🎙️ EP24: Funding & Training Diverse Emerging Fund Managers with Sara Zulkosky,… | InvestHer Podcast

Welcome to episode 24 of InvestHer Podcast. If you're new to this podcast, welcome. We hope you're going to enjoy it. And if you've been along us for the ride, this is going to be a super interesting episode. This week, you're going to hear from Zara Sulcoski, who is the co-founder and managing partner of Recast Capital, which is a fund of funds that is investing in diverse emerging fund managers. So she is putting money in those new funds to invest in new, great startups. And you're also going to hear about how they fund those emerging funds, how they also train up new emerging fund managers. And apart from that, if you're a founder, this is super interesting for you to hear, because you want to know what's changing in this world of funding. What are the new funds coming and, and how do they raise money? And of course, she's going to give you some great funding tips, particularly for those female founders. So stay tuned, enjoy this episode. I certainly did. Investor Podcast is for you, the female founder who has a product, a service, or a message that you believe in and need to get funded. Or for you, the investor who wants to learn more about the huge untapped investment opportunity that gives you a higher return— women entrepreneurs. My name is Anne Ravanona. I'm an entrepreneur, TEDx speaker, and women's advocate. And I'm passionate about helping women entrepreneurs get funded. In each episode, we'll take a behind-the-scenes look into real-world funding tactics and strategies to help you get the funding you need faster. Let's put the fun into funding. Thanks for spending some time with me today. Now let's get started. There we go. So welcome everybody to our latest funding conversation. And we are so excited today to have Sarah Zylkoski from Recast Capital. And I am your host, Anne Ravanona, from Global InvestHer. And we are a go-to community for female founders who need to learn about funding, but we also connect you with the funders. But today, we're catalysts in this space, and we're really interested in helping push more capital towards female founders. So the conversation we're having today with Sarah is very important because we all need to know where do funds get their money from? How does that work? How does then those LP— how do those LP decisions impact the investment criteria of the funds? And so this is— we're going to get behind the scenes with you, Sarah. Welcome.

Thank you so much for having me. Excited to be here.

So, um, I just want to share with all of everybody in the audience who's with us live. We have people coming here from all over the world today, guys. This is so exciting. So those of you who are attending and who are live, if you want to put in the chat box where are you calling in from, tell us. I can see that certainly the people who've signed in are calling from the UK, US, Ireland, Netherlands, Russia, Australia, Mexico, all over the place, Sarah. So it's Great to have everybody with us. So I would love the chat to be very interactive with Sarah today. So please feel free to put your questions in the chat box. Forget about the Q&A, put it in the in the chat box because we're going to catch all of it there. And let's get started. Hi Sasha from Uzbekistan, Russia. Whoa! How cool is this? Excellent. Okay. So Sarah, I always like to start off this. funding conversation with a kind of a warm-up question, which is, tell us one fun fact about you. Let's get to know you a little better.

Sure, fun fact about me. So a little-known fact is that I'm actually spending some time translating a manuscript that my grandmother wrote in German about my grandfather's life during World War II.

Amazing. Wow. And so what are you going to do with that manuscript? Do you want to make it into a book, or is it for the family?

I think we'll start as just a nice treat for the family. You know, something that just is a nice way for us. My grandfather passed very, very early on, and it's a wonderful way for us to kind of have a piece of him without him being here.

That's amazing. I love it. That's a very original fun fact.

So thanks for sharing that.

I love that. Okay. So let's understand a little bit more about you as well. And how did you get into investing, Sarah? Tell us about you, who you are, and how you became an investor. And before we go into the fund of fund journey with Recast Capital.

Sure. Yes, absolutely. So my path is a bit of a winding road, honestly. I'm actually an engineer by background. I have a bachelor's and master's in engineering and spent the almost 8 years of my career, first few 8 years of my career, working as an engineer for a venture-backed startup. I was the 3rd person hired there full-time and ended my time there as director of engineering and director of product management. I didn't really pivot to the investor side of the table until I was partway through my MBA, where I was awarded a fellowship from Foundation Capital to serve as essentially an early-stage scout in my local area and was bit by the bug. I fell in love with the idea of a career in venture as a way to support multiple businesses, as opposed to just one as an operator. From there, I joined a family office in the DC area, and there I worked on a team of 4 investing in venture and private equity opportunities, both funds and companies, on behalf of the family. It was a very wonderful place to be, phenomenal family to support. But unfortunately, while I was there, the patriarch of that family passed. And with that set off a bit of a strategic shift within the organization towards philanthropy, which meant that we started managing out that existing portfolio. From there, I made my way to my most recent role, which was with Greenspring Associates. Greenspring Associates being a very large venture-only platform headquartered outside of Baltimore. The family office that I had been supporting was a longtime friend of that firm, had been an LP of Greenspring. And so It was a fairly seamless transition and was excited to join their team to support them, where I spent the majority of my time on the fund investment side of the house. While I was there, had a front row seat to many of the dynamics that were taking place within venture and became more and more focused on how I could leverage my career to move the needle for diversity within venture. And found that by supporting emerging managers in venture, who are typically far more diverse than the established players within our industry, you could really enable a pathway greater diversity within our industry broadly. And so wanted to spend 100% of my time there. And, and that's how my, my latest venture, Recast, was born.

Amazing. And I absolutely love the way you've transitioned from being, you know, a techie, okay, an engineer, an engineer operator in at the startup, in at the bit, like one of the first employees, all the way through to doing your MBA, all the way to joining a family office, and then all the way to doing the— like, it's It's a fascinating cycle. And that's why it's great because it gives you great insights, doesn't it? Because you've been on the other side of the table. So you totally understand, you know, how startups are built, how companies are built, what it takes, you know, all of that kind of good stuff. So it's very interesting. It's always nice to see the ones who've gone from operator to investor to that side of things. So tell us more about Recast Capital because you are a fund of funds. Give us some insights into who you are, why you set it up, and your thesis.

