S4E2: Sydney Sykes of BLCK VC on transforming VC and building diverse communities for future founders & funders

Welcome to The Room Podcast. My name is Madison McIlwain and I'm a partner for seed stage investments at DefyVC.

And I'm Claudia Laurie, a co-founder of Pryve. We're a founder and funder who are in the room where it happens. If you're a first-time founder or an emerging venture capitalist, we're glad you found us. We share inspiring, authentic, and insightful stories from founders, funders, and operators who have been in the room and provide tactical feedback on their early aha moments and learnings along the way. Before we dive into this week's episode, we have a short message from our partners.

Support for The Room comes from Silicon Valley Bank.

What's next? What if? Now what?

Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't, which could be why 50% of US-based venture-backed tech and life science companies bank with SVB. Learn more at svb.com/next.

Silicon Valley Bank, built for what's next.

Cooley is a global law firm built around startups and venture capital. The firm has been devoted to entrepreneurs and investors, partnering with both to transform breakthrough ideas into successful companies. Cooley works with thousands of entrepreneurs and newly formed companies to ensure that they are structured for growth and long-term success. Since 2005, Cooley has been ranked the number 1 most active law firm. Representing VC-backed companies going public. Learn more about the firm at cooley.com and also at cooleygo.com, Cooley's award-winning free legal resource for startups.

Thank you so much, Sydney, for joining us in the room today.

Thank you for having me. I'm glad to be able to join.

Today you are a co-founder and co-CEO of the nonprofit Black VC, and you're currently doing your MBA at Stanford GSB. Where did you start your career out of undergrad?

So I grew up on the East Coast and went to Harvard undergrad, was very much in the investment banking and consulting cycle, ended up not being as interested in that world as I thought I would be when I entered college, but still loved the idea of helping companies and being involved in fast-growing industries. So really with that in mind, stumbled upon venture capital when I was in my senior year in the, the midst of trying to figure out what I really wanted to do in life. And my conversations were VC— with VCs were just so interesting that it made me feel like that was what I had to do. Started just cold emailing, hustling, trying to get connections to VCs, and actually started out my career as the first analyst at a large VC called NEA. So I actually started out my career in VC, then tried a bunch of different things— startups, mom-and-pop business— all the while doing some angel investing. And most recently was really trying to figure out before business school what I wanted to do long term, because there were so many things I had tried out and decided to come to business school to do that journey. And part of what I wanted to do during business school was spend more time investing, spend more time thinking about industries. And through that investing, through angel investing and scout investing for Lightspeed, really realized that was what I wanted to do more long term. So now I'm in the process of figuring out what is the right firm for me. And I'm at a firm right now called Wave Capital for the summer. Which just following the path of good people I wanted to spend time with, and hopefully that will be the perfect fit.

It's clear that you've had an interest in venture and knew that's where your path was taking you from a pretty early point in your career. But did you at any point think that you would found a nonprofit?

Not at all. Part of the reason I wanted to be a VC was because being a founder looks grueling. It is stressful, it is hard. I also never thought of myself as being that kind of charismatic founder that everyone thought was such a monolithic personality back in late 2010s. And on top of that, I never had any interest really in nonprofits. I thought they did great work. I thought the best asset I could be to nonprofits was to support other people who wanted to start them or to give them money or to support causes I found out there. So on both ends of being a founder and being involved in a nonprofit, I never thought that was my path. Truly, it came from my own experience of being in venture capital, seeing how homogeneous it was, how few Black people there was, how much the industry affected our world and who the leaders of the US were. And so I created the org to support myself as a Black investor, to support other Black investors who are my friends. And I almost wanna say it spiraled out of control into a nonprofit. It really started as a group to support Black investors. And that led to this organization that's focused on increasing Black representation, empowering Black investors, increasing the number of dollars held by Black investors. But that happened in a way I never expected.

