian Women for Harris, Black Women for Harris. Yeah, yeah. In the fall, there'll definitely be kind of more tech focused fundraising outreach. I myself co hosted a fundraising lunch for the first bipartisan women's health pack focused on women's health issues outside of abortion. And so, yeah, I think there's momentum and energy around getting involved.

[Christine Ligorio Chavkin]

Yeah, yeah, yeah. Healthcare and women's health is really front and center, it seems, in the selection with the DNC right now. Going on. It's sort of front and center. You have a couple, one, at least one that I can name, female health startups in your portfolio. Do you think that the excitement around Women's Health right now and just all the buzz during the election cycle can translate to greater funding for future companies? I mean, even outside of your own fund?

[Anu Dugal]

Yeah, no, definitely. You know, you've seen in the numbers that there's been, I think, a pretty significant increase in funding towards companies within women's health. I think the reality overall, though, is we're just in a tough part of the cycle and so those companies are kind of facing the same challenges as any other company. You know, I think ultimately.

[Diana Ransom]

Can we stop here for a minute? You just touched on something with Anu that is on all of our minds right now. Politics. Did you get any sense from her about, you know, thinking about the fund and her investments, given the sort of state of DE&I backlash these days? I mean, the whole situation with Fearless Fund last year was so devastating.

[Anu Dugal]

Right?

[Christine Ligorio Chavkin]

Yeah, I talked with her about it and you can kind of hear in her answer that she is either unconcerned or unwilling to kind of engage in that discussion. After all, this entire funding ecosystem that she has is women. She's made a career out of advocating for them. And she is both unwilling to change that and is not running the same kind of grant distribution system as this specific DEI lawsuit that you're mentioning. But she's very dedicated to continuing to advocate for and fund the community of female founders that she has been over the past decade. That's not changing.

[Diana Ransom]

So she herself is kind of fearless. So is she just not wading into politics at all?

[Christine Ligorio Chavkin]

Yeah, she doesn't talk a ton about politics and she did tell me she does not advise her, the female funders founders she works for about politics specifically. I mean, she has hosted some fundraisers at her own property in the Hamptons. She has been involved in some PACs, and she's very much full steam ahead on women's health care issues, which playing very much a role in this election cycle. Yeah, and I do ask her more about that, which you will hear after this quick break.

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[Christine Ligorio Chavkin]

You've mentioned more traction in terms of companies starting as well in terms of women's health, you're pulling back a little from D2C and are you looking to fund more health companies right now or are there other growth areas that you're really passionate about at this moment?

[Anu Dugal]

Yeah, so I would say, you know the four categories that we remain, you know, kind of excited about broadly speaking. So digital health, you know early in maven have seen the trajectory from the sidelines and it's been incredible to see the growth and moment momentum. Oola, which is another women's health company and then Branch, which is in the fertility space. So continue to be excited about opportunities within healthcare and then the second would be beauty and personal care and we treat that a little bit separately than kind of more traditional direct to consumer. Just because you have the, you know, incredibly high multiples, the Repeat rate and margins and so excited about that category. Climate tech is a newer category for us, both hardware and software, and so excited to continue doing more as we're meeting really, really exciting founders, building within those spaces and then just kind of pure vertical software, which, you know, bento box, which is a, an exit of ours, you know, great example.

[Christine Ligorio Chavkin]

Can you look forward a couple years? I mean, do you see us coming out of this funding slump anytime soon? What factors are you looking to see change?

[Anu Dugal]

I mean, I think ultimately the thing that everyone's waiting for is the IPO markets to open again and, you know, just provide some liquidity that I think it's been now 18 months where it's been pretty, what's the word? It's pretty much a desert. So I think that's really the key. Obviously interest rates coming down, but I think the IPO market is the, you know, once that opens again, I think that'll be a huge, hopefully get the, the wheels turning again.

[Christine Ligorio Chavkin]

Yeah, yeah, yeah. I mean, I was there at the IPO of Reddit and we felt like that might be a floodgate opening effect and it kind of didn't. I mean, yeah, I also do feel a little bit more skepticism from founders who are running fast growing companies of, I don't know if I want to be a public company CEO. And I think there's also that, like general hesitancy. Have you heard that from.

[Anu Dugal]

No, definitely. I mean, I think the reality from a liquidity standpoint is that, you know, only 10% of exits are IPOs. So I think that there also needs to be a recalibration of whether your business is a truly viable long term candidate for an ipo. And I think a lot of founders are really asking themselves that question as the markets have shifted.