Sure, absolutely. So Recast is a new platform focused exclusively on emerging managers in venture, meant to both invest in and support those managers with a focus on diverse partnerships. There's 2 pillars of our business today. One absolutely is the fund investment strategy or the fund-to-fund product that we have focused on those managers. And then the second is an educational program that we started as a way to hopefully impact and accelerate the success of more emerging managers in market. The platform itself was really built on 2 core theses. One being that the data shows us that it's emerging managers in venture that are providing the alpha that everyone's looking for out of their venture portfolio. It is not a stagnant list of 10 names that you must get into. And so we believe that any well-built venture portfolio includes diversified exposure to emerging managers for that for that access, for that return potential. Secondly, we believe deeply the data that shows that diversity drives better outcomes.

Yeah.

And so as a result, we are focusing our efforts on more diverse partnerships. And finally, we are, you know, it was really built on the pathway that I mentioned earlier, which is by focusing on more diverse partnerships within the emerging manager space, you can absolutely enable a path to greater diversity in our industry. broadly and doing so in a returns-first way. This is not a concessionary strategy. We believe that diversity is an advantage. All the data shows you that that is true. And so that's— those are kind of the core pillars that our firm was built upon.

I love it. So it's like doing good and making money at the same time and changing the world. Like, okay, it's not good for goodness' sake. It's like, we understand you— like, you understand diversity is an incredible lever and a source of value creation. So that's what you're investing in, in the diverse set of fund managers.

Yes, absolutely. Absolutely. And hopefully serving a specific need within the market as well. There are many very savvy venture investors all the way from high net worth individuals, family offices, endowments, foundations, and so forth that believe the thesis. They do believe that this is where the returns are being generated. They just simply have trouble accessing it themselves. Right. They can't write checks small enough to back these smaller managers, don't have the breadth of team to cover the space. Perhaps it's the political risk of investing in a name no one recognizes yet that makes that—

We're going to get to that. That's the hot potato. That's the elephant in the room. Right, right.

Oh, yeah. Our hope was to create an institutional-grade intermediary that could help provide that access as well.

Okay. So there's a lot of different people in our audience on this call and on this webinar and podcast. So for the founders who don't know what a fund of fund is and how it works, can you very simply say what that is just to give context? Because then we're going to dig deeper into the more technical side of things because there's a lot of investors on this call today.

Sure, happy to. So a fund of funds is essentially both a GP and an LP. We raise outside capital from institutions and invest it on their behalf from a pooled source of capital.

Right. So it's like, you get the money, and you inject it in the funds that are going to then deploy that money. So you're, you're, yeah. And that's, that's important as well to remember, because, you know, sometimes a lot of founders forget that venture capitalists have had to go and raise the money, they've had to go knock on the doors and do that as well. So because there's often this, this perception that investors are not really, you know, founder-friendly, that they're only in for the money and that they're in to make big returns, of course, but it is purely, purely transactional. And it's not also based on, you know, innovation and many other criteria. So I think it's— and that, you know, oh God, how could the investor understand where I'm coming from, you know, because, you know, they've got all this money. And so I think it's important to say the money doesn't fall from heaven, manna doesn't hop from fall from heaven. You have to go looking for it.

Yes, yes, absolutely. Absolutely. That is a hard part of the job as well. Certainly, certainly even more so for emerging managers in venture.

Right. So let's talk then about what is an emerging market— sorry, emerging manager. Again, let's just demystify that term and then get into it.

Sure. Yeah. So unfortunately, it's one of those terms that carries with it a few different definitions depending on who you're talking to. But for the purposes of this conversation and how Recast thinks about emerging managers, We think about that as those raising funds 1, 2, or 3. So they tend to be far earlier in their journey. Okay.

So now let's start to address the elephant in the room. Okay. What's the story in venture capital today? Honestly, most of the— most big funds of funds and so on are still investing in the big boys. All right, Sarah, in the bigger funds, they like— they kind of shy away the emerging markets. I'm just talking about the main tendency. They're like, no, no, no, you're a first-time fund manager. How could you possibly know what you're doing? Know what you're doing? Know what you're talking about? Have the right connections and find, you know, give me some great returns on my portfolio. You haven't got a clue what you're doing. You're a learner. Why should I give you my money? I'm going to give it to the people who've proven it and they have a billion-dollar fund. So explain to us, like, A little bit more about that.

Sure. I mean, it's an interesting dynamic, right? There are certainly a handful of names that— a handful of funds, established fund managers that are exceptional at what they do, despite the fact that their fund size is enormous. And I would never tell them— I would never tell a prospective LP, if you had access to those funds, not to invest there, right? But that's the exception, not the rule. And I think that there are really exciting opportunities happening with those smaller funds and earlier fund iterations. Even for some of the larger organizations that operate as a fund of funds, though, their hands are tied from a structural constraint as well, right? They have raised larger funds, and writing smaller checks for them is outside of their portfolio construction. So it's difficult for them to do as well, just as it is from the institutions in which they may be raising capital.

Yeah.

And I think another piece of this too goes to the definition of emerging manager. Some are happy to support managers earlier in their journey, but fund ones just fall outside of a space in which they're comfortable doing diligence. There are— in order to diligence a manager that has a fairly nascent track record or is coming at it from an adjacent industry, it can be— it requires a lot more heavy lifting. Let's put it that way. It requires a lot of attention. Certainly more time. and perhaps a different approach in some cases. And it doesn't always fit the mold that many traditional LPs are used to looking at. And so as a result, it can be a space that feels as though they are unable to touch.