I love the unexpected founder journey here. We talk a lot about this. Some people believe they were born to be founders. They've been doing this since they were kids, and, and others stumble into it because there's a problem that needs to be solved in the world and they realize they're the only person to solve it. And feels like that's what happened with you and, and BlackVC. You touched on some of the, the work that you're doing, but could you take a step back and share with our listeners what is the mission behind BlackVC?

BlackVC is a nonprofit focused on empowering and supporting Black venture capitalists and increasing representation in our industry. That looks like a lot of things. On the increasing representation side, that means we're out there supporting incredible Black talent to help them break into the industry, get the skills and the network they need to succeed. And then on On the empowering side, it means we're creating communities and networks of Black investors. We're also making the introductions that are crucially important to Black VCs getting jobs, finding deals, getting promoted. And it also means we're supporting firms that are trying to become more diverse, that are trying to hire Black talent, but have for years and years not had those networks. They just haven't. It's a historically homogenous industry that frankly, a lot of people woke up one day and said, we need to change this. and we're trying to help those firms change as well.

That's incredible. We're excited to chat a bit more about where you see continued opportunities for people to step up and put their money where their mouth is on those statements. But it's incredibly complex. I call it a three-legged stool ecosystem, which we all live in. There's the venture capitalists, there's the LPs, limited partners, and then the entrepreneur. How is Black VC engaging within the community and helping to open doors and bring those three parts together?

That three-leg stool structure is something that made the formation of Black VC really difficult. Because on the one hand, I think there's a huge immediate problem with the fact that hundreds of billions of dollars in venture capital alone go into these entrepreneur-started companies, these venture-backed companies, and very few of the founders who receive that money are Black. So there's problem one. You need more Black founders receiving more dollars so they can start companies so that they can spur our economy and make the, the future leaders of large companies look more diverse. Then you have the challenge of limited partners. That is a vast amount of wealth going into venture capital firms, private equity firms, all these other capital distribution tools. And that group is also very homogeneous, very white. and then you have the venture capitalists who get their money from the LPs and then give that money because of all this business knowledge to the entrepreneurs. So if you try to just fix the entrepreneur side, you're gonna constantly face the issue that the people who are deciding to give entrepreneurs money are very homogenous. If you try to fix the LP side, you're then very far upstream and there could be this hypothetical situation where A lot of Black people don't even know that entrepreneurship is a path. And then if you try to just fix the VC side of things, you still have Black VCs fighting and clawing to get money from these LPs who are sometimes hesitant to invest in a type of entrepreneur they'd never seen before. You truly can't attack one of these issues in isolation. On the other hand, if you try to attack all three of these issues, you will have no expertise and you really won't get as far. So for us, we said we need to focus on our little corner of the world. Neither of us, neither me nor my co-founder Fred, were entrepreneurs. Neither of us are LPs. We knew the VC world. We knew we could make a difference supporting investors and increasing the number of Black investors. And so we ultimately decided we had to focus there, even though there's these areas that require so much attention and are equally important. So the answer to your question is really, it was a sacrifice. It was not because we didn't care about those issues. It was because we felt like we couldn't appropriately tackle them. With the skillset and the bandwidth and the experiences we had had to date.

[Speaker:MADISON_MCILWAIN] A true founder who says, wow, there's so many problems I'd love to solve, but we have to go narrow and start here, start with what we know and hopefully make a difference and be able to disrupt beyond the corner of our world. So that makes a lot of sense and definitely gives a good picture for anyone who's thinking, how do I start a nonprofit? How do I build a change from where I'm sitting in my world? It's clear that you can take your lived experiences and start small, and when something resonates, it grows. How many people are in the Black VC community today?

That is a great question. There are three stools again to the Black VC community. You have Black investors, so actively investing in the venture capital space, self-identify as African American, you, or Black actually. You have the allies, so generally investors or entrepreneurs or people who want to support the mission that we have who are involved either through mentorship or events or something else. And then you have the broader community, which is this group of people who find what we do as people trying to increase diversity and working in the venture capital space, they find that relevant. So those are a lot of Black entrepreneurs and LPs and these other types of investors. Who find what we're working important. We focus our energy, our efforts, our events on Black investors, and that group is about 270 people today. The ally community is another couple hundred people, but in aggregate, the entire Black VC community, the number of people we touch is really close to about 13,000 people overall and about 1,000 on a weekly basis. So it's a large community because a lot of people understand how prevalent these issues are.

