Trailblazing the VC Industry (Joanna Strober / Midi Health)

[00:00:00]

Joanna Strober: when I joined a venture firm

in 1997 and I spent quite a few

years.

In Venture we funded pretty much no women.

I think for your, for your listeners, like you don't actually

realize

how much things have changed.

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Over the last 20 years, the startup and venture capital ecosystems have evolved in many ways. We've seen hot industries explode like mobile SAS, crypto, and AI. And we've seen the landscape of capital change from the emergence of mega crossover funds. To the rise of angel investors and solo GPS. One important trend that we've seen over the same time period. Has been in the increased representation of [00:01:00] female founders. Since 2009, the percentage of founding teams that include at least one woman has more than doubled. And while there's still tons of work to be done, we are seeing progress.

Today, I get to talk to a founder who has experienced all of these trends firsthand. She started off her career as one of the only venture capitalists in the industry.

That was a woman before becoming one of the few female founders receiving venture capital dollars in 2013 for her first company. All the way till now having landed a full $39 million for her current company, mini health.

My guest today is Joanna Strober. And if you couldn't already tell she's pretty impressive. After hearing about her crazy background, I was extremely curious to hear if there's anything in her childhood that led her to become the trailblazer she is today.

​

Joanna Strober: I was a pretty

studious kid.

that I had a very happy upbringing. I mean, Seriously, I don't

[00:02:00] think I, there's a better place to grow up

than Palo Alto, California in the 1970s and eighties. Um, all my friends' parents were professors at Stanford or were engineers here in Silicon Valley. Um, I just went to high school, honestly, with the most amazing people. I was just surrounded by,

a lot of really smart, smart people, I would say. Uh, and, um, a lot of smart, yeah, just a lot of smart, ambitious, geeky kids, basically

Jason Yeh: yeah.

Joanna Strober: was the,

the norm

around, around here. but I also

didn't have any role models, of women.

at all, honestly. So, I mean, the women, very few of the moms I knew of my friends worked.

Um, they, uh, certainly were not raising money to start companies. They were not they were,

uh, if They did work, they may have been probably a few, may have been professors. Um, but it was definitely not a model [00:03:00] of, of working.

mom. That I saw. And my mom

is an amazing, amazing mom. but She was also,

a stay at home mom. So the the models that I saw were,

um, were not that, and certainly not entrepreneurs. So.

the other models, you know, even honestly, I, I, I

went to Penn for college.

I went to law school.

I started working

as a, lawyer here in Silicon valley, um,

there were no

female partners at the law.

firm that I worked at. None.

Actually, I take the fact there was one, she cried every night,

um, and she

Jason Yeh: gosh.

Joanna Strober: So,

the models and and also I.

was working with venture backed companies, none of whom those had female founders. So I wanna like talk about that. 'cause it's not so much what I saw, but what I didn't see and I didn't, See anyone me raising money. and

when I joined a venture firm

in 1997 and I spent quite a few

years.

In Venture we funded pretty much no women. So none. I went back and looked in [00:04:00] preparation for this discussion and I tried to see which women we funded in those years. I cannot find them. so, you know,

it's, I I think for your, for your listeners, like you don't actually

realize

how much things have changed.

until you really look back,

uh,

Jason Yeh: no, that's, uh, it's an incredible background and a great way to start this conversation. Um, first of all, understanding, you know, the bookish ness and where you came from, and then also not having

Those entrepreneurial role models. I think overall maybe, but certainly from the female perspective. Um, but you touched on a few things, which is kind of maybe where I wanna accelerate the conversation. Um, you weren't thinking about being an entrepreneur. You went to law school. Uh, but then you do get into venture capital, which.

Gives you a lot of the perspective of what it means to be a founder overall, but a venture backed founder. [00:05:00] You know a lot about fundraising, um, or at least from your side of the table, enough to be dangerous. But what we get back to is this idea that you never saw anyone else do it that looked like you or, or very few, if any.

So, you know, this is unlike what I would normally do, but . Do you remember being in the seat of, of a venture capitalist? You know, this is probably years before you went into being a founder yourself, but even with all that back knowledge, you kind of must be thinking to yourself like, do I have what it takes?

Or do you have a chip on your shoulder that says like, I definitely can do this, even though no one else could do it. Do you remember your mindset back then?

Joanna Strober: Um.

mindset when I was 20 something or mindset more recently,

Jason Yeh: No, no, no. I actually want to think about, 'cause you, you at some point made the leap from venture capitalist to, you know, and a and a corporate worker or a lawyer to then actually [00:06:00] starting a company. But that leap, even with all your background, must have been a bit harrowing because you're like, can I do this?

Track 1: Are why, why aren't other people that look like me doing this?

