Episode 1: Rashmi Gopinath on True Diversity in Investments and Startups

with Rashmi Gopinath and Kalin Kelly

December, 2019


Our first episode of Earnings features Rashmi Gopinath, Managing Director of M12, the investment arm of Microsoft, formerly Microsoft Ventures. Rashmi leads investments in enterprise software, cloud infrastructure, cybersecurity, devops, and AI/ML for M12 in the US, Canada, and India.

Rashmi has been recognized by Forbes as a female VC leader, received multiple awards as a business role model of the year for two consecutive years and has led an impressive 21 investments with 10 exits, including IPOs as well as acquisitions.

In this episode we cover

1.  How Rashmi got into Venture Capital (skip to 1:33) 

 

2.  How to succeed in Venture Capital as a female or as a female founder (skip to 4:03) 

 

3.  Finding and sourcing new investments (skip to 5:09) 

 

4.  Competitive edge to being a women in Venture Capital (skip to 8:00)

 

5.  Battle scars that make you successful (skip to 14:00)

 

6.  Shruti’s most memorable investment (skip to 15:20)

 

7.  Challenges of raising your own fund (skip to 16:06)

Highlights from the Episode

"It's important to understand why an entrepreneur is excited and passionate about a particular problem that they're looking to solve."

"Entrepreneurs need to go after big problems. There is still a big number of white spaces that exist out there that need to get solved."

"It's the tremendous amount of empathy that I have for founders. It's really easy to sit behind closed doors and advise companies on what they should do and what they shouldn't do. When you walked in their shoes and you've got those battle scars as well, they know I understand their journey."

"When you are going through the lows - you need a partner and that helps you figure it out instead of just pointing fingers. I got their back as an investor. " 

"One of the ways on how we can have more women on the founder and investor side is really being more thoughtful about building a truly diverse team. And it's not just diversity in gender and race, it's diversity in thought."

"We need diversity in backgrounds, diversity in experiences. It's really easy for everyone to go to those same schools for recruiting and go find people that have the same backgrounds as you, but as funds are starting to build their team, they really need to think outside the box and think about what perspectives they are missing as a team and how they can bring those folks in." 

"I want people to pay their success forward, and give opportunities to more females, think about adding more females into those decision making roles, both as CEOs and founders for our portfolio companies, but also on the GP and the partner side." 

"I was once told that I would never have an investment career. This was a time when I was an engineer and why I would never be good at that and why I'd never be able to do that. And coming from somebody who was several levels senior above me."
 
"Being able to be a good storyteller is crucial and it's critical to your success. That comes into play when you're fundraising, recruiting, building a team, selling the company or looking for a strategic exit." 

"I would say empathy is a great skill that I've seen leaders who I respect and people who've been successful have. They're not going to remember that they had this great pitch and this person gave me $10 million in funding. They're going to remember the positive experience of working with you." 

"Great leaders know when not to say anything and be good listeners."

Full Transcript 

Kalin:
Welcome in. This is earnings, a podcast exclusively highlighting