Okay. And yet the more recent research, I mean, it's great that we're starting to see research that says, hey, these first funds are doing really well. They're actually giving really good returns and they're backing some great Companies. So can you tell us more about your perspective on that? Because of course that feeds into why you exist.

No, absolutely. So we believe deeply that the smaller fund sizes, earlier fund iterations, and diverse partnerships are just so well positioned to outperform for a number of reasons, right? Oftentimes you're seeing managers coming with very deep industry expertise or a specific kind of strategy expertise. And With that, they have these exceptional networks where they can identify phenomenal deals, win those deals based on the expertise that they have, and provide really exceptional post-investment value add. It creates this flywheel, right, for them. And, you know, that, that's truly what you're looking for in that space, you know, taking that, that individual or that team's expertise and mapping it to the space in which they want to play and trying to assess how they can bubble to the top. You know, I think very early in companies' development, entrepreneurs are looking for folks that will roll up their sleeves, sit with them around the table, and help be an extension of that management team. And oftentimes you're finding these smaller funds and these earlier investors are more able to do that, more able to devote that time and that attention and have the expertise, very focused expertise to do that.

And I think my perception, certainly from having spoken to a couple of very, you know, fund 1, new emerging market managers, fund managers, is that they're hungrier, aren't they? They have so much more to prove, if you will, and they're like really, they're really hungry and they have to prove. So I think that there is an extra motivation. Again, not to say that in more mature funds they don't have that hunger, of course not. However, my perception is that certainly diverse emerging fund managers, they really have that extra hunger.

Yes. Yes. No, I think that's absolutely true. I mean, when you're starting a fund, it can be very similar to starting a business, right? It takes kind of a hungry, scrappy individual. They're building their own firm as they're building a company. So that definitely is a personality trait and a similarity you see across many of the successful managers that are starting out. Then I'll say with these smaller funds, incentives are completely aligned, right? Depending on how small that fund size is, unfortunately, sometimes those fees aren't enough to pay those managers well at all, but I'll set that point aside. Their financial performance of that fund is dependent upon the carry, and that's where they will earn their significant money themselves. And with some of these larger funds, you know, not saying that they don't work hard, they absolutely do. But in some cases, you do see those incentives misaligned, right? The management fees are so large that the prospect of carry in the future isn't always such a significant driver. In some cases, certainly not in all, but you just see that incentive alignment so much stronger with those smaller funds and earlier fund iterations.

And so I'd love you to kind of explain a little bit more about what impact do you want to achieve with Recast Capital? What is it like really that you want to change?

Yeah, sure. So, I mean, first and foremost, we are absolutely hunting for returns. So we are definitely that returns-first strategy, but thankfully we are doing it in a way that we think is really moving the needle for the industry. You know, we, we want to support more diverse partnerships because we believe the advantage that they have in the market, that diversity of lived experience, that diversity of perspective just generates different and in some cases better deal flow, makes for better investment decision-making amongst that team, and can oftentimes lead to better outcomes because of that post-investment support you can provide from those different perspectives. So we believe deeply that, you know, we want to shine a light on those managers that are doing this exceptional work that perhaps are falling under the radar of, as you mentioned earlier, some of the institutions that aren't typically playing in this space or are playing, but just not necessarily in the bucket of more diverse teams. So to the extent that we can move the needle there and shine more light on these managers, give them the visibility they deserve, we would love to. Secondly, look, the nature of any fund of funds unfortunately is limited slots, right? You can only invest in so many managers.

Yeah.

And at one point, my co-founder and I looked each other in the eye because we do believe so deeply in trying to move this needle and said, hey, are we really doing enough to do that? Are we actually going to achieve what we hope to? And the answer, very frankly, early on was no. How can we do more? And the thought was, can we productize the support that we offer the managers and the fund of funds anyway, right? And offer it to more folks to accelerate the success of more managers in market. And that's actually how the educational program was born in our— in this quest for creating more impact in the venture industry. There are exceptional opportunities that we won't have the ability to invest in or are very early in their journey, and we have an opportunity to build a relationship with them and leverage our institutional expertise to help them hopefully build their firms and accelerate their success. So interesting you asked the question because the enablement program was born out of us forcing ourselves to really ask that question as well. I love it.

So tell us more about the enablement program.

Sure. Yeah. So we— it's a cohort-based model where essentially we bring in, you know, roughly 12 to 15 managers at a time for 12 weeks twice a year. And we cover topics that we believe are foundational to a successful fundraise. You know, we don't go soup to nuts in the process of building your firm because we believe that fundraising tends to be challenge 1, 2, and 3 for most emerging managers. So we felt that given our expertise, we could really focus there and talk about the elements in and around it. So as an example, fund market fit, differentiation, how to manage your fundraising process, how to get and build out that network, and how to leverage your peers. A big part of what we're doing is how to build a peer network for our managers as well to lean on, because that can be such a such a powerful tool. In addition to that, we also offer executive coaching to our managers because we believe that that's such a unique lever for their success in market as well. We were very lucky to be able to work with Pivotal Ventures. They're— with their support—

Yeah.

Pivotal Ventures being Melinda French Gates' incubation company. We're excited to have them on and as a generous sponsor. So that's been an exciting addition this year as well. We also believe that a big differentiator of the program is it being tuition-free.

Yeah, that was my question, is like, do I have to pay for that? That is huge because you've just answered the question. How are you different from the ones that are set up, you know, with the big business schools, the big Ivy Leagues that already exist out there, particularly in the US?

Yes, yeah, so we, you know, we believe that we wanted this program to be as inclusive as possible. So, you know, no referrals required in order to apply, though it is an application-based process, of course. You know, we felt that many folks that are beginning this journey, and certainly those that are maybe coming from adjacent industries, they may have a day job still, right?

Yeah.