Joanna Strober: So I've had five careers

Jason Yeh: career.

Joanna Strober: at

Jason Yeh: Okay.

Joanna Strober: Honestly, I've had a lot of different things that I've done in my life. Uh,

Jason Yeh: life.

Joanna Strober: I've did venture investing. I worked at a

Fund

of funds. I started

another company before this one. Um, so I've done

a, a lot of different things and I think all of them were

in that

same position of like, well, Why shouldn't I?

be able to do this? but uh, But it's really, helpful to see.

other people and it, it is hard when you think you're the first one and when you don't see other people around you who are doing these things, it's much harder to envision yourself doing it. Um.

So I.

think, uh, you know, I think that the more that you see other people who, who seem like you doing it, it just seems easier.

Jason Yeh: Totally. Um, well, so you've been a trailblazer, [00:07:00] throughout your career. You're five, you're on your maybe fifth or more careers, and I'm sure you'll have different ones from here on out. Um, but at some point I'll touch on what we said or what you had mentioned. Mentioned, which was you had started another company before midi.

Uh, and actually from just looking it up, seemed quite successful. Raised real venture capital dollars, almost $6 million, um, and then actually led it to a sale, right? So we don't have to talk about that experience. And my, my thought was that I wanted us to then fast forward to starting your next company because like in our side conversation before we jumped into this

We talked about this idea of showing different stories to founders who might be listening to get inspiration to see themselves and the founders who, who we cover here. Um, your. Your setup for this company and this most recent [00:08:00] fundraise is that of someone who, by that point certainly had a great background and network.

Um, you had been a venture, uh, venture capitalist. You'd been at a fund of funds, which I didn't realize. Lots of connections there. And the craziest best part about it all was that you had actually run a company successfully and made money for your investors. I mean. As a former venture capitalist, you know, that's like check, check, check, check.

So crazy ability to then go into deciding that you wanted to do your next company when you started MIDI and you're thinking about midi. you knew. Did you know right off the bat like, okay, this is a large venture-backed company, we're gonna need to raise money for that. Was that, was that the mindset going into it?

Okay, so you wanted to go raise your first round of capital and this is a story we haven't told and and May, this is certainly. Funner more comfortable than maybe when you went out to raise your first [00:09:00] round of capital for your first company, but going out to say, we want to raise money to start midi, can you tell us what that was like?

You know, what is it like being a founder with a, a successful exit who wants to go raise? What was your process thinking about how you'd raise capital for this company the first round?

Joanna Strober: So I'm gonna

tell you right? You,

think from reading the press that, oh, you're a second time fund person.

It should be easy.

Maybe

it's easy for some people,

but it was not easy for me.

Um, It not like,

like, oh yeah, people are gonna throw money.

at me at a good price. Just to be clear,

like,

Jason Yeh: Oh, can I, I pause you there, Joanna? And because I do want you to finish this thought, but I loved that you shared that because so many people, . When they're looking up at the headlines, they're like, oh, I'm not them. Or like, it's easy, it's easy for her, it's easy for him.

You know, they, they had all these things and I think that's right. I think you would be super surprised at how hard it is almost every single time. So anyways, [00:10:00] I'm so glad you shared that. Uh, tell us more.

Joanna Strober: Yeah, it's. Honestly, I was just giving a talk Yesterday, at one of our funders

a party they were having for entrepreneurs and

now they looked really smart. Investing

in us. At the time. It didn't feel like it was that smart, like it looked really risky.

Who knew

whether women were gonna go trying to get their care online

and whether this could scale and what our CAC would be

and could we get insurance

coverage. There

were so many questions

when we first started, and.

so it was not a no-brainer investment.

I, I, we, I'm super

grateful to those people who did that first check, and it was, it was not a no-brainer. So any idea that just because it was a second time, everyone would trust me was not the case. Uh,

Jason Yeh: you're like, shouldn't they trust me at this point? Can finally, can this be easy? Um, okay, so there was still real work that went into this. Um, you know, I, I, I looked at the reports on Crunchbase of when at least the funding [00:11:00] was announced and there's always some bit of lag, so, . My guess is that that first round, especially with how large of a round that seed round was, was still done with a decent market in place.

Like the, the funding market was still quite active. Am I right around when you raised the seed round?

Joanna Strober: So, yeah, but

Actually that

funding announcement, let's be real. That funding

announcement,

of the, was actually like four different rounds of funding

were all rolled into one. So Right, we raised earlier, we raised

a few Million

then we raised more.

like that. We just didn't announce it. Um,

I

Jason Yeh: see I see

Joanna Strober: so people

understand like just 'cause you see a big number like that, it doesn't mean that

it was all raised at that one time. Um, also. yes, it was a good funding market and it was still

Really hard.