I can say I did not know it was quite that big. How long have you guys been doing this?

We have— Black VC has existed since the end of 2017, I believe.

I hope there's a, like, Black VC summit coming to us soon so we can meet all these incredible people in person and continue seeing in real life the growth as we come out of COVID of what that has meant for, for you all in the community. Before we talk more about like your perspective on what's going in the broad, broader venture ecosystem, I am curious what tips you would give to someone who maybe is you 3, 4 years ago, who is thinking about joining venture, perhaps they're an underrepresented individual in the community and thinking through what it could look like for them to join VC. What are your tips for them?

Such a good question. I think I have two broader tips. So one is If you are interested in venture capital or any specific industry that feels difficult to get into, that feels exclusive, I say just go after it. Just hustle after it. You might not always succeed, but there are so many venture firms out there and there are so many perspectives that are needed in this industry that there's a strong chance that someone will recognize how powerful your point of view is. And maybe it's not your ideal venture capital firm, or maybe you're becoming a scout first, or if you can, becoming an angel investor first. There is space for every perspective in this industry. So just hustle and put in the work and keep going after it until it happens, which I know is so hard, but that's my advice there. My second perspective is everything you do, do it with an understanding of what your goal is. If you want to be a venture capitalist, think about why. Is it because you want to support companies? Is it because you want to make money? Is it because you want to be part of the future of industries? Just always be checking in with yourself as to, is this meeting up with those goals? Am I actually having as big of an impact as I wanted to have on companies? Or did I even care about that side of this industry? Do I care about it as much as I thought I would? Because then if you're always cognizant of why you're doing something, of what your broader goals are, you can focus on actually being happy and actually figuring out what is the right place for you to be rather than blindly following some of these goals you set for yourself at different points in your life.

That is advice that even resonates from the founder perspective, and I think a lot of that can be applied to founders who are listening to this podcast who are trying to figure out their path and their entrance into the tech industry and becoming a founder. I think understanding what makes you happy and not blindly following Yes, it's time to fundraise. Like you have to fundraise, or this is what a fundraise looks like, and this is what product market fit looks like, or this is the type of product you should be building, I think is incredibly important and can't be underscored enough.

To that point, Claudia, actually a lot of the conversation I'll have with founders is why venture? There are so many ways to start a business. I think venture can be a great way if you wanna build next biggest company. Or if you wanna have the largest impact on a really capital-intensive space, venture is really great for that. If you want to be your own boss and you want to start a company, or you wanna pursue some dream or some product you've always cared about, venture doesn't need to be the only way to do that. And sometimes it's not even the best way to do that. So I always check in with founders and say, make sure that this is the way you wanna do it, because if you're a smart founder, there are 100 ways to build a company.

Totally. And this is a topic we've touched on a couple of times where in order to get venture funding, you really need to be signing up for some pretty significant financial returns. Otherwise, it just totally doesn't make sense. And I think there's a few folks that I've chatted to who are founders who now have taken venture funding, but that's 6 years later after they're hitting multiple millions in revenue, and they were able to do that without the funding. And then there are also family businesses that put together an incredible business and don't take funding at all because that's not really the lifestyle and the outcome that they're signing up for. Not to say that those are not founders and incredibly successful ones. Uh, one of the topics we kind of like to touch on, because I feel like a lot of, uh, the founders on this podcast have had experience in this space, is e-commerce and, and what's happening next there. And I was very excited to see that you had spent time at Dolls Kill, which is a venture-backed Gen Z retailer. I'm always curious as a founder in kind of the e-commerce enablement space, what are some opportunities you saw in e-commerce during your time there and working for a brand?

