Diversity Startups Venture

Seed Series: Susan Lyne from BBG Ventures

Editor’s Note: The following Q&A is the second installment in our Seed Series where our own Gené Teare sits down with various players in the tech world to talk everything from diversity and innovation to the state of funding and anything in between. The below conversation has been edited for brevity and clarity.

Today as part of the Seed Series, we talk to Susan Lyne, founder of BBG Ventures. Susan has been a big part of the New York media establishment. She transitioned to tech starting out with Gilt Groupe in 2008. We talk about her lengthy career, her role in supporting the new wave of female founders coming out of New York, her fund BBG Ventures’ focus on e-commerce and the future of work, and which startups she is most excited about.

Gené: Susan, you launched BBG Ventures in 2014. Why BBG Ventures?

Susan: Well, as you can see my career has moved across a lot of different sectors over time. I’ve been working for decades. And Gilt was a big shift for me. I had been working for large companies and public companies before that. I joined Gilt in 2008, when it was a very small startup. They were clearly rethinking and reinventing what shopping could be, as a cross between entertainment and commerce.

While I was there, I started meeting tons of young women who were starting companies. I think it was both the moment, and also New York City. Once you had AWS, and you had iOS, an operating system on mobile that allowed you to build, it really opened the door for a different kind of founder. We started seeing a lot of women who were coming out of B-school or coming out of consulting, coming out of companies where they had vertical expertise and they were launching companies to solve a specific problem. Something, usually in their life that they thought was broken, and thought they could do better. And they all had the same stories about raising money. They would walk into rooms that were filled with guys, and they’d have to explain how women think about X, before they even start pitching their company. And the more I heard it, the more I thought there’s a huge opportunity here.

I should back up a little bit. I’ve always been focused on that female consumer. Women are the dominant consumer. We always have been. We are responsible for 85 percent of commerce. And not just the obvious areas. Not just in fashion and beauty, which I think people expect, but women make the final decision on what house you’re going to buy, and what health plan you’re going to use, and a hundred other things. So to me, the idea of backing really smart entrepreneurs who intuitively understood that end user, that female consumer, was going to be a competitive advantage. And so we launched in September 2014. I have a partner Nisha Dua who I work with and it’s been great.

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Gené: You require for your investments at least one female founder. I’ve come across a lot of funds who are sector focused, and stage focused. Does that cut out a lot of deal flow for your firm?

Susan: I think that you’re always better to have some focus. We chose this largely because we thought having a founder who understood that end user was going to have a competitive advantage. We have seen over 4,000 companies since we launched. So there’s clearly not a dearth of companies being founded by women. We haven’t actually met with all those, but well over 4,000 have reached out to us, or been introduced to us. That’s really limited by the fact that we are two partners. I know there are companies we miss. So I know there are no lack of companies out there.

Gené: We do hear people say it’s a pipeline issue when it comes to funding female founders. Do you think it is a pipeline issue?

Susan: I think the issue is pretty simple. This is an industry that has always run on relationship networks. You get in to see a great VC, or a team of people because you get a warm introduction. If women are not part of your network, they’re just at a big disadvantage. I do think that’s starting to change. We’ve seen a lot of legacy VCs add a female partner this year. And I think that’s in part because there’s been a lot of noise about it, but I think it’s also because they’re starting to realize that they could be missing out on significant companies, if they don’t have those networks. So, there’s more of a focus. And I think with initiatives like All Raise, you’re going to see more of that.

Susan Lyne, founder of BBG Ventures.

Gené: We are noticing that there are more female founded companies, both in the New York tech scene and the LA tech scene, and less so here in Silicon Valley. Do you think there’s a reason for that?

Susan: Look, I think there are there are lots of reasons for it. I would say the biggest one is because tech startups bubble up because a certain area is the center of X or Y. New York is the clear leader in media, fashion, retail and I would argue fintech, medical startups, and real estate. There are so many sectors that are dominant back in New York, besides just pure tech, that I think you tend to see different kinds of companies there, and many more with a female founder.

Gené: BBG has invested in 54 companies at the seed stage. How much do you like to invest in a round, and how much do you like to get out?