I don't, think you like

can just.

'cause it was a good funding market. Some people, you're right, some people can go raise a huge amount of money at a really high price and that was not us.

Jason Yeh: Okay, so I'm glad you pointed [00:12:00] that out. And just for everyone following along, what I was reacting to was on Crunchbase, it says that a $14 million seed round was raised and announced on October 27th. And what, what you are clarifying for us is that that was chopped up a little bit. Um, and then when we announced, when you announced, you just announced it all at once.

The, the thing that I, I want to . Play into, or sort of pull apart here is if that were chopped up, that means you did raise some at, in the hottest market possible, like in the hottest market we've ever seen in venture capital, certainly in my career. Probably in your career as well. And um, what a lot of people don't realize is that at the time everyone was looking to their left and right.

I remember. Um, I had recently exited my last company and people were like, should you raise, should you raise company for your money for your next company? Should you raise a venture round? All this money was going around and people felt like, oh, all the people that are raising now are so lucky. And they're like, they're, they're doing [00:13:00] it at the right time.

But what we've come to learn is that because it was the hottest market that a lot of times these companies were raising capital at super high valuations relative to traction, which . Leads me to actually where I wanna focus our conversation, which is the most recent impressive round that you announced.

And my, my point is, and, and you can clarify and you can share what you're comfortable sharing, is that going into this last fundraise, which was announced, uh, in September $25 million led by Google Ventures, you were likely sitting at a pretty high valuation. And in a really bad market, , I mean, this is just reading the tea leaves.

I could be wrong, but this is kind of where I wanted to jump in and hear a little bit about what this round was like. What were you, you know, what were you thinking? What was going through your head? What triggered the need to raise? And then any stories that you [00:14:00] can share about, you know, what would, what it was actually like.

So I'll pause right there and just say like, was I slightly accurate? Was I well off? Um, let's go from

So I think you usually talk to different founders than me, honestly.

Joanna Strober: No, not coming into it with a High

valuation. I had a very low valuation every time.

We

Jason Yeh: tell us

Joanna Strober: high valuations

Jason Yeh: Amazing.

Joanna Strober: so

now

Jason Yeh: You, you had had, you had given the advice before of don't just raise at the highest valuation. So when you went into it, I mean, tell us a little bit more about

Track 1: that.

Joanna Strober: No, but Obviously.

honestly, it wasn't

necessarily my choice.

either, right? I raised it

Jason Yeh: What you could,

Joanna Strober: that I was able to get just

That's what I was able to get and

I really wanted to build this company into a big company.

So I was willing to take valuations that some people, if they were coming out

of Y Combinator,

might have said were too

low, but

I wanted,

to raise the money for the company and was willing to take

those valuations to grow the company. So

now it looks like [00:15:00] we.

got lucky because our valuation is not super high, so we don't have to worry about down rounds or recapitalizations or anything else, but. Uh,

Jason Yeh: that's, uh,

that's, well, you know, I've seen this happen before too, where, um, founders during the hottest market, and I won't even say, you know, what gender or race they were or whatever, but they were getting lower valuations and they, I remember them being upset about like, why this was happening. And now when we look back on it, we are like, oh my gosh, like.

That that might've been the best thing that ever happened to the company. That you could take a reasonable valuation and continue reasonably growing and get to your next round and be like, yeah, we still have the right momentum. So, okay. That's, that's where you started. Um, so as you went to go raise Yeah.

Joanna Strober: had an Opportunity to,

do an up round, right? Like we didn't

have about doing a down round. We didn't have to worry about, uh, disappointing our investors. [00:16:00] Um. We did get two term sheets

at low valuations that we thought were too, were too low. And um, they were trying to take advantage

of the new market. And they said, well, you know,

this is a new market so you don't,

you

don't need to get

an up

round basically, or you don't need much of an up round.

And, um, we were able to.

to be much more successful than, than they assumed, I think that investors thinking they could, uh. You know, get a discount for the market, but we were showing really good traction, so we were able to, be more successful than that.

As markets get tough. So do investors, even for founders, like Joanna, who had the traction to prove that her company was great. Still had trouble convincing investors. That it was going to stay that way.

After the break, we get to hear more about miHealth series a as well as what it was like for Joanna to go out, to raise again. A lot of people assume that once you've done it, once it gets easier. [00:17:00] But does it.

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[00:18:00]

Jason Yeh: So, so let, let's double click into, um, kicking off this latest fundraise. so you announced it September, I assume you were going out at the beginning of the year. Um, but can you tell us a little bit about what was happening in the company and what the. Trigger point to saying, I think we need to go start fundraising was, was it hitting a milestone?

Was it, um, the amount of, uh, of runway you had left? Was it a combination of a few things? Um, tell us a little bit about that.