E-commerce is incredibly interesting because it is such a large industry that in some ways is so tech-forward and in other ways is so antiquated. You have companies like— so many startups that are coming up, and I could name 5— Rothys, Untucket. There's so many who are just even in the D2C space. And then you talk about payments and platforms. There's so many startups there. And then you also have these incredibly large players who have been around for generations. And even for some of the startups and for many of those antiquated players, the tools they're using, they've been using for years and years. And the, the process of change can be pretty slow. But on the other hand, like I said, fashion is so fast moving and e-commerce is so fast moving. The trend I was most interested in that really drew me towards Dolls Kill is the belief I have that niche customers, niche businesses are the way of the future, not to be too dramatic. But I think there's a lot of these businesses in the past that have really focused on how do we make everyone want to buy our thing? How do we make sure that this is the most beautiful brand and it's so aspirational? And there's something great about that, but there's also, I think, something really powerful right now about meeting a customer and serving all of their needs. And so Dolls Kill was really focused on who is that fashion-forward misfit who really spends a lot of time trying to find the perfect outfit, doesn't want to wear just what every person next to her is wearing, and how do we meet all of her needs? And Dolls Kill has done an incredible job at that and producing brands that really keep— find a niche customer and giving her what she wants. So that is something I wanna see a lot more of, is entrepreneurs who know exactly who their customer is. They figure out all of her needs. They are the business that if you ask a customer, what brand do you wanna work for? Or what brand could you not live without? Or what, uh, company most resonates with you? They say, 10 outta 10, this company didn't even need to think about it. I think the Other trend that I'm really excited about is how do we really get data-enabled and tech-enabled in terms of predicting sales? On the one hand, we've talked a lot about reducing returns, but most businesses, especially startups, are not thinking about reducing returns as much as they're thinking about increasing sales and predicting sales. How do I figure out what this customer wants? How do I— judge by what she's bought in the past in order to, to tailor what I should make for her or sell to her or market to her in the future. And that system is still really antiquated. It's designer-based. And in terms of marketing, it's the same as it's always been— clicks and, and eye contact. It's not that sophisticated yet. So I'm really looking for startups that are going down that path and, and making e-com much more tech-enabled.

I was smiling because I deeply feel a lot of the points that you just made. A big plus one to, to that being a massive area of opportunity in e-commerce.

Great. I'm glad I'm not just one of those investors preaching theory and I actually am talking to what's out there.

Just because I'm curious, as we're talking, it's fun because first of all, we're all women on the call today and all of us have worked at brands. I worked at Gap, Claudia had interned at Calvin Klein, Sydney, you were at Dolls Kill, and now we've all pivoted our careers out of the brand world. But I still see a lot of young founders in —female founders starting brands, direct-to-consumer, Shopify-enabled. And there's been this conversation happening in the landscape that venture backers aren't as hot on investing in D2C brands. This trend has been trending downward, and I don't know if VC is meant to always back a brand. And so it's just a question I have, and I'm curious, Sydney, what you think about the relationship going forward coming out of this heyday of direct-to-consumer for the venture investor and the brand founder?

I think that's a really good point, and I personally have gone through a lot of ups and downs with direct-to-consumer and brands in terms of venture capital. Brands— direct-to-consumer is a model that can be done incredibly well without any venture capital funding. And I think there— a few years ago, we were seeing this trend of just a lot of brands raising venture capital money because they could. And some of those brands have done really well. I think people started to get sour on those ideas because it seemed like there was a cap. And people also started to get sour on those ideas because in a lot of ways anyone can make an e-com brand and anyone can make an e-com brand that looks pretty good. But these brands can also be really incredible businesses that can get really early traction and then be a very sound bet. There are quite a few, I think, especially coming out of the pandemic, maybe it was the venture market tightening, or maybe it was people leaving their jobs, or maybe it was the increase in consumer product consumption. But I have seen really incredibly strong brands launching in the past 6 or so months that are taking a unique approach to being an e-com brand. They're not just saying, look, I have customers, You should give me money so I can pour it into marketing so I can have more customers. They're saying there is no one else doing what I'm doing or servicing the customer that I'm servicing. And that is the reason that this brand can grow really large. There's this company that I recently made a scout investment into called Apothecary, which is really focused on being a plant-based pharmacy. And yes, they are a brand. And if you go on their website, you'll be like, this company is so beautiful. Look at their boxes, look at their bottling, look at the Instagram influencer ability of this product. But you'll also say, there's really no one else doing plant-based pharmaceuticals in this way. There's really no one catering to my healthcare in a way that represents what I wanna put in my body and the way I actually consume these days and the way I think about health and food and diet. And that's a classic example of a company that, yes, that is direct-to-consumer, but it's also new age consumption. It's also a new angle on e-commerce. So So that's a pivot that I'm really excited about is brands being really thoughtful about what's different about what I'm doing and why is this gonna take off in a way that works for venture capital.