Like, and they may be working on this fun concept, nights and weekends before they feel like it's at a point where they can kind of let go of that current, that current salary. And so we didn't feel that we wanted to add more burden to charging a higher price. And in fact, in some, in some instances, it felt like it was almost predatory, which I know is a very strong word, but to ask the most from those that need the support the most, it seemed, seemed a little bit of misalignment from the value set of Recast. So that's tuition-free is something that we feel very strongly about. And And intend to keep it that way. And so excited to keep the— to really have that be a differentiator for us. But, you know, I would say that we're not— we don't compare ourselves to some of the bigger, you know, business school programs in any way, and certainly not to Kauffman as an example. I'm a proud Kauffman fellow. You know, they cover so much over a few years. You know, we are a scalpel where they are a hammer, right? And so we are hoping to serve a very specific need in the market and proud to kind of stand alongside them and others that are doing really interesting work in the emerging manager education space. I love it.

And I mean, I'd love you to kind of share with us a little bit more about your view of diversity and like the type when you're talking about diverse fund managers. So what do you mean by diverse? You've talked about difference of experience and expertise, but beyond that, I mean, what is your definition of the type of diverse fund manager that you want to help?

Sure, yeah. So in the, in the fund of funds, we are looking at teams that have at least one member of senior investment team, or in most cases general partner, that identifies as an underrepresented minority. And because many of these firms are started by 1 to 3 individuals, that's a very considerable percentage of the team.

Mm-hmm.

You know, from an educational standpoint, from our enablement program, the way we talk about that is You know, in the application, we, we say that, hey, we're hoping to kind of invest in and support those managers that kind of reflect the diversity we want to see within the broader venture industry. So like, tell us about how your firm kind of fits that bucket. And, you know, there's— there are elements of individuals' diversity, lived experience, perspective outside of their demographics that we 100% want to offer, because all of that is important to building those those different perspectives. Not all of it's always something that folks are comfortable talking about openly or putting on an application. And so we felt it very important to have that kind of free space to talk about it in a way you're comfortable. And then, of course, on the fund-to-fund side, we just believe deeply in, as we build relationships with the managers, some of those elements will become more apparent over time, some earlier, some later. And again, it's not the type of thing that we're going to ask anybody to disclose if they're uncomfortable doing so. So we're trying to keep an open aperture because we do believe that there are a number of different ways of building a diverse team, but underrepresented minority felt like the right place to start.

And so we've— the questions are flying in, so I want to make sure that we start to answer those that are live with us as well as other ones. Okay, so Carlos here from Mexico, he wants to know, What's your involvement and value add with the funds that you back? So we're talking about fund-to-fund strategy. Let's go on that side.

Sure, sure. From the fund-to-funds, I think our value add is we hope to invest early and with conviction so that— so often in some managers' journeys, kind of getting those first few dominoes to fall is so challenging. And we hope to kind of be that catalyst for the raise. And as I alluded to earlier, kind of being that shine a light on these managers so that our friends in the LP community that do invest directly, right, that don't need an intermediary like Recast to invest here, can feel excited about coming alongside us, right? We, my co-founder and I, are institutionally trained. So we're obviously doing the hard work, the heavy lifting to get excited about these folks. And so I think we are a trusted entity in this space, and so are excited to kind of be that shining light for folks. So that would certainly be number one. Number 2, I would say, is given our institutional backgrounds, we want to help support these managers building the foundations of their firms as a way to really set them up for success in the future, because they want to build enduring franchises, right? They want to be the blue-chip names of tomorrow. And, you know, the sooner we can help them do that, the better. And so we want to lean in with them. And, you know, not to say that every manager that comes to us doesn't already have that, because they do. We're investing in funds 1, 2, and 3, right? So obviously earlier fund iterations may need a little bit more support than others that are further along. But it's something that we're happy to do when it's appropriate and when it's needed.

Love it. So Sasha is saying that you're very inspiring. And she— I'm not sure if Sasha— sometimes it's a male or a female name, so I may be wrong. So if it's a male, I'm sorry, I don't know. Sasha, tell me if you're a man or a woman. But Sasha wants to know about your enablement program. How diverse is it, and is it still harder for women to get into the industry?

Well, so from our enablement program, because of that question I mentioned earlier, and because those that apply that have kind of done some digging on our website, kind of know us and our DNA and what we're looking for and what we value and whatnot, we actually tend to have very diverse classes. So as an example, we have, of our first 2 cohorts that have gone through the program, I would say, I think just over 75% of them included at least one general partner that identified as a woman.

Mm-hmm.

Which we're very proud of. And I think over 50% have included at least one general partner of color. So we're very proud of those stats. And I'm sorry, the second question.

So the second— hold on a second. Is it still harder for women to get into the industry and to become fund managers?

Unfortunately, yes.

Yeah.

Definitely, yes. I think that there are still many biases that are present. And it can be challenging for women to overcome them in market. But certainly, we're encouraged to see more and more investors— and by that, I'm sorry, more and more limited partners, I should say specifically—

Yeah.

Kind of believing the data that shows that it's these diverse teams that are outperforming diverse partnerships. And so they're getting a lot more attention. There's still a lot of work to do, still a lot of work to do. I mean, I think in the establishment, I think I'm broader venture industry, right? There was a recent study done by Deloitte and MVCA that showed that I think it was only 14% of general partnerships included a female, included a Black general partner or Hispanic general partner. I mean, those numbers are abysmal. I mean, we have a lot of work to do.

There's a lot of work. And I know that in the past, we've always seen statistics from different people, from Crunchbase, PitchBook, et cetera, saying that like there's about between 8% and 14% of venture capitalists in the world are women, let alone other types of minorities, although women are a majority, which makes me laugh when we are put into this minority category. I'm like, have you looked outside?