[Christine Ligorio Chavkin]

Yeah, it's a natural thing to drive toward, but yeah, you're right, it's not the most common exit and increasingly not. So let's talk a little bit more about climate tech.

[Anu Dugal]

Yeah, yeah.

[Christine Ligorio Chavkin]

What are your climate tech investments now and what kind of areas within it are you looking toward for the future?

[Anu Dugal]

So one of the companies that's most exciting within our climate tech portfolio is Beyond Aero. So Beyond Aero is the first hydrogen powered private plane company and it's started by a 27 year old French aeronautics engineer. You know, I met her at a conference, she won the pitch competition and just incredibly inspiring at founder. I remember saying to her, you know, you're 27 years old and you're building a plane. And she looked at me and she said, Well, I went to school to build a plane. I was like, that's definitely not what I was doing at 27. But. But yeah, really, really incredible founder. You know, they just had their first test flight and so, yeah, just excited to see, you know, kind of where, where and how they. They grow that business.

[Christine Ligorio Chavkin]

Are they small planes or are they.

[Anu Dugal]

They're private planes. So six to eight people. Yeah. Wow.

[Christine Ligorio Chavkin]

How does that work with the hydrogen? Would you and would you go in one?

[Anu Dugal]

Yes, definitely. I'm waiting. I mean, hydrogen is a replacement obviously for fuel. And instead of retrofitting kind of existing planes, they've built kind of a net new plane that can accommodate the level of hydrogen that's required.

[Christine Ligorio Chavkin]

Neat. And I'm assuming it's a light, kind of lightweight vehicle as well.

[Anu Dugal]

Yeah. And then we, we also invested in a software solution for waste management, which is called Watts. So very not sexy. But waste management, you know, is an issue for many, particularly in the hospitality space and in the restaurant, hotel space, real estate as well. And so these two founders have had an entire career in waste management. So. Yeah, just really exciting to see, you know, founders building within, within categories like this.

[Christine Ligorio Chavkin]

Yeah, that's. It's such a tricky category because, you know, they're in waste management, you're dealing with something that is like a reverse economics. You're dealing with something that has like a negative worth.

[Anu Dugal]

Exactly.

[Christine Ligorio Chavkin]

And then trying to make it worth something to people or like the service of it is, is tricky too. What are the founders like of that one?

[Anu Dugal]

They're great, really. You know, again, committed to the space. Started off, you know, kind of small, working with companies like Eataly and others to kind of help them craft a better strategy around their waste management and then realize that, you know, there's a larger opportunity to do this for other organizations.

[Christine Ligorio Chavkin]

Are you investing in any AI companies? Are there opportunity, growth opportunities there that you've seen?

[Anu Dugal]

So we are taking a really cautious approach to AI. I think there's been obviously a lot of money poured into the sector and you know, as seed investors, we are definitely not the ones competing with the highest valuation. And so I think that, you know, for us it's really a wait and watch type of approach. I think a lot of people unfortunately are going to lose a lot of money in this cycle. But that's not to say that there's enormous value creation happening and we see that within our portfolio companies as well.

[Christine Ligorio Chavkin]

Yeah, I mean the forecasting of there's going to be a lot of money loss here. I mean, that sounds A little like a bubble?

[Anu Dugal]

Yes, definitely.

[Christine Ligorio Chavkin]

Are we in an AI bubble?

[Anu Dugal]

Yeah, definitely.

[Christine Ligorio Chavkin]

So tell me Anu, 10 years into running your fund, you are also a founder. You're a multi time founder and still kind of operating as a founder and leader. What have you personally learned in terms of your own leadership, growth and management?

[Anu Dugal]

So I think, you know, one thing that, that I've definitely learned and reflected on is that from a team perspective, we are building something that's bigger than just a venture capital fund. We're really trying to change an industry. And so in building and growing a team, it's incredibly important to be able to identify and work with people who are committed and aligned in those values. And I think that long term you see that play out. There are many other venture funds that are looking for women. And so I think the team that we have is really committed to the work that we're doing. In terms of other insights, you know, ultimately as an investor, this is really a long game. You know, you're investing in companies that you know are pre launch and as an entrepreneur it's easy to get impatient and want to see kind of things move faster. But ultimately, you know, it is out of your control. And so getting comfortable with that as a state of being and doing the best that you can to support those founders, I think has been a big learning. In addition to the fact that it just takes time, there's nothing you can do to really make that move any faster. And so I think that's also been a big learning.