Joanna Strober: Yeah, it was really both. It was both the fact that everyone was saying, well, you need to start fundraising and a year in advance 'cause the market has changed, so make sure you give yourself a year. And we were having really good traction, so it also seemed like a good time to fundraise. So it was really both of those, it was both those things coming together.

Jason Yeh: Okay. [00:19:00] And, and how do you, how do you feel about going into fundraisings now? You know, this is, I don't know, number seven or eight rounds that you've raised across a few companies. Is it, have you, have you grown like a sense of like crazy confidence about it, or is it still like nerve wracking to you?

Joanna Strober: Zero crazy confidence That is not how I think of this with crazy confidence. Uh. I, I mean, I'm gonna have to go do it again. Uh, 'cause we're growing really fast, which means more money is required to support the growth that we have right now. And, um, so I am thinking about starting again to go raise more money, which seems crazy that we would have to go raise more of money, but we are way ahead of our plan On everything we told them. So now,

we have to go do it again.

and I cannot tell you that there's any crazy,

confidence. It's like . It. Okay, how do I tell

the right story? how do I write the right deck? [00:20:00] how do I,

convince people of what I am seeing? I, I know what I'm seeing, but convincing other people of that and why it's such a big opportunity is, is a challenge and every,

every time.

Jason Yeh: Yeah. I, I think what, what founders don't realize, or people from the outside don't realize is like I. , anything that is, uh, that is like on paper, a slam dunk might not actually create that outsized return for people. So it is like a crazy story that you're always having to tell, and there's going to be people that, um, don't agree with it, and you kind of know that yourself.

So it's like getting ready to be rejected a bunch. I, I guess never, never feels better. Right. Um, so can you tell me a little bit about how . Many investors you thought you would have to talk to? Like as you started preparing for the fundraise, were you like, we're doing it a year in advance, we know it's gonna take a long time.

Did you feel like it had to be a bigger number? Like how did you think about your fundraising [00:21:00] strategy? I.

Joanna Strober: Actually, I think the thing that we did really well

is we spent a lot of time,

Jason Yeh: a lot of time,

Joanna Strober: uh,

cultivating investors

from

the first

Jason Yeh: the first,

Joanna Strober: Fundraise who said no and keeping them up to date on were doing and kind of bringing them along with our story.

so.

by the time we needed to fundraise, people knew what we were doing and they saw that we were outperforming on

our numbers. and they

we had, you know, we had, we told people in the seed, here's what we're gonna do. And we were doing better than that,

on every, pretty every metric.

and we were constantly

updating people.

who we thought we wanted to invest, including the Google Ventures people. So it was actually a very easy fundraise, um, because we, we were able to go to people who we had been talking to for quite a while and say, okay, we're gonna start fundraising. Here are our numbers. We told you we were gonna do this. We did x plus this. And, um, it was, it was a [00:22:00] much less painful process thing You may have thought.

Jason Yeh: Right. And so that's, that's another thing that's great for people to hear. It's like founders, especially ones that maybe didn't come from the industry or a first time founder. They, they get, I think they get, um, . , um, discouraged by the fact that they see other people do it. Um, do it quickly, do it fairly easily, um, and then feel like, oh, we should be able to do that.

So like, let's just go out and talk to investors. And I think, like it sounds like most, if not all of the investors that you even talked to for this round, that by any measure was extremely successful, were people that you had been talking to for. Over a year. Right? Like had seen your

Track 1: last

Joanna Strober: before

Jason Yeh: and they turned you down before.

So Google Ventures turned you down before.

That's great. That's, that feels amazing. So I think like, just even hearing that, like the reason it went so well was [00:23:00] they had perspective on who you were, Joanna and what MIDI was and your ability to continue executing. And whether it's around like your, your series A after a seed.

Or you're going out to raise a pre-seed if a, if an investor has like data points on you from before, something that they can match against and say like, does this founder have the ability to execute on it? That's what makes it easier for investors to do deals, and so I think hearing that is probably a.

A bit of a wake up call for some people and like what is necessary in order to get an easy round done and if it, if it's not, if you don't have those relationships in play. The reason it takes a long time, a lot of, a lot of the times is because they do need to get to know you. They do need to develop conviction around you and the business.

So, um, very, very cool to hear. I'm glad that, that this one was a little bit more comfortable. Um, you know,

Joanna Strober: a lot of people.

turn me down.

Before our interview ended, I asked Joanna if she'd be willing to [00:24:00] share the worst experience she could remember while fundraising. Seriously. I can't believe that some of these things actually happen.

Joanna Strober: so

So

In

2014, I raised money from my first company, Kurbo. And, um, the best, most memorable one was when the person said, well, I already have a female in my CEO this year as a female CEO. This year,

Jason Yeh: Oh God.

