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Sequoia’s First Woman Partner Is Raising Capital, and Standards

Bloomberg logoBloomberg 7/29/2019 Sarah McBride and Lizette Chapman

(Bloomberg Businessweek) -- In 2017, shortly after becoming a venture capitalist, Jess Lee attended a startup conference in Los Angeles. Her badge identified her employer as Sequoia Capital, an Apple Inc. and Google backer that was gearing up to raise more than $12 billion in several new funds. Under most circumstances, that’d be enough to get a VC mobbed, but the crowd largely ignored Lee, the first female investing partner at Silicon Valley’s most prestigious firm. “No one was even looking at my name tag,” she recalls. In lieu of standing around, she retreated to the bathroom for a while to answer emails on her phone.

Lee’s experience underscores the sexism that runs through much of the clubby tech industry. It also showed her that “this classic networking method of getting deal flow is probably not going to work for me.” To succeed in venture capital as a youngish Asian woman, she’d need her own approach, one that took her uphill battle into account. “If you are underestimated, you can use that to your advantage,” she says.

Just 11% of American venture investors are women, and Sequoia hadn’t had a female partner in the U.S. since it was founded in 1972. (The firm’s Chinese funds had employed women partners.) In 2015, Mike Moritz, the firm’s best-known partner, brushed off a question about the possibility of hiring a woman by implying that none were qualified. “What we’re not prepared to do is lower our standards,” he told Bloomberg TV. He clarified that there were “many remarkable women” candidates, but Sequoia wound up back in the news a few months later when a woman sued one of his colleagues. The plaintiff revealed that Michael Goguen, a Sequoia partner for two decades, had been paying millions of dollars to hush an extramarital affair. Goguen denied the allegations and countersued; Sequoia severed all ties to him. Lee, who was already being recruited, joined the following year.

Lee declined to comment on Goguen’s exit or Moritz’s remarks, but she noted that Sequoia has backed dozens of women founders over the years. She says the firm has also gone to great lengths to ensure she succeeds. Like all new partners, she was invited to board meetings at portfolio companies and given an official mentor. She has a standing Monday appointment with Bryan Schreier, the partner who backed file-sharing service Dropbox, to decipher Sequoia’s weekly partners meetings and brainstorm ways to help the six portfolio companies on whose boards Lee serves.

Nga Kor Ming, Jess Lee sitting in a room: tech_jesslee_02 This image can only be used with attached article for period of 90 days from publication© Photographer: Ulysses Ortega for Bloomberg Businessweek tech_jesslee_02 This image can only be used with attached article for period of 90 days from publication

Lee led her first investment, in yardwork-app maker Setter, in 2017, and followed up with bets on businesses including Wonolo (staffing), Ironclad (legal services), and Maven (women’s health). The first deal she lost out on was a proposed investment in fitness app Mirror. Two people familiar with the negotiation say a more experienced Sequoia partner began talks with the company, then passed the deal to Lee, who, like Mirror founder Brynn Jinnett Putnam, is a woman in her 30s. These sources say Putnam saw the move as a bait-and-switch by Sequoia and returned to her existing investor, Spark Capital’s Kevin Thau, for an additional $25 million. A Mirror spokeswoman says the company chose Thau “for a number of different reasons.”

Since then, Lee says, she’s leaned more on team members to close a deal instead of “trying to do it alone.” Late last year, she brought Moritz to New York to deliver a term sheet to founders of the Wing, the women’s social club and co-working space, resulting in a $75 million round of funding.

Lee’s situation is grounded in a rarely acknowledged reality for women in tech. Despite paying lip service to a rising sisterhood, women investors will sometimes try to avoid women founders, and vice versa. As a woman, says longtime angel investor Magdalena Yesil, who’s funded many women-led companies, “you are already the outsider” and might worry about drawing unwanted attention to gender by teaming up with “yet another female.”

That stigma is fading as Sequoia and other firms grapple with how to represent women in a more meaningful way. That started, by most accounts, with an unsuccessful lawsuit filed in 2012 by Kleiner Perkins partner Ellen Pao. While the suit failed, it made firms more sensitive to gender discrimination.

a screenshot of a cell phone: Share of U.S. VC Deals by Industry© Bloomberg Share of U.S. VC Deals by Industry

Today, VCs are less likely to blame the “pipeline problem,” saying firms have to work harder to seek out female founders. They’re also less likely to take a “one and done” approach to hiring a senior woman. Along with Lee, Sequoia has added three more women as U.S. partners.

“On all my deals now, there’s at least one other woman investor, sometimes more,” says Trae Vasallo, a longtime partner at Kleiner Perkins who launched her own firm, Defy, in 2016. “That’s never been the case before.” Vasallo says groups such as AllRaise, a two-year-old diversity nonprofit in which Lee is active, have also helped encourage collaboration among women in the field. AllRaise seeks to push the number of female venture partners to 18% within ten years and to increase the percentage of funding going to companies with a female founder from 15% to 25% within five years. The group holds small gatherings to teach women skills such as how to serve effectively on boards. AllRaise says it's arranged introductions between startups and investors, leading to around 50 checks for startups, two of them funded by Lee.

Raised in Hong Kong, Lee studied computer science at Stanford, then worked at Google. In 2008 she joined Polyvore, a media startup focused on fashion, eventually becoming chief executive officer in 2012. “It would have been a different company, and most likely not as successful” without Lee, says Polyvore co-founder Jianing Hu. Colleagues admired Lee for the lengths she went to in recruiting. She once answered an engineer’s comment that he was “on the fence” about joining Polyvore with a gift of a chain-link fence from Home Depot. “I’m a big fan of the over-the-top close,” she says. Yahoo! bought Polyvore in 2015 for $230 million.

Shortly after Yahoo! announced it was selling itself to Verizon in 2016, Lee agreed to meet Jim Goetz, the Sequoia partner who’d backed messaging service WhatsApp, at a Mountain View cafe. When she showed up, she tried not to stare at two customers at a nearby table dressed head-to-toe as characters from Toy Story. After a few minutes, Woody and Buzz Lightyear held up a watercolor of the cowgirl character, Jessie, and other toys from the movie. Words beneath read: “Will you join US on a new VENTURE?” The toys then removed their headpieces: Woody was Goetz; Buzz was Roelof Botha, who’d backed Instagram and payment company Square. Lee, a cosplay aficionado, was impressed. “It meant that I could bring my whole self” to work, she says. She accepted the offer.

It’ll be hard to tell for at least another two years how much promise Lee’s companies show and how much credit she’s due. For now, she’s making progress in other ways. During a recent San Francisco party of startup founders and investors, she deftly broke into a mostly male cluster of older guests. With a beer in hand and a twentysomething female founder in tow, Lee unapologetically steered the conversation to talk up the woman’s accomplishments. Sure the conversation was on track, she excused herself. Then, instead of opting for the restroom and her email, she headed back into the crowd.

(Corrects the date of Lee’s Setter investment in fifth paragraph.)

To contact the authors of this story: Sarah McBride in San Francisco at smcbride24@bloomberg.netLizette Chapman in San Francisco at lchapman19@bloomberg.net

To contact the editor responsible for this story: Jeff Muskus at jmuskus@bloomberg.net, Max Chafkin

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©2019 Bloomberg L.P.

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