Jesse Draper is founding partner of Halogen Ventures as well as creator and host of Emmy nominated television series, The Valley Girl Show. She is a 4th generation venture capitalist focused on early stage investing in female founded consumer technology. Gwen Salley, Head of Investment & Services at STATION F, interviewed her to learn more on her vision on the ecosystem in the coming months.
You have an incredible and singular background prior to becoming a VC with Halogen. Can you tell us a little bit about your story and how you decided to launch an early-stage / female-founded / consumer-focused fund?
Maybe to briefly present Halogen Ventures, we invest in early-stage female-funded consumer technologies, we currently have 62 companies in our portfolio, all female-funded, with 3 male CEOs. I have to point that out! We love men.
Back in the early days, I grew up in Silicon Valley, surrounded by an incredible family of entrepreneurs and investors. I’m the fourth generation of VC – and first female – in the family but I never thought I would join the industry as I didn’t see any women in technology or in investment around me growing up. My aunt Polly (Draper) was a very successful actress in the 80s and of course, you become what you see so right after graduating UCLA, I went into entertainment. I had the chance to be an actress in a few successful shows however the reality of the industry quickly made me realize that I could do more productive things with my time.
I grew up surrounded by technology so I decided to combine these two passions of mine and created “The Valley Girl Show” in 2008. It was my own entrepreneurial journey in the early age of digital distribution. We did 5 seasons and got nominated for an Emmy.
But you had a « men problem »?
Yes, after season 2, I realized we only interviewed men and so, I decided to focus on finding incredible women in technology and have my interviews being 50% men and 50% women. At first it was difficult to get women on the show but I crossed the path of a group of women in fashion technology and they changed my life. They made it ok for people like Sheryl Sandberg to come on my show and suddenly we received amazing people like Marc Cuban, Jessica Alba, Elon Musk or Eric Schmidt, the former CEO of Google.
Because we put this word out there, vouching for giving a voice to women in technology, we received thousands of messages from women in tech looking for exposure and it was incredible. Most of the time, they were a little too early for the show however I had the chance to write a few checks and be a strategic advisor even though I didn’t have a lot of money at the time. With time I developed a little bit of a track-record of investments in these early-stage companies and ended up with a first exit by making a 25x return by selling my participation in a startup on the secondary market. I used that track record to raise my first fund, pitching maybe 500 people and now we are on our second fund still doing the same thing, investing in amazing women building great businesses.
You’ve been supporting women in technology for over a decade now. Taking a broader view on diversity in tech, have you seen the needle significantly move over the past few years?
It has certainly moved since 2008 but I am still frustrated with the velocity of change which is too slow. I’m glad we are addressing that and indeed these protests (this interview was recorded on June 5, 2020, as protests happen in many American cities after the death of George Floyd) needed to happen in America. Focusing on women has brought me into a very unique pool of entrepreneurs. By putting the word out and showcasing the success stories of people not following the traditional path of Stanford students, Harvard students all the way to Sand Hill Road – a famous street in Palo Alto gathering the most prestigious Silicon Valley VCs – and saying, “I’m looking for women, we invest in the best”. We are always looking for new ways to support underserved communities and I am proud of our pool of diverse founders. We invest in diversity of age, race and gender and let me tell you that this has been an opportunity for us. A lot of people still believe this is all charity but no, we are in a return-focused business and we make good money focusing on diverse people.
Change is being made and fast forwarded but what is currently happening and people are listening. I think it is important to mention as well that I am coming from a privileged background with a lot of resources and network in the technology business, I am grateful and aware of that and I am now working to enable others.
What do you think is the right place and formats for VCs to support diversity? Is it by having dedicated diversity funds? Is it by asking their founders to have diverse boards and executive teams?
The main issue I currently see is at the top level. In our world of early-stage VC, there is plenty of tech for good, diversity focused funds. As a woman, I still get laughed out of the room of big pension funds and large organizations that still can’t believe that I am a woman investing in women aiming at making a great return out of this strategy. We need to change it at the level with the most capital. Pension funds, Teachers plans, Mutual funds and so one… putting more money toward diversity through real managers’ programs… Funding 5 or 10 different types of VCs creating their first fund and doubling down later on the best ones. Today this doesn’t exist.
Things are slowly going back to normal in Europe after over 2 months of complete lockdown. What is the current situation in the US?
It’s not good… I’m in Los Angeles and protests are all around us with no end in sight with good reasons. As for COVID-19, it weirdly went in the background of discussions with the protests being the main issue we are currently facing. In terms of activity, a lot of funds closed their new funds early this year so they have a lot of dry powder to invest, so we are seeing a lot of movement.
For Halogen, we made an investment the first week of the crisis however we have been focused on our portfolio and reassessed our entire investment strategy, making bridge rounds where needed and advising founders on how to handle this period. This is now pretty much under control and we are slowly reopening sourcing activities however, we are approaching sourcing differently. We are writing checks for people we haven’t met physically but we do a lot of due diligence and we tend to do more reference calls than usual. It is also a time of great opportunities in terms of valuation and as an early-stage investor, you don’t want capital sitting there so we are actively investing.
You mentioned doing more due diligence and overall having to change the way you operate. How do you adapt to this new reality to assess new opportunities?
We call a lot more references and we talk more to previous investors, having a good understanding of their path and most importantly, assessing how coachable the founder is. Especially doing these times, you want to make sure your founders can adapt quickly and be reactive to changes in the market. We ask a lot of questions to test this particular trait and assess their coachability. At the early-stage level, we take on a significant amount of risk so right now, more than ever, we focus on our founders, as people, to make sure they will have the resilience and strength to succeed in the long run. We usually have a 100 due diligence checklist but today more than ever, we believe in people and their ability to keep the company alive. We are focused on survival right now.
What are the elements VCs focus on the most when meeting with founders solely over video calls? Do you have new ways to assess opportunities in a full remote setting?
Definitely, first of all there are plenty of things you cannot assess over a Zoom call. We still believe in meeting people in person as people are the main factor of success in our industry. We like to dig in their background and now that we do it remotely over video-calls, we use different tactics by paying close attention to what is happening around them, why they chose a specific background, where they are located, how they dealt with the lockdown or how they parent as well if they happen to have kids in the rooms. All of these are factors and as I mentioned, we do more referencing, more backchanneling to understand and get to know the founders a bit better. On calls you need to make them open up in new ways and get to know them as best as you can prior to making a decision.
In a post-pandemic world, do you think you’ll keep doing remote investing and do you think the industry overall will be more comfortable making these types of deals?
Yes, we are taking new habits and if we are able to get enough references and believe in the connection we make with a founder, we’ll be able to invest without meeting them in person. However, this is still a people business with a big factor being the personal fit between us and the entrepreneur. This is way easier to assess and develop in person.