Joanna Strober: uh,

Jason Yeh: It's like almost it, it is almost like you made that up, you know, like, like this is a sitcom

you know?

Joanna Strober: that one I

remember.

I

left. I was like, oh, okay. Um. You know, uh, the world has gotten much better. So actually this time I would say I don't have, this time, I didn't have any horror stories. People were incredibly nice. They were incredibly respectful. Um, I really

Jason Yeh: Even in this market,

Joanna Strober: even in

Jason Yeh: it's

Joanna Strober: I think,

they didn't all say yes.

lots of noss, but, but it was, um, [00:25:00] very respectful.

No if you know, and, and I appreciated that. And I felt like this time I got a really fair I got a very

fair hearing.

from people. They may have said, I don't believe your margins. I don't believe you're gonna grow this fast. I don't believe, you know, blah, blah, blah. But, um, it was, it was just how I wa how you would've wanted to

be treated, honestly, in the sense that people either were gonna believe your story,

and buy into it and then wanna know more details, or they didn't believe the story,

which was fine too. Um, but it

was, I felt

very,

respected during the process.

Jason Yeh: that's awesome. You know, there's a, there's a speech that I give to founders, um, 'cause a lot of times we'll do workshops and the makeup of those, uh, of the audience is just . Tends to be, um, and not by design, but tends to be pretty diverse background.

A lot of women, and one of the things I talk about is the fact that I still have tons of connections in venture capital and we talk a lot about their [00:26:00] desire to change. it's like actually . Because I've been on both sides of the table. I'm not, I'm very pro founder, but I also understand venture capitalists.

I don't, uh, I don't, you know, vilify them. I, I think most of the, the stuff that happens is not malicious. Right. And we, we talk to these, I've talked to these VCs and they're like, we are. Actively trying to make sure that we look at all types of deals, that we look at, all types of founders and, um, but the, but the usually harsh reality that I do share with founders is that they're still using inaccurate tools in order to make decisions they still use.

I. Pattern matching as the thing that allows them to make quicker decisions. And if most of the deals they've done in the past have been done by men, like even if they're not explicitly biased, there is some implicit bias there. And so usually what I tell people is, look, the industry wants to change. It does.

And it's trying to change, [00:27:00] but it's trying to move a very big shift ship. You know, like you're kind of moving it like this. And one, Joanna, I'd just love to say . Awesome that you, you experienced, um, you know, just a, what you said the way you, you would want to be treated. And then two, what I tell founders is like, you may be the pattern that other people get to match against in the future.

And it sounds like that that's what you're doing, Joanna, which is incredible. I think. I think this is a, a really great story.

uh, we, I do like just asking, so . You now have been a venture capitalist. You've run a couple companies and you're in silicon. You, you grew up in Silicon Valley. You live in Silicon Valley now. Um, we always love hearing about the sort of next generation of founders that are coming up.

Um, do any founders come in mind? Maybe founders that are just getting off the ground that we should keep an eye on either their names or their companies. Um, this is like a fun little segment that we'll, we'll put out sometimes.

Joanna Strober: Yeah, I'm blown away by all these young people [00:28:00] that I meet who are starting great companies. I mean, I am

old

in the sense that, you know,

I've been doing around for a long time and not, not super

old. but uh,

I am, I'm just blown away by these young people who are starting

great companies, particularly in healthcare 'cause that's where I'm focused.

But, um, I, I, find it incredibly inspiring. All the young people I meet who are starting really cool healthcare companies to solve serious problems. And I, they inspire me a lot actually.

Jason Yeh: It's amazing.

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That was my conversation with Joanna Strober founder and CEO of mini. Health expert care for women over 40. And while the VC industry could use a lot more improvement. It's safe to say that trailblazers like Joanna have driven a lot of change. And that makes me excited for the future. When we come back, I get to talk to my producer page to hear her thoughts and questions about today's interview.

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[00:29:00] [00:30:00] Hello, Jason. Hey P, what's going on? I am just processing this episode, which had a lot of moving parts to it. And, um, I feel like I always start off with saying, Oh my God, this founder is so impressive, but it's so true.

And I actually really extra mean it today because Like she said in the interview, she's had like six or seven different careers. She's been, um, and not to mention doing this at a time where the careers she was doing was not common for women. She went to law school. She said she was one of the only law students there that was a female.

She um, was a venture capitalist, said that she was one of the only [00:31:00] females there and also saw, She couldn't even find a deal that she did with female founders. Then she's also, um, bet like she started another company, fundraised for it, sold that. Now she's on to her next one. I just, I am awfully impressed with her.