[Christine Ligorio Chavkin]

Yeah. And what about the change from running one company to now having your eyes on dozens and dozens at a time? How do you, do you have any tricks for sort of that like splitting your time, your interest, your brain when you've got a bunch of areas of focus now?

[Anu Dugal]

I mean, I think we've developed like a strong kind of operating system in terms of. Because we're not only looking after companies, we're also managing the fund itself. So.

[Christine Ligorio Chavkin]

Yeah, and looking at new companies and vetting them.

[Anu Dugal]

Yeah. So I think just making sure the allocation of time, you know, whether it's between supporting existing portfolio companies, meeting new founders and then, you know, fundraising for our next fund is kind of how I spend my time.

[Christine Ligorio Chavkin]

What culturally? I mean, you've built a culture that is largely women. You largely deal with women led companies. What can other companies learn from the culture you've built?

[Anu Dugal]

The three things that we really care about. So number one is collaboration as a value set. Second is transparency, and third is empathy. So those are the three kind of values that we bring to work. And I think it's interesting we had an employee join us who came from a really large, very large private equity fund. And the comment she made in her first kind of review session with me was, at the end of the day, when I was at this other firm, anytime I was given anything to do, it was needed immediately. And the reality was nothing was really needed immediately, but that was the culture and kind of the vibe of that particular organization. And so coming to Female Founders Fund, she said, you know, I'm doing the same, if not more work, but it's just the kind of environment and the way that things are communicated is so different. And she just really appreciated that you don't need to have that kind of investment banking mentality of scarcity to really be productive.

[Christine Ligorio Chavkin]

Yeah, the scarcity plus like the false pressure.

[Anu Dugal]

Exactly.

[Christine Ligorio Chavkin]

What else are you looking forward to in the next five years? Are there any growth, other growth areas that you haven't mentioned that you're seeing or that.

[Anu Dugal]

No, I mean, I think a decade in venture capital is a long time. And so, you know, for me personally, it's a moment of truth in the sense that, you know, am I signing up for another decade as we launch, you know, our next fund? And so I definitely wake up every day and ask myself, you know, am I still as excited as I was 10 years ago? And I feel very fortunate and grateful to really have an opportunity to be doing something that I love every day.

[Christine Ligorio Chavkin]

So are you, are you in for 10 more years here?

[Anu Dugal]

Yeah, I'm in it.

[Christine Ligorio Chavkin]

That's fantastic. Well, thank you so much, Anu, for being here with us today.

[Anu Dugal]

Yes, thank you for having me.

[Christine Ligorio Chavkin]

After talking with Anu, what surprised me the most was her lack of frustration in the fact that even after a decade of funding women led companies herself, that the total percentage of funding that goes to female led startup hasn't budged. She's not getting frustrated. Instead, she's hoping women and their companies can prove her point by continuing to display with their own successes, including some really huge exits. She hopes that they are the right choices to fund. Of course, there's a long way to go, especially amidst this current funding drought. But Anu has given us a lot to think about regarding the future. She thinks the excitement around this election cycle, and particularly Kamala Harris as a candidate, can actually translate to greater funding for women's healthcare companies. She also thinks that the eventual opening up of the IPO market will help end the funding drought. And she knows that women will be at the center of that future. That's all for this episode of from the Ground Up.

[Diana Ransom]

Be sure to subscribe on Apple Podcasts, Spotify, or your podcast platform of choice. Also, if you like this episode or have suggestions of what topics you'd like to hear about, leave us a review on Apple Podcasts or reach out to us on Inc's social channels on LinkedIn X or Instagram.

[Christine Ligorio Chavkin]

From the Ground up is produced by Julia Hsu and Avery Muttered, editing by Blake Odom mix and sound design by Nicholas Torres. Our Executive Producer is Josh Christiansen. Thank you for listening and we will see you next week.