It's interesting because I feel like there is this tension between the future of DDC potentially being more and more specialized and targeted for specific needs and specific users, but also the question mark around TAM. So it is awesome to hear that really the way that we think about D2C and e-commerce and retail is evolving, and it's not just necessarily brands selling product to solve a surface-level need, but there's deeper networks and synergies and platforms that can be built behind brands. We chatted about e-commerce a little bit. Would love to take a level up and hear if you are watching or focused on any trends or spaces. More broadly as an investor?

Again, I've always been interested, or my longer-term area of interest has been e-commerce brands that really understand their customer. Again, focusing on that kind of niche brand or company that really knows their audience. So going away from that a little bit, I have also been really interested for a long time in tools to start and help small businesses, especially in terms of getting off the ground, financing, and tools for small one-person entrepreneurs, so sole enterprises or freelance workers. I think that economy has grown even larger during the pandemic, but the trend has always been that there are gonna be more and more small businesses and freelancers and one to two person companies. And on top of that, the expansion you're seeing in e-commerce brands, brands that we've been talking about, those companies need to be fueled by new technology and by new platforms and services. So that's something I'm really excited about. I'm also really curious about, but still trying to figure this area out more. I'm curious about tools for e-commerce, tools for shopping. What does that look like? People have shopped in the same way online for so long. I think Honey has been an innovation, but what's going to really change the way I shop online? What's going to create a universal cart or what's going to change the my shopping strategy so that I'm on my phone more, or so that you, you hear about Asia using WeChat and tools constantly from their phone to purchase. The US is not like that. We are so slow to changing our shopping habits. And I think there's a company out there, and I have no idea what it does, that will change the way that we shop.

Thank you for sharing your insights into kind of what's next and what we should be paying attention to. Moving outside of e-commerce a little bit and more just in terms of some challenges that I'm seeing myself as a founder who's now hiring, I'm often curious about hiring on the venture side and the importance of making sure that you have diversity in hiring. As a Black woman in venture, you are a minority twice over. And so how would you encourage traditional funds who perhaps have not historically hired for diversity to create more equity and spaces and opportunity?

That is a great question. I think in some ways it's complicated, but in other ways I think you can boil it down to something really simple. The first answer to that question is this industry is dependent upon new perspectives. It's dependent upon unique ideas, and it's dependent upon bringing in new perspectives. If a venture capital firm continues to have the same perspectives for long periods of time, or doesn't bring in new networks, or doesn't bring in something that gives them a competitive advantage, that firm will fall behind. They will have lower returns. And that includes diversity. If a firm doesn't have diverse perspectives, they're missing a huge part of our ecosystem. They're also— if you don't have any Black investors, you are missing 15+% of consumers in our economy, not to mention the entrepreneurs that you're not relating to or understanding or communicating with. So I think there is a pure and simple business rationale for having a diverse fund that represents diverse perspectives. The second thing I will say to that is, okay, don't get overwhelmed by that. Start making moves. If you're hiring a firm, make sure you're leading a diverse process. If you're not currently hiring, you should be launching a scout fund that's more diverse, or you should be constantly bringing in diverse entrepreneurs and investors into your networks through events and dinners, or bringing them in as advisors or independent board members. It needs to be a constant move forward and a constant discussion that doesn't just happening when a firm is hiring.