Um, maybe I can hear your thoughts. No, I mean, first of all, like she certainly hasn't. The easy path ever. It's like, it's much easier when other people have done it and, um, you know, carved out the trail for you, but she definitely has been a trailblazer. And, and I know from experience being the first might be lucrative, but not, definitely not the easiest.

And, you know, the other thing to say is, is she. She really deeply understands this industry from all angles. Yeah. You know, um, being a venture capitalist, um, getting to be a partner at a big firm, uh, and then I'm not sure she mentioned it, but she, she was at a [00:32:00] fund of fund. Um, investor, which is essentially an investment firm that invests in venture capital firms.

So she's been a venture capital firm that invests in startups. She's been in a fund that invests in venture capitalists, and then she's been a founder that's raised capital. And still with all that, like, it's challenging, which I, I think is a good, uh, is a good part of the story to tell to people. Mm hmm.

And I wanted to point out, I literally wrote this down because I love this quote so much. When she was going into, she was talking about her career and all the careers she's had, she said, every time I wanted to do something, I just asked, well, why shouldn't I do it? You know? And that is like the definition of a trailblazer, like you pointed out throughout the episode.

And I also think it's cool because as she was speaking about all these different things, my mind kind of Went to this topic of pattern recognition, which you speak about a lot and. Just thinking about how it's people like Joanna [00:33:00] that are the ones that are creating this next, this new world of pattern recognition for female founders.

Like you look at Joanna and her background and what she's been able to accomplish. And, um, luckily maybe for future female founders down the line, they'll be able to use Joanna and people like her to be like, yeah, they've done it before. Because we know where, where we've been stuck in, um, which is something you've talked about for a while.

So I don't know if you have any thoughts around that. Yeah, totally. I think like talking a lot about what pattern recognition is, how it helps venture capitalists, how it holds certain founders back is a part of just learning how to navigate, navigate the ecosystem, whether or not you are a founder that fits a pattern or not.

And so, yeah, I think it's worth saying the words that I usually share with people, which is like pattern recognition is one of the most, um, Well used tools in a venture capitalist's toolbox when making decisions. It's [00:34:00] not 100 percent accurate, right? It's, it's just, you can't say that because I am talking to Paige and Paige is a founder that looks like another founder that I've backed who's been successful.

Now I want to back Paige. Like, that is a, is a very fuzzy match. Um, it's fraught with mistakes, you know, you can't just say because they feel the same, they're going to be the same. But I think what's important to call out for people is that VCs don't have many other, if any other, more accurate tools to use in evaluating founders, especially at the earliest stages.

Like what founders really need to understand is that investors are making a bet on the future that nobody with, with any amount of experience or skills. Can tell with 100 percent certainty that it's going to happen. It's like, I talked to this founder. We're trying to say that in 10 years that this company is a massively profitable public business.

But [00:35:00] today we're at day one. Like, what are the things that we can use to try to do better at making that bet? And well, one of them is to just be like, well, this kind of looks like something I've seen before. And so a lot of people can get upset that that is one of the tools that VCs use, but if you really start thinking about, the way decisions are made and the data that's available to make these decisions, you might be a little bit more sympathetic that that's happening.

Now, where that, where that falls apart or that doesn't help is when there are really great founders who have, uh, deep knowledge and expertise, hard earned, unique insights in an industry. As well as, you know, experience or, data points that say that they can execute and all those things are there, but they just don't happen to look, sound, smell like a founder that the VC that they're talking to has seen before.

That's when that model falls apart. [00:36:00] And so, you know, we talk a lot about the things that. Founders that don't fit the stereotypical pattern can do to, to help with that. Um, but one thing that we love seeing is when successful founders who don't look like the stereotypical norm start becoming more and more successful and start interacting with more and more investors because like you said, they then become the pattern that future founders can take advantage of.

They can be, you know, Oh my God, Paige Randall. She just reminds me a lot of Joanna Stroeber. Yeah, I wish. Has that same, you know, no, you know, I think you, you can say those things. And it's like, that's what Joanna is doing by being a trailblazer. So yeah, love that about her. Yeh, and I also like, kind of on the same topic, I wanted to bring up, Joanna was talking about how when she went out to raise for her second [00:37:00] company, Vinny Health, her current company, um, even though she had raised before, she, I don't know if it was, The, you know, the market's been a little more strung out, but she had a very hard time and I found it interesting because, only because her company before that was so successful.

She has, she had a successful exit. She had proved that she could reach the milestones that she said she was going to, and then that still wasn't really. Enough like she she said it was actually very hard to go out and raise like the first few rounds for many health And I want to hear your thoughts on that because obviously everything is has its own different variables but I just feel like that'd be one of those things where it'd be like a jackpot for a VC you find a founder who Like you can be confident in their ability to Go out and repeat what they've done before, but it wasn't the case for her.