I know. I do believe it's getting more attention, which we're pleased to see. And certainly, I mean, I think the similar stats within the emerging manager community aren't as solid. I mean, our firm is tracking over 1,500 managers today, but In an early study that we did when we were first starting the firm, we looked at almost 800 managers that fit kind of this emerging micro category and found that 52% of them had at least one member of the senior investment team, so in most cases general partner, that identified as a woman, was Black, or was Hispanic. So if you're looking to move the needle, this is certainly a place to be playing.

So this is like a key question. Where do you where do you scout for these emerging fund managers? Because often people are kind of shy to say, actually, that's really what I wanna do. Or they kind of keep mum, they're in stealth mode for quite a while until they've actually kind of done the work. In which case it's a pity because they could have benefited from your enablement program and/or your contacts on the LP side. So how do you find your potential 1,500?

Well, we have a number of ways in which we do that. First and foremost, we do want to be as accessible as possible. So if you are an emerging manager and you want to make sure we know about you, there is a kind of GP intake form on our website that we pull from, which is fantastic. Obviously, folks are more than welcome to reach out to myself and to reach out to my co-founder directly as well. Happy to share my email address with the group. And, you know, there— so we, again, want to be as accessible as possible. But obviously our sourcing strategies come from more proactive outreach as well than just kind of our inbound that we receive.

Yeah.

It comes from a few different ways. I would say, you know, we— my co-founder Courtney and I both come from institutional backgrounds, so we do have relationships with managers at established firms and those that are, you know, both at a mid-level and a senior level. And so We are often an early call when folks are considering doing their own thing, spinning out, and/or leaving their perhaps principal role to go do their own thing as a partner, put out their flag. So that's always exciting conversations for us to have and be supportive. We certainly leverage the enablement program and that application process for us to build relationships with folks. And that's so critical for us too, because that's a wonderful way for us to meet folks that are coming from outside of the venture bubble. That's important, right? Not everyone that starts a venture fund or should start a venture fund is coming from within the bubble in which, you know, we, we are in today.

Yeah.

In fact, that's what's needed in order to kind of push our industry forward. So that's a huge part of it too. And then I'll say, you know, we have a— from our existing network and those coming in from outside of it, there's, you know, the rockstar operator angel groups that, you know, are, are really looking to kind of step away from their their day-to-day operator role and leverage their industry expertise to start their own thing. So there's a number of different channels that we leverage outside of just, of course, our relationships with other organizations that care deeply about diversity as well, where we hope to be a referral back and forth. And then of course, the LP community. As I mentioned, there's LPs that we support because they don't typically do this themselves. And then there's limited partners that do do this themselves. And I think we try to be a support them as well. And likewise, they'll share interesting opportunities with us that we see. So we try and sit somewhere squarely in the middle to have our hands all over. Not to say we cover everything, but we certainly try.

I love it. There's a question from Shebin who wants to know about the enablement program. What's been the average fund size for funds coming— for folks coming in? And do you have any plans to venture out of the US?

So they are correct in saying that we are today US-focused. Crawl before you walk before you run, right? I would say on average, it probably— we tally folks in kind of a few different buckets. I'd say on average, those first funds land in that kind of $10 to $30 million range.

Yeah.

Some certainly have come through that have been doing sub-$10 million, but that tends to be kind of the most. And we are open to— it's not just fund ones, happy to have those that are kind of pursuing fund 2 as well, or even a bit beyond. We're not going to tell any emerging manager that they're too far along for support from a group like ours if they feel like they could benefit from it. But more often than not, you're seeing it's kind of a typical fund 1 raising $10 to $30 million.

Yeah. Which, and again, first of all, it's so interesting because in Europe, that kind of like, wow, that would be a fund 2 for some people if they were lucky to be getting into that bracket. Because fund 1 tends to be your micro funds of the $1 to $5 million.

Oh, sure.

We're so far behind. It's like all the money's in the US. So we need to try and get our funds bigger.

I know. And I will say that there have certainly been those that have been sub-$10 million in the program as well. You know, part of it too is the relationships that we bring in and the folks that, you know, the networks we want to build for those that are going through the program. So when we bring in our friends from the LP and GP community, they're excited to support managers that are smaller in size as well. But very small funds of about $1 million or so, those are difficult for this group of LPs to support in the sense that we're talking about institutional funds, 1, 2, and 3, really raising outside capital where you're building your fund administration and whatnot, really setting the foundation. So I think that that's where you tend to see a little bit of the difference between kind of the $1 million fund and then maybe jumping into a program like ours. We just want to be helping those that we think that they're— we can— what we're building is best suited for their needs.

Which is also like coming to the point of the diversity of your emerging fund managers and whom you're targeting. You know, given it is harder for Black fund managers to raise money, Right? It is harder for Hispanic and women fund managers to raise money. So it's like, I think it's in my mind, just listening to you, it is fantastic for them to go through your enablement program as to also build the relationships with you. And so that you can help them maybe kind of leverage your networks to try and increase their initial fund size. Because often, I'm sure you see a lot, I kind of tend to see $5 million, First fund, sometimes, you know, there's these magic numbers. It's like when, like female founders, when they're raising money all over the world, I see them pitching for $500K as the start. I'm like, for their seed round. I'm like, why $500K? It doesn't matter which bloody country in the world, they just kind of focus on them. Like, no. So similar for, you know, emerging fund managers who maybe come from different backgrounds and don't have access to big checks. simply because of other reasons that are outside of their control. You know, I think that's why it's very important to have your program as well, to, you know, help them to build their networks and give them access, as you keep saying, shining the light on them to your LPs, to all of your greater networks and the bigger bubble.

No, I appreciate that. I appreciate that. And yes, you know, we do aspire to be, you know, supporting international funds. At some point as well. Like I mentioned before, kind of crawl before you walk before you run. We've seen a ton of interest internationally and we would love to support it.