Susan: When we started out we were writing small checks – $200,000 – so we end up with probably 1 to 3 percent of a company. We’ve got some great companies, in that first portfolio. We are in The Wing, Zola, Lola and Pymetrics. A lot of companies that are doing exceedingly well, but we’ve got small pieces of them. Our second fund we really tried to get more like 3 to 5 percent. That’s a relatively young fund. We didn’t start investing until the beginning in 2017.

With our next fund, we’re planning to launch in the first quarter of 2019, we plan to take 5 to 10 percent. We feel like we have our sea legs. At this point, we have a much better sense, not just about what excites us, but what it takes to make a company successful.

Gené: So what technology wave are you riding? Where are you focused in terms of your investing?

Susan: From the very beginning we were focused on ecommerce. Ecommerce is growing at a substantial rate every year. Even though Amazon eats about 50 percent of that, there is so much to be done to make it a better experience both for buyers and sellers. We are interested in the potential for personalization, and better discovery. Amazon is great if you know exactly what you want to buy. Anyone you talk to is going to say that they don’t go to Amazon to browse. It is a very efficient shopping platform, and no-one is better at fulfilment. There are a lot of other ways that people shop, including brands that understand their consumer, and are delivering something that makes them happy.

We are also focused on the future of work. We are interested in this freelance workforce. 60 million Americans now define themselves as being freelancers. And that’s a growing number. So all the things that they need in order to be successful. Those are things we are very interested in. We are in a company called Pymetrics which is the other side of this equation. Pymetrics is a two-sided jobs marketplace that allows companies to find the right employee without going through resumes. They use neuroscience games and AI, to identify the traits that are going to make you successful in X or Y role. And they can do great matches that way.

Gené: Is this for any type of company?

Susan: It’s primarily for large companies that bring in a class of employees, management trainees, or a class of traders. They are able to cast a much wider net than a company ordinarily would. The other benefit is that you end up with a far more diverse group of people to choose from.

Gené: You are a New York focused fund but you don’t only invest in the New York ecosystem. What’s your relationship to the Bay Area?

Susan: We’re out here a lot. I would say 60 some percent of our companies are based back in New York. But the other 35 to 37 percent are primarily West Coast. Most of those are in San Francisco. We have a half dozen investments in Los Angeles, one in Chicago, one in Denver, but San Francisco is a big source for us.

Gené: Why is that?

Susan: There are a lot of great companies being launched here. Why would you not be here? We are out here every other month. We have strong relationships with a lot of VCs out here too. We try to stay in touch, and find out what they are seeing and invest alongside them when appropriate. The last company we invested in here is called Future Family which wants to be the technology and finance layer for IVF and egg freezing. Great founder and smart approach to all of this. It was a company that was pointed out by another VC and we ended up investing. We are always keeping our eyes wide open.

Gené: I hear a lot about seed being very friendly and that there’s a lot of co-investing. Who do you have that you’d like to co-invest with?

Susan: We co-invest with Lerer Ventures, Female Founders Fund, Cowboy Ventures, and Forerunner Ventures.

Gené: You joined Gilt Groupe early during the Series B raise, the growth stage. I remember at the time, all of my mom-friends were on Gilt. It was a phenomenon. It was one of those early social shopping sites, which I think has gotten bigger as a sector today. So what happened to Gilt?

Susan: There were specific things about the experience that people adored. It was new every day. The sales were completely fresh. It was appointment shopping. You knew when the sales opened every day. It was noon every day. You were going to compete for this fabulous product. It was great brands, at great prices. There was a limited assortment. You could open the email and see whether you wanted to shop something. If you did – you could be in and out of the sale in a couple of minutes. So it’s very efficient, and it was a high. It was a way to do something that was highly entertaining, and feel like you won something.

And as we scaled it changed that dynamic some. In order to be able to give product to a whole lot more people , we had to broaden the kinds of brands we were selling. And the experience changed. There’s no question about that.

Gené: Changed for the negative?

Susan: For the early adopters, it was definitely a change that wasn’t for the better. They came because they want to shop those high-end brands. We had a lot of money being thrown at us to grow the brand, grow the stores, expand the categories. It’s hard to say no, and on a certain level when you’re trying to serve more and more customers you gotta do that.