Yeah. Look, I think you're right that there are a lot of confounding variables possibly with [00:38:00] timing and market, whether or not, you know, it was a good market or a bad market. Um, this does feel like one of those situations that is an example of, of one of my sort of. Tough love speeches that I give to cohorts of founders, which is like, I do just think it's going to be harder for some people, right?

Like you have a pristine background, you have the experience, you've started and sold a company, you have metrics. And it does seem like those things lined up. Pointing at a big industry and a big opportunity should be a no brainer for tons of people to line up to invest. And like, it's not saying like even the, even the best and craziest fundraisers have people that don't want to do the deal, but in this situation, I have to believe that.

A lot of that difficulty for Joanna is because, um, pattern [00:39:00] recognition is harder with women and harder for, um, VCs to just blindly get stoked about backing a female founder. And I, even saying it out loud actually makes me feel a little uncomfortable. Yep. It shouldn't be the case. Joanna has proven herself over and over again, that that should be a profile that people line up to back and just be like, When, when is the next time that I can invest in you?

Um, because when that is like, don't even tell me the valuation, just, you know, let me send a check that that should be what it feels like. Um, but, you know, hard to say without knowing all the details. Um, but she, she got through it because as she's proven throughout her career, she, you know, why not her?

She's gonna do the work to get it done. And, um, yeah. And she has got it done. Like she literally, she got it done. One of my favorite. Parts that like when she was speaking about like leading up to this recent series A is all of her past raises she had Surpassed the milestones that they had set out [00:40:00] to achieve like she had gone way beyond it So it's like alright after a few rounds of you surpassing and doing so much more than you said you were gonna do it's about time that she had a It's a semi easier round, which wasn't just because they were like, Oh my God, Joanna is amazing.

She was putting in the work before the Series A to constantly reach out to past investors and be like, Hey, we're still doing more than we said we were going to do. Hey, again. did it. You know? And she kept saying it. And, and that's one of those things where obviously it sucks that she's, she even has to do that.

But now I really do believe like she is one of those people who is breaking. The pattern, like, for other women that are going to come up because she's proved, she's had to prove herself over and over and over again. Right. And you bring up some, uh, uh, strategy. It's not even a strategy. It's, it's just something that people have to fall back on, which is like, well, you know, you might not, Follow, um, [00:41:00] pattern recognition by looking at what this looks like and I'm motioning around my face, but I will show you a pattern that's going to be undeniable, which is my pattern of execution, showing you a goal that we've set out as a company and meeting that goal.

And then showing another goal where we raise the bar and meeting that goal again. When we show you that pattern, it's going to be hard for any investor to say no to that because it's like, well, I have seen that before and it has nothing to do with what the founder looks like. But when I see this pattern of execution, that's something that I want to back.

That's not as easy of a pattern to create for investors to see. Yeah. But it is that higher bar that a lot of people will have to meet, which is just that execution pattern, um, that you showed to the investment community, which is colorblind, to be honest, is gender and colorblind. Yeah. I, I did have a clarifying question, um, that just came to my mind while we're on this subject.

For her earlier rounds, [00:42:00] I believe she had a lower valuation. She was talking about it like she, you, you asked her, Oh, didn't you have a high valuation? She had a low valuation. And I'm just wondering what are, what is bad about having a lower valuation? Like how does it not like, yeah, and that's, I'm going to leave it at that.

This is a great question. And like, I can read it on your face. Like maybe you're like, uh, I'm a little embarrassed to ask this question. I've, I've been with you for a year doing this. Should I know this? And as I always tell you, it's like, if you have the question page, I bet you tons of other founders who are deeper in this have the same question.

So I'm always glad when you ask these questions. Let's talk about the lower valuation and the higher valuation. Lower valuations. are quote unquote bad for a couple reasons. Um, one is that if you raise a certain amount of money, let's say [00:43:00] a million dollars, let's say you raise a million dollars, a million dollars at a 5 million valuation, uh, post money valuation is a 20 percent dilutive event, as in you sold 20 percent of your company to investors.

They took 20 percent of your company for that million dollars. If you were able to get a higher valuation, like let's say 10 million, that same million dollars, which you'll use to do the same exact things only represents 10 percent of your company. So you only. Sell slash give away 10 percent of that company of your company in order to get that million dollars.

And that equity is important for, well, one, when you eventually sell your company, well, all that equity turns into cash for you and your employees. Um, and yeah, for you is important, but for your employees is also important because they own equity and that equity. Um, is how they're going to incentivize, be incentivized for future work.[00:44:00]

Now, the opposite side of things is, well, why is it good? You might be taking in a lower valuation and higher dilution by getting, you know, by, by signing up for that. But it does set you up in order to show progress and momentum in your next round. There's a bit of a psychological component to this, but when an investor comes in 18 months later and they say, well, um, what was the last valuation that you raised at?