[Glenfiddich Ad]

Hi listeners, I'm Blake Odom, producer of from the Ground Up. Today we have a special segment brought to you by Inc. In collaboration with our partners at Glenfiddick Single Malt Scotch Whiskey this year at the Inc. 5000 gala, Glen Fiddick presented the inaugural Legacy Award to Stephen Marsh, founder of smarsh. This award recognizes a trailblazer, an individual who has graced the Inc. 5000 list multiple times, embodying the spirit of innovation, boldness, and a relentless drive to defy the ordinary. Much like Glenfiddich, a brand that has pushed the boundaries of excellence throughout its 130 year history to become the world's most awarded single malt Scotch whiskey, Stephen Marsh exemplifies the courage and brilliance it takes to redefine industries and elevate the game. Inc. Editor in Chief Mike Hoffman spoke with Stephen Marsh about his remarkable journey, the legacy he has built, and the honor of being the first recipient of this award presented by Glenn Fiddick. Here's that captivating conversation. Enjoy and be inspired.

[Mike Hoffman]

Hi, I'm Mike Hoffman, Editor in Chief of Inc. And I'm delighted to be here today with Steve Marsh, the founder of Smarsh, a multi time Inc. 5000 honoree and the recipient of the inaugural Inc. 5000 Legacy Award presented by Glenn Fiddick. So Steve, thanks so much for joining me.

[Steve Marsh]

Thanks for having me. I'm excited to be here. Mike.

[Mike Hoffman]

Oh yeah, this is great. Great. Let me get this straight. You've been on the Inc. 5000 list 17 times so far?

[Steve Marsh]

I think that's correct. I think 17 times we double checked it.

[Mike Hoffman]

So you've been on the list 17 times? How many years has the company been in business?

[Steve Marsh]

Since 2001, so about 23, I guess.

[Mike Hoffman]

So you've been on the list more than you've not been on the list in the 23 years of your corporate life?

[Steve Marsh]

I think once we finally made the revenue threshold, we made the list and have been on it since.

[Mike Hoffman]

Well, congratulations. It's amazing to make the Inc. 5000. It's amazing to make the Inc. 5000 a couple of times and to make it 17 times puts you in really rare error. Only a few companies have made it more than 15 times. Congratulations. You started the company in 2001, is that right?

[Steve Marsh]

That's right.

[Mike Hoffman]

Your name is Steve Marsh and the name of the company is Smarsh. Do I have it right that your original email address had something to do with the ultimate name of the company?

[Steve Marsh]

I incorporated to do consulting work, never thinking that the business name would see the light of day. It was just incorporated as Smarsh Inc. Because Marsh was taken by the large insurance company, so we couldn't use that. My friends at the time, my coworkers had all called me Smarsh because that was like my email handle. So I said, hey, let's just go with that. The domain name was available and many years later, with a larger marketing department and more resources available to us, more domain names available to us, we still decided to keep the name Smarsh. But that should serve as proof that it never had intention of building this business into anything.

[Mike Hoffman]

So who was your first client?

[Steve Marsh]

My first client was a small brokerage out of Boston, Massachusetts and a friend of mine had worked there and had told me about this need to archive communications for regulatory compliance. And I knew virtually nothing. I mean, I knew absolutely nothing about that. I knew that I needed to make some money to pay rent and that I had some technology skills. So I set out to actually help them implement a solution that I thought I would source from another vendor and quickly found that there weren't other vendors out there doing this, at least to service the small and mid sized companies. The business at that point pivoted from being a consulting business to being the archiving and communications intelligence business that it's become today.

[Mike Hoffman]

When you started on the hockey stick like trajectory of growth, what was the first moment, if you remember, where you knew, oh, this is not just a consulting business, this is a real business, a technology business, and actually it's a fast growth technology business.

[Steve Marsh]

One moment that comes to mind is we had a large competitor in an adjacent space. They weren't archiving the way we were, they did data backup or something and they made an offer to buy the company, really in our first year of effort in trying to sell the archiving service. And it was hard as a founder to turn down. I think it was like a million dollars. But it was complicated. But we Passed on it. That was a great decision. But that really validated for me that we had built something that was at least. Least perceived to be of value to someone else. And of course, making the Inc. 5000 list for the first time after applying earlier that year and not being able to apply the year prior to that because we didn't meet the. We weren't big enough. We didn't meet the revenue thresholds. Anyway, when we made that list, that was fantastic validation for all the hard work that we had done. It gave us a sense of credibility when we would go out to our customers. By being able to put the Inc. 5000 recipient logo on our emails and on our website, that actually helped us grow to the next level.

[Mike Hoffman]

Beyond that, you at some point took growth capital, private equity, is that right?