I mean, you can see the thread. I don't know if you can see the questions. They're like, second this question, when are you coming? Like, it's like Africa and all over, Russia. Like, when are you going international? Have you any kind of indication? Like, are we talking 3, 5 years? If I had to kind of Pin you a little bit to that. No, no commitment, no commitment. No, no, let's be careful.

No, no, no, no. So I think, um, it's a great question, one that we're wrestling with right now. If it were 3 years from now, I'd be disappointed, meaning I would hope it would happen sooner than that.

So it's interesting. So, um, Olga is saying that it would be great to have you at Transact Global. And Olga, she needs to tell us a bit more about that because that is a great female emerging managers community, but it's international.

So have you heard of them? Yes, big fans. You know, know the founders there, Ginny, Soraya, and the team that's put that together. They're amazing.

So you know them, so it's all good. So it's good, Olga, I'm doing a bit of advertising then for Transact Global.

No, no, no. And they deserve that visibility. So excited about what they've built. And, um, you know, I've had the pleasure of speaking to that group before, hope to continue to support their efforts and, um, just love what they're doing for the community.

And it's good, she makes another really good point that like, of course, when you're thinking of international, the obvious contenders, Ireland. Yay, I'm Irish, so I'm very happy to say Ireland, of course, until they start changing the tax laws because you know what's happening there enough. But Ireland, Switzerland, Singapore, Luxembourg. Yeah, of course, you know all that. But like, yeah.

We know the opportunity is immense. We're very excited to tackle it.

So, Egul is asking you to share the link to the enablement program if you want to share it in the chat box. They want to make sure that they get that. And I wanted to share some other questions that we had from people who, when they registered, that they sent in. So, okay, there's one question, I think, from a founder. So she wanted to know, do VCs allocate funds to diverse teams, then find the startup, or is there one pot that everyone is pitching for? I'm not sure I understand the question, but there you go.

I'm happy to— yeah, happy to try. So I think there are venture funds that are building their thesis around backing diverse founders because they believe, just as they believe the data that shows that it's those diverse teams that are going to outperform as well. And so we've seen more and more venture funds, frankly, that are focusing on more diverse founders specifically. That being said, I think more diverse GPs tend to back more diverse founders anyway because of—

Yeah.

network effects and whatnot. And so we are excited just to see that it's just more diverse partnerships broadly that tend to have more diverse portfolios. So that's been exciting to see. But it varies. It varies depending on the fund that you're talking about.

Okay. So Carlos from Mexico, who asked you a question earlier, he has an interesting question. So he's saying, with firms like Greylock, raising $500 million to invest at seed stage. How would you advise emerging fund managers to navigate the current seed funding landscape?

Sure. So we focus quite a bit on the pre-seed, seed space. We believe it's a very attractive place to be investing for a number of reasons. But, you know, it's exciting to see larger groups kind of building these, such as Greylock and others that have kind of put the stake in the ground to say, hey, we want to do more in seed because we're excited about it. I think that there's seed and then there's seed. I mean, some of these nomenclature almost doesn't matter anymore, right? Because they're like, oh, what used to be Series A is now seed, and what seed is now pre-seed. And so it's this kind of moving target always, right? But I think at the end of the day, it does go back to some of the points I made earlier in the sense that What you need to be is truly differentiated for an entrepreneur to appreciate your value. There are big brands out there that some entrepreneurs gravitate towards because they believe that that's extremely important, and in some cases it absolutely is. I think that in other instances, outside of the brand, it's less about the brand, it's more about the general partner, right?

Yeah.

And it's more about that person's expertise, the one that is going to be working with that entrepreneur day in, day out at the earliest stages of that company's development. And so I think that how you compete is proving why you matter, proving why entrepreneurs need you around the table. And your brand will come from that.

I love that. Which is like, which is, it's interesting. I just wrote a blog post to help female founders to kind of understand what do investors look for. And I'm like, that was one of the things like prove why you matter. Why you? Why now? Why should your company even exist? What problem are you trying to solve? But I think it's also interesting to remind everybody that, yeah, that's the same type of question that emerging fund managers need to be able to justify, you know, very much so.

Yeah.

So we have some specific questions like, what are the top skills or experience that a female investor needs to have to raise her first VC fund? So now we're getting into the practicalities of fundraising. And I know you've said in the enablement, it's like, we don't focus more on that, we focus more on other side. But if you had to give some key tips to that investor, what would you say?

Key skills. Well, at the end of the day, I think LPs are looking for true differentiation. So when you look at the emerging manager space today broadly, we're tracking 1,500 funds and that's predominantly US. That's not even global, right? And that's a sea of sameness, right? Everything feels the same. Everything looks the same. And what LPs like us are looking for is contrarian, right? And obviously we spend our cycles trying to figure out if it's contrarian good or contrarian bad. Sometimes they can look very similar, but they, you know, that's really what you need, right? That's, you know, you want those opportunities that are pushing the envelope. That's what venture is meant for. It's that risk-return profile, right? pushing the envelope. And so assuming that the story itself that you tell is differentiated, the skillset you bring to the table maps to that investment thesis, right? Then you're off to the right start, right? It's so much about how your experiences make sense for the strategy you're trying to employ. It is not the other way around, right? You don't want to make yourself fit a mold. You want to figure out what your superpower is and develop your thesis around it. And if it's one that is truly differentiated and tells a really great story, I think you'll find LPs that want to lean into it.

I love it. And it's interesting because we had Mac Conway from Rare Breed Ventures on the podcast a few months ago. And of course, it's Catherine Finney who are doing— and they're like the First Time Funds doing an amazing job. And Mac was saying, like, how he had had— he's a very diverse experience as well, and how he got into it. But, you know, he was sharing on the podcast how, you know, again, a bit like your journey, how he kind of got into— he was investing in early-stage startups for another entity.

Right.

And that's where he got his chops. And he said, that's the space I want to support. And, you know, there's a gaping need for pre-seed. So he focuses on pre-seed funding at Rarebreed. But, you know, pre-seed Black— and Black founders are founders who are serving Black communities. That's the type. And who are innovative, who are on the edge. And he was giving us some amazing stories of the types of founders that are very different. And as you know, Catherine Finney is also, like, targeting a very different type of founder. So I I love the way you say, don't fit the mold. Figure out what's your superpower, focus on that, but, you know, have your strategy and then build the rest around it. Don't be kind of trying to look around for the strategy. I think that's really, really good advice.

Thank you. Yeah, we've seen it play out the other way too many times and it doesn't work, unfortunately. Fitting the mold doesn't work. No one should try and fit the mold.

No, it doesn't.

That's kind of the reason why we found ourselves in this mess in venture.

It is, it is, and it's interesting. I mean, it's exactly that, and all this bloody pattern recognition and all the bias and so on that comes in, all right? It is because of the mold, and we just kind of need to stick to those boxes because we think we need to. But honestly, I think we're, we're all at a tipping point, uh, you know, things are really changing, thank goodness, and it's about damn time, as Arlen would say. She's behind me.

Yes.

It is about damn time. It really, really is. So how can investors, like, how can LPs reach out to you and say, hey, okay, I want your help in investing in different funds? How can they reach out to you? You mentioned that you have a GP forum, but then your LPs who may not know you and are discovering you here, how do they reach out to you?

Oh, I mean, anyone that's interested in kind of learning a little bit more about our business is welcome to reach out by email or on the website. We do have a contact form There's a newsletter we have that folks can sign up for to kind of hear from us periodically of what we're focusing on, what we're doing. Always delighted. As I mentioned earlier, we're a bit of a tweener, right? We sit between those that kind of do this themselves and those that, that don't. And we have unique ways of supporting both, both groups. So to the extent that we can be an interesting resource for either group, happy to.

And I just want to say to those who are with us live, keep Send your questions in, guys, because we've, you know, we still have Sarah for a couple more minutes, so keep them coming. Now, I want to— let's focus on the female founders, because that's our focus, is to help get more female founders funded. So we're downstream for you.

Yeah.

What specific, like, what general advice would you give to female founders just who are on the raise? Just general advice. I know that's not your But you've been there, you understand this game. So give them some general advice.

Yeah, no, happy to. You know, I think first and foremost, I would say trust your gut. Trust your gut. Unfortunately, there are still— there's still a lot of work to be done in this space. There are still bad actors. If something doesn't feel right, or there's misalignment, Trust your gut.

Yeah.

Authenticity matters, not only for you in sharing your story with venture funds that may invest in you, but the other way around. You know, find investors that you believe are authentic, want to support you in what you're building, you know, are true believers. And because you will need that kind of support around you, because building a company is not easy.

Yeah.

And you'll need those that can kind of help you ride those waves over time. Build a community. I mean, obviously everything that, Anne, you're doing here and kind of bringing folks together, there are so many interesting groups that, you know, we mentioned Transact Global, but there are other organizations like Women in VC and others that kind of bring together women investors, but also founders as well. Have that trusted kind of group of Kind of your personal advisors that you can lean on as you go through this process. It is not easy. You do need that support from your peers too.

Yeah.

I think you'll find that other female investors and entrepreneurs are very collaborative, want to support one another, and frankly can be phenomenal sources of information of types of investors to target and stay away from.

Yeah.

Right? I mean, it's the most important resource you have is time. Be as efficient as possible and focus it on those that are actually out in the world being a net positive and, you know, kind of deserve to be in the room with you. Not everybody does.

I love it. And any specific don'ts? So you're saying like, of course, trust your gut, build a community, authenticity matters, and any key don'ts to female founders who are on the rise?

Oh man, I mean, that's a tough one. I mean, I want to say don't give up.

That's a good one. You know, I really want to say don't give up.

It is difficult. It is difficult. Another don't: don't shy away from cold outreach.

Yeah.

You know, not everyone comes in this business with these immense networks, right? Not everyone has a Rolodex of venture capitalists to reach out to. Not everyone has a Rolodex of limited partners to reach out to. Please, you know, don't shy away from cold outreach. It can be extremely useful when done appropriately. And then, you know, the last thing I would say, again, probably true for both buckets, again, investor and entrepreneur, don't underestimate the power of product-market fit. And by that, I mean what it is you're building, your company, and what an investor is looking for. There has to be a fit there. Again, it goes back to being efficient with your time.

Yeah.

Understand the folks that you're reaching out to.

Yes.

Understand what they're looking for, what they need. Certainly same is true for a fund manager. Understand what an LP can and can't do, what they do like, what they don't like. It can be a better use of your time.

Well, I'm glad you said that because that was my next question. It was to come around to the, what would be your advice to emerging fund managers? You've given them loads of advice here, but if you had to kind of summarize it, what would the key dos and don'ts be?

For fund managers, again, I think product-market fit is just so important. Definitely want to double down on that. Differentiation is so important in order to stand out and get the attention you deserve. Storytelling is so important to help LPs understand why you're the right person to be doing the strategy or chasing the strategy that you are.

Mm-hmm.

And then community, again, it's so important. You need to have those peers that you can lean on because this is not an easy business. Particularly for those coming from outside of the industry, which is the most— those are the most important people coming into the business, right? They need to, in order to be successful, need support. So I would say, you know, build that community. And obviously Recast is a community that, you know, we're very proud of and would love to find ways to support you all on this call. You know, but there are certainly others like it out there. There, you know, Transact Global is one that was mentioned. There's Emerging Manager Circle, a group run by Equal Ventures that is wonderful. There's other educational programs out there. We have a resource library on our website. It's completely free, accessible to anybody. In it is kind of some of those educational programs, links to them so you can find it, other helpful resources in building your firm. Our goal there was just to kind of democratize access to information as it hopefully create more of a level playing field here to start. So please check that out too. Hopefully you'll find something that's helpful to your unique situation outside of the advice that I've provided. I love it.