If it's a valuation that's like, of what feels low. That means that everything you've done to date feels like you made tons of progress. Like, Oh, they were only valued at 5 million. Well, now they're doing a million dollars of revenue. Yeah. Like a million dollars of revenue that, wow, they've made tons of progress.

Whereas, if you actually were able to get a really, really high valuation, twenty, thirty million dollars from out the gate as opposed to that [00:45:00] five, when you go talk to people at your next round, the expectation is that you are a company that would have made huge strides in, uh, you know, progress, traction, revenue.

And if you don't show those numbers, well, that momentum is not there. You're not like, investors aren't like, oh my God. This is a company that keeps marching. It looks like they've barely grown into that past valuation. As in, I don't even know if they're worth the money that they were valued at before.

And while we're all making bets on the future, like that momentum piece is really important for VCs also, by the way, like they, they also know that your. Employees have been compensated based on equity. And if your valuation doesn't keep going up and the employees are like, I was, a lot of them are thinking like, well, every year that I work here, we're supposed to be growing the [00:46:00] value of our equity.

And if you can't continue growing the value of the equity, Employees, early employees who are making a fraction of what they could make and the open market for bigger companies are like, what am I doing here? I'm like, are we actually getting the value of my equity? So, um, while it can feel painful in certain markets when other valuations, and we talked to founders a lot, the really savvy founders who get multiple offers from venture capitalists and choose not to take the highest valuation.

Great. They choose to actually, and if you remember Emmanuel from Bubble, they choose to say, I actually don't want that high of a valuation. Let's pull it down somewhere where we can show real growth, um, with the money that we're about to take in. Yeah. The reason I was asking is because I feel like it's such, such a cliche that the best thing to have is like a super high valuation, which maybe in some, maybe in some cases it is, I'm sure it is.

[00:47:00] But I think there is also strategy. Like when it comes to valuation and, you know, bigger doesn't always mean better type thing. Um, like in Bubble's case, just like you said, they were able to use that to their advantage. And obviously in some situations, a low valuation is probably harmful. But in other areas, like the market right now, everyone who had super high valuations in 2021, it's hard, you know, it's really hard.

No one would have been able to tell that that was going to happen. So for people like Joanna, she was able to really like, Capitalize off of that, I guess, and, and show that she was able to accomplish a ton, um, with that. Yeah. And the last thing I'll say on the topic is like, I'm giving all this advice around lower valuations are better, you know, higher valuations can get you stuck, but it's hard, it's hard advice to follow, right?

Like if you are in the middle of, um, a fundraise and someone says. A big headline number, 100 million valuation. You're [00:48:00] thinking to yourself, well, like there is a sexiness around being able to say, we just got valued at this large number. And, you know, you think like, Oh my God, I'm not getting diluted by as much.

I like when we exit, we could. You know, I could keep even more of the value. Um, and it's just, it's just not easy to follow. So like if anyone listening has made the mistake of being too highly valued or any founders are like going through the struggle, it's, it's not an easy decision, but these are some of the things that I think people should hear about and, you know, In hindsight, with Joanna, like, some of that actually might have helped, um, to have been at a lower valuation as she went out for the latest round.

Yeah, yeah. I'll, I think that's a good place to end and also maybe I'll add, like, you never know, uh, you never know what's good or bad, you know, in the moment. Like, Joanna could have been really bummed that she had a lower valuation and now she was probably jumping up and down when going out to, uh, [00:49:00] raise her Series A.

So, you never know. I'm going to end with a Chinese proverb, which is funny because I don't really speak Chinese that well, and when I was learning it, I, you learn these like essentially like Aesop's Fables is one way to learn Chinese. And I learned like, I studied like a hundred of them. Don't remember any of them, except for one.

So if there are any Chinese speaking listeners out there, uh, what you just said is this thing, like sài wēng shī mǎ yān zhī fēi fú which is a story about this guy who keeps having these things happen to him that like. On paper look bad. Like he, he had a, he had a horse run away. Yeah. The horse ran away and he's like, shoot, I lost the horse.

But then the horse attracted two other horses and he came back and he's like, well, I thought I lost the horse. I actually gained two, you know, two horses. And then later he's riding one of the new horses and he falls off [00:50:00] and he breaks his leg and he's like, Oh my God, why is this happening to me? I broke my leg.

Uh, And he's like, this is the worst thing that happened to me. But because he broke his leg, he wasn't sent to war. And then all these people died. He stayed alive. So sài wēng shī mǎ yān zhī fēi fú And that's what we're talking about with low valuations Damn.

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