[Steve Marsh]

We did. It wasn't until 2007. First investors were minority investors in 2007. Ironically, the point at which they became interested was a point at which we no longer needed money. I think many founders probably go through this. When you're trying to raise money, it's a lot harder than when you don't need it. When you don't need it, everybody seems to come out of the woodwork and then they try to convince you why you should take money. I think that was a key moment where we realized we needed to significantly upgrade our technology infrastructure if we wanted to win bigger and bigger customers. We were making incremental changes every year. You know, the rip and replace that you hear technology companies go through, where every six months or so we were taking out old equipment, replacing it with new, bigger and better equipment. And that really just wasn't scalable. It was becoming a distraction to have to keep going through those projects every six months or so. By raising capital, we were able to get off that hamster wheel, and we were also able to start making some acquisitions became a part of life from that moment forward.

[Mike Hoffman]

What did you learn about business ownership and business leadership going through the process of acquisitions?

[Steve Marsh]

You know, we gained access to people who had operated at the level beyond where we were, which is a pattern, you know, we'll see occur over and over in our business. But there were smarter people who had more experience in a variety of areas, and they presented some of the reasons why we would want to do some acquisitions. They also educated me and the rest of my team on how to do them, but it taught me that there are a variety of ways to help grow the business. You probably don't want to grow your business just doing acquisitions, although that does create value For a lot of companies. But for us, it was a combination of organic growth through innovation and product development and serving our customers with different products and services and making some of these acquisitions to bring in new technology, to bring in additional competitors, to bring in more expertise than we otherwise would possess. And today that trend continues. We're trying to bring in more AI expertise. For example, we might look to do an acquisition there.

[Mike Hoffman]

Can I ask, where are you guys at revenue now?

[Steve Marsh]

We are about 500 million.

[Mike Hoffman]

And what's the fastest growth part of the company right now?

[Steve Marsh]

There's a lot of focus on leveraging the data that we have stored on behalf of our customers. If you think about the initial use, case for those that don't know is that we help customers by storing their electronic communications so that they can meet regulatory requirements. You have to have this stuff, you have to be able to produce it. That's kind of the baseline service. But what we've found is that over the years, you start to amass more and more really valuable information on behalf of our customers. So we have years and years worth of emails, text messages, zoom calls, you know, whatever it may be. In a world where artificial intelligence is taking over and people are trying to find ways to harness the value of data, we're sitting on what we think is one of the biggest goldmines out there in terms of data. It's employee communications that were captured initially for a different reason, but now can be turned into sales opportunities, customer service opportunities, new product ideas. I think we're seeing a lot of growth.

[Mike Hoffman]

So an archive can become a large language model.

[Steve Marsh]

Yeah.

[Mike Hoffman]

So this is obviously the Inc. 5000 Legacy Award brought to you by Glenn Fiddick. As you think about the legacy of the company and your legacy as a founder, what do you still hope for? What is your idea of what the legacy you want to leave is?

[Steve Marsh]

We have a very unique culture, I think one that reflects what I wanted to create many, many years ago. I want it to be an organization that hopefully my kids one day look back on and say, wow, dad must have built something pretty interesting here. It's still around, it's still relevant. Our customers still find value in what we're doing. I just want to see it reach its maximum potential. Not every company, even, you know, not every company that is started or that I'm involved in or that I invest in has the same opportunity to persist through time. Some companies are better as a short term product that maybe gets sold to someone else and they integrate the technologies. Some technologies have a shorter lifespan where maybe it's two to three years and then you have to move on. This is a business that I believe truly has the opportunity to exist for many, many years and to be relevant by just listening to customers and adapting and finding or addressing use cases that we found many years ago.

[Mike Hoffman]

Steve Marsh, the founder of Smarsh, a half billion dollar company founded in a Brooklyn apartment that's been on the Inc. 5000 list 17 times. Thanks so much for joining us today.

[Steve Marsh]

Thanks for having me.

[Mike Hoffman]

And before I let you go, we have these glasses of Glenn Fiddick here. You are the inaugural recipient of the Inc. 5000 Legacy Award presented by Glenn Fiddick. So let's cheers to your success.

[Steve Marsh]

Cheers.

[Glenfiddich Ad]

Congratulations again to Stephen Marsh. And I couldn't end this episode without getting a little taste of Glenfiddich myself. And since I got a bottle right here. Cheers to you listeners with Glenfiddich, the world's most awarded single malt Scotch whiskey. Drink responsibly. Glenfiddich single malt Scotch Whiskey is copyrighted 2024 and imported by William Grant & Sons, Inc. New York, NY.

[Anu Dugal]

Panoply.