And that was Sasha's question. So I've just, I've just added it in straight into the link to your resource library into, into the chat box.

Oh, great.

So okay, I'm just double checking any of the extra last questions that we had. There was a question about investing in ESG and open-ended funds. Like, what's your take on that?

Well, ESG, I think, is a huge kind of differentiator. And interestingly, I think that more and more managers today are raising funds that are purpose-driven, focused on solving some of the biggest challenges that we have today, whether they be environmental or social or otherwise. And obviously, we fall in that bucket to some extent.

Yeah.

Again, I use this term about us a lot. We're a tweener. We're returns first, but we do hope to be moving the needle with diversity in our industry. And so I think that there are really great opportunities out there that do both. I don't like the notion that anything ESG-related or impact-related is automatically concessionary. That's extremely frustrating to me. That's not the truth. There's— it's certainly true for some, like some, some programmatic dollars, catalytic dollars, they're not meant for market rate return. But very often ESG can be used to your advantage. and to create better outcomes. So I personally think that it's an important piece of this broader puzzle. So I think very highly of it. By open-ended funds, I'm assuming that we're referring to perhaps rolling funds, or—

Yeah, I think so. That's the— yeah.

I think it's a unique strategy. It's one that I think many family offices, high net worth individuals are attracted to for a number of reasons. For folks that aren't familiar with it, it's a product by AngelList. You can see it on their website to learn more. There can be some challenges for institutions in accessing funds like that, just given the different constructs, a little bit of a different animal. So a little bit outside of what some institutional investors can support, but I think it's a really great instrument, a wonderful tool in the toolkit for emerging managers. And and one to take a look at and debate whether that's the right approach. Perhaps that's the right strategy to leverage than a traditional fund, but only you can answer that.

I love it. And I know that there's one amazing rolling fund manager and fund in Europe called 2050 that has been created by Marie Eklund. And she's always been ahead of the curve. And it's like, I do think it's going to be a new mini trend. Obviously not everybody's going to be able to do that. It takes a specific risk profile to want to invest in that type of fund, as you've clearly said. And I do think it's one of those trends for the future. So as we wrap up, how can our listeners best connect with you, Sarah? What's your preferred way of them, you know, getting in touch with you?

Sure. Yes. I mean, please feel free to reach out to me on Twitter. That's a great way to stay in touch with us. LinkedIn is certainly another way. And then, of course, feel free to reach out on our Contact Us page on our website. And, you know, certainly feel free to reach out to us directly via email as well. Happy to share my email here. It's sarah@recastcapital.com. Probably an easy one to guess as well.

That's right.

But, you know, we'd look forward to hearing from any one of you. I know it's hard work, all that you're doing, building your funds, building your companies. I couldn't do what I do without you. So thank you for all that you do. I love it.

And so how can we, how can we put more fun into funding, Sarah?

More fun into funding, my goodness. Let's just turn it all on its head. Let's just turn it all on its head. Okay. You know, we, I think there's a really unique opportunity here for venture to continue leading the way. Innovation economy is powered by all the wonderful minds in this room. I can't think of anything I would rather be doing. So for me, the fun is in funding every day. I love what I do. I hope you all feel the same way. I love it.

So listen, for those of you live, please tell Sarah what you thought of this webinar. We've already got Anne who said amazing webinar, kudos to Sarah, and like, you know, it's amazing. So give her some love, let us know in the chat, just give her a couple, a little bit of feedback. It's always nice to give feedback to our guests live. There we go, Sarah is saying absolutely amazing, thank you so much, wonderful, thanks Thanks. Sorry, Sasha, who said that. So thank you so much, Sarah. We're going to wrap up here. We're very grateful to your time. Very insightful, says Egu, and she's in Turkey, so she's like, you know, also think of Turkey in Europe for the future. Madeleine was saying that you're very inspiring, eye-opening. So yeah, thanks so much. You've got great feedback there. Really grateful to you, Sarah. So for those of you listening, This podcast episode will be coming out very shortly. You're going to catch it on Investor Podcast, also on our YouTube channel. So you're going to have many ways to hear Sarah again. We'll do a blog post. And then next week, we'll be having another funding conversation, this time with a founder who's used innovation vouchers and innovation partnerships with university as a way of funding. So that's a very interesting one with Sarah Hayes-Colleton. So stay tuned for next week and check us out on social to learn more. Thank you, Sarah. Thank you so much for your time today and all your insights, and continued good luck and success to Recast Capital. It's very important what you're doing. We are honored to have you on this show, and I'd like to give you a, let's say, an appointment for this time next year, or certainly in X number of months. We want to touch base with you and see how everything is going and how you're moving the needle forward with Recast Capital.

Well, thank you so much for having me. I really enjoyed the conversation and I would love to be back. Thank you.

Great. We'll make it a date. Thanks everybody. Thanks, Sarah. Have a great day. Bye. Thank you for listening to InvestHer Podcast. Don't miss more great funding tips and insights by subscribing to the podcast on Apple or your favorite podcast host. And while you're there, I'd love you to rate and review the show. We'd love to hear from you. So if you'd like to send in some questions, interact with our guests, or suggest other great people we should feature, join our community on the Flick InvestHer group or send us a message on investherpodcast.com. Want more great resources for female founders about funding? Check out our InvestHer Academy at academy.globalinvesther.com. I'm Anne Ravanona and look forward to having you with us again for our next episode. Let's put the fun into funding and get more women entrepreneurs funded.