Gené: It just grew too quickly, or went in the wrong direction?

Susan: If it was launching now, you could have kept that experience the same, and personalized what everybody was seeing. It was harder to do that then. You could have kept more of that initial experience. I do think we benefited in that there was a ton of great inventory in the marketplace in 2009 and 2010. We launched in 2008, at the start of the downturn and retail suffered. There was a lot of inventory at great prices, and we were able to pass on those great prices to our customers.

Gené: And when did it start tilting for you?

Susan: There were many good years of Gilt. It was really not clear until quite a bit later, that it was not growing enough to be able to IPO the company. Then it was just a question of where you could get a sale.

Gené: It was billion dollar valued company that sold for $250M. It only raised around that so some return, but not a big exit. The other thing I noticed, is that it did spawn a bunch of companies?

Susan: I think Gilt is one of the big reasons New York is such a great startup marketplace. There are so many people who learned a whole lot, great engineers, great merchants, great marketers, and great product people. They have gone off to do fantastic companies as a result.

Gené: We’ve talked about a bunch of your portfolio companies. Are there a couple of companies you want to mention the name, what sector they work in and why you’re excited about them?

Susan: I will skip the two most people know the best, Zola and The Wing.

One of the things that we hear a lot is this assumption that women will only do certain kinds of companies. So two companies that are our in our portfolio that I love include one called Full Harvest. It’s a marketplace for very large farms to solve the 30 percent of produce that gets ploughed under, because it doesn’t meet cosmetic standards for grocery. This is a huge problem, with a female founder, who had come out of Organic Avenue.

So she understood who the buyers were going to be. She has built what is already a nice business. I think it is going to be able to scale into something really huge, and have a real impact in a state like California where so much of your water goes to agriculture. There are companies that are are attacking this by selling that produce to consumers. You can’t scale that. For these big farms, those are the ones you want to address. You need to find large businesses, juice companies, prepared food companies. All the companies that don’t care what it looks like, but that it is high quality.

There’s also a company we invested in quite early called GoTenna. It’s connected with your phone and allows you to send a text message and your location when there is no wireless coverage, no cell coverage, nothing. It was really developed initially for rock and roll concerts, and off-grid sports. They began to realize what they built and how to look at the broader opportunity there. With a mesh network, this could be used in far more interesting ways.

Now they actually built a pro version of it. The French army, many police forces are using it, and it is being used for rescue operations. It’s just a great communications protocol that allows anyone to communicate in a disaster. It’s another one of those companies that we’re proud of because they’re going at something that was a very hard problem to solve, and they’ve come up with a solution that is significantly cheaper, that works a lot better and that I think is going to have a big impact on the way we think about dealing with emergencies.

Gené: I do have one more question. You did say you’re out here for a board meeting for GoPro. You’ve been on a number of boards over your career. What’s your advice to women who want to get on boards and what’s the skill? I know there are very varied skill sets on a board. What would you advise?

Susan: I think it’s unfair, obviously, because there are certain things that everyone’s looking for.  Which is, are you a CEO? Or were you a CEO? And can you serve on the audit committee? I was meeting with a woman who runs The Boardlist. I would say for a lot of women what The Boardlist is trying to do is put together a broad database of board-ready women who have specific skill sets.

What I see more and more is that you look around the room and say, for us to be successful as a board, we need someone who understands product better, or get somebody in here who really understands digital marketing, or really understands supply chain. Those are the things that are going to drive the next five years of board appointments. Now that companies realize to compete in this new world, they need different skills. Not just different skills on their teams. It’s also a board that understands that language, and can really assess whether you can change or not. So I would say, figure out what it is. What’s your superpower, and make sure that’s what you are putting out to people. I am all for board readiness courses. But essentially, you have to be able to market what it is that you could bring to a board that is going to make that board and that company ultimately more successful.

Editorial update:BBG Ventures was referred to as “Built By Girls” in the original version of this article. That is incorrect, and we regret the error.

Illustration: Li-Anne Dias.