Sep 21, 2018, 11:00 AM ETConversation, Fireside Chat, Interview

A Conversation with Aileen Lee - Moderated by Geoff Ralston

Grew up as a first-generation Chinese immigrant in New Jersey; her family owned a restaurant, instilling an entrepreneurial mindset early on.
Attended MIT and previously worked in investment banking before living in China for a year to teach English and study the language.
Developed an interest in consumer branding in the pre-internet era by manually researching companies via library magazines (Fast Company, Inc.) and phone books.
Hired summers at Odwalla and The North Face, which she now views as early "growth companies."
Joined Gap in 1999 to lead their online store (Gap.com), recognizing the .com boom while colleagues hesitated.
Moved to Kleiner Perkins after suggesting they acquire Amazon; the firm rejected the idea fearing it would "screw up our multiple."
Worked at Kleiner Perkins for 13 years, eventually partnering with John Doerr and managing investments in Google and Amazon.
Left Kleiner Perkins for two years to serve as CEO of RMG, a digital out-of-home ad media company, to gain operating experience.
Raised a $20 million Series B at RMG in 2007 (later recognized as a Series A), survived the 2008 downturn by laying off half the team, and acquired competitors before returning to Kleiner.
Founded Cowboy Ventures after realizing the importance of "operating experience" for giving advice to startup CEOs.
Previously served as a Series A and Series B investor before shifting to seed-stage investing, which allows for working with raw, less-defined situations.

Defines an entrepreneur as "who does more than anyone thought possible with less than anyone thought possible," a trait she associates with immigrants.
Advocates for an empathetic, "missionary" approach in venture capital, believing investors should believe in founders and help them evolve rather than just auditing performance.
Notes that while "mercenary" (cold, results-driven) investors can succeed, empathy and the ability to believe in potential are key traits of the best investors.
Emphasizes that investors evaluate founders on their long-term ability to hire and lead, not just short-term execution.
States that the only thing that matters to investors is the future; the present is merely an indicator of future potential.
Highlights the importance of "lead qualification" in sales, warning founders not to mistake high meeting volume for valid progress if leads are not truly closable.
Argues that founders must understand VC math: institutional funds typically need a few "10x" or "100x" winners (unicorns) to offset zeros and achieve a 4x fund return.
Distinguishes between seed funds (which can be returned with a $400M exit if they own 10%) and larger Series A funds (which often require an $8B+ company to return a $500M+ fund).
Recommends that founders practice their pitch relentlessly, treating it like code iteration by testing it with "off-Broadway" audiences (friends, family) before approaching top-tier VCs.

Storytelling is a critical skill for fundraising, recruiting, and selling, requiring founders to articulate a journey from "rags to riches" with a clear upward arc.
Advises founders to start their pitch with a Team Slide, detailing why the specific founders are the right people to solve the problem.
Requires a Problem Slide that quantifies the market size; investors look for addressable markets of $5B–$10B to ensure potential for hundreds of millions in revenue.
Expects the Product/Solution Slide to demonstrate a 10x improvement over existing solutions; a 1-2x difference is rarely enough to disrupt habits.
Demands Honesty in the Competitive Landscape, warning against hand-waving competitors as "stupid"; transparency builds trust.
Recommends a Financial Plan covering a three-year horizon, detailing top-line growth, margins, and specific spend allocations (marketing vs. R&D).
Suggests a Summary Slide at the beginning and end to reinforce the core narrative ("tell them what you tell them, then tell them what you told them").
Advises against using different caps for different investors in the same round, as it creates immediate friction and damages long-term relationships.
Recommends seed-stage budgets focus heavily on team and technology, with minimal spending on customer acquisition for hardware or AI startups in early stages.

Coined the term "Unicorn" to describe privately held startups worth over $1 billion; the term replaced a cumbersome description because it felt magical and special.
Her analysis of unicorns (companies <10 years old, >$1B valuation) revealed contrarian findings:
- Successful founders in the prior decade were typically in their 30s, not 20s; age 30+ is common for enterprise startups.
- The vast majority had co-founders; solo founders face significantly higher hurdles.
- Most founders had existing connections (colleagues, roommates, alumni) rather than meeting on "blind dates."
Acknowledges gender bias in fundraising, noting studies where women received less funding than men despite identical pitch scripts.
Critiques the industry for over-relying on Stanford/Harvard networks, citing a lack of diversity in venture capital that leads to missed opportunities.
Founded All Raise, a non-profit accelerating success for women in tech (founders, employees, investors), and promotes Founders for Change to encourage public commitments to diversity.
Attributes the 84% valuation gap for women-founded companies to both investor bias and a potential need for better coaching on storytelling and pitching.

Reference Checks: Founders should reference-check investors as rigorously as investors check founders to ensure a healthy, long-term partnership.
Non-Traditional Founders: Non-traditional backgrounds are an asset; founders should highlight their "hustle," problem-solving grit, and unique insights rather than traditional pedigree.
Valuation Caps: Founders should budget for 20–30% total dilution over multiple rounds and avoid accepting the first offer if they have leverage.
Cold Intros: While warm intros are helpful filters, seed firms regularly accept cold emails; the quality of the market insight in the email is the primary differentiator.
Investor-Founder Alignment: Investors and founders share the goal of conserving cash to build a Minimum Viable Product (MVP) and get market feedback, rather than spending heavily on unproven features.