Thank you so much for sharing that. It's something that we actively think about at my firm. And I think as the ecosystem continues to put more emphasis on diversity, whether it be in gender or race or life experience, all of our investments are going to do better over the long term. And that is my sincere hope and my sincere belief. And I think as the room, we are hopeful that through sharing stories like yours and insights that you're learning on the ground, is helpful for more and more people to feel emboldened to be able to do this and hopefully come knocking on all of our doors for jobs and for opportunities down the line. So thank you for sharing that, Sydney, and for all of the really exciting and awesome things that you have coming up. Is there anything you wanna plug, anything going on with BlackVC that our listeners should know about?

One, BlackVC is crazy hiring. We are looking just for smart people who are passionate about changing the landscape of venture capital or building out new and innovative nonprofits that work like startups. So please, if you are interested, take a look at our website for our jobs or email us at general@blackvc.com. I will also say we are excited to start doing some events, especially in person. We've been online for the past year and a half, and it's been incredible to reach so many people, but we're looking to get Black investors together. Yeah. If not in the room, then outside. So for Black investors, please keep updated on that and sign up for our newsletter. And then the last thing I'll say is I am still at my core very much an investor looking for exciting deals, pre-seed and seed, consumer and marketplaces and tools for small businesses. So always excited to meet with and, you know, hopefully invest in some great up-and-coming entrepreneurs.

Please come to Sydney for that. And then we'd love to lead your Series A over at DesignSafe.

That's a great setup. That's great. We got to do it.

Exactly. Sydney, it's been a pleasure. Our closing question is the same for all of our guests. Who is a woman in your life that has had a profound impact on you?

There are so many. The one I will just call out for today, because she's top of mind, is Sarah Kunst, who's— you might have had on this podcast. She's incredibly prolific as an investor as well as a content creator. She's awesome, smart. She's one of those people who will always pick up the phone when I call or text, and she will give me her full, honest, blunt, and unabashed opinion on whatever I need help with. So it's just incredible to have women like that in your life who are looking out for you and willing to be totally honest and helpful whenever you need it. So she's someone who I look up to and has been a huge influence on my life.

I'm a fangirl of Sarah as well, so that is very cool to hear. That she's a mentor to you. Sydney, thank you so much for the time today. We're really thrilled for all that's to come for you and the Black VC community and beyond. So thanks for taking the time.

Thank you so much, Madison. Thank you, Claudia. This has been an awesome conversation.

Thank you for listening to this episode of The Room Podcast. If you're new here, please subscribe, follow, write us a review, or DM us on social. We'd love to say hi. We've had some pretty incredible guests over the past 3 seasons, so go check them out. We'll be back next week, Tuesday, 10 AM Eastern, 7 AM Pacific. See you in the room.

All opinions expressed by Claudia Madison and podcast guests are solely their own opinions and do not reflect the opinion of The5AC. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

Support for The Room comes from Silicon Valley Bank.

What's next? What if? Now what?

Silicon Valley Bank understands these questions can keep founders up at night like Claudia. For over 35 years, Silicon Valley Bank has helped high-growth companies through scalable financial solutions, plus insights and expertise that many other banks just can't, which could be why 50% of US-based venture-backed Tech and life science companies bank with SVB. Learn more at svb.com/next. Silicon Valley Bank, built for what's next.

Cooley is a global law firm built around startups and venture capital. The firm has been devoted to entrepreneurs and investors, partnering with both to transform breakthrough ideas into successful companies. Cooley works with thousands of entrepreneurs and newly formed companies to ensure that they are structured for growth and long-term success. Since 2005, Cooley has been ranked the number one most active law firm representing VC-backed companies going public. Learn more about the firm at cooley.com and also at cooleygo.com, Cooley's award-winning free legal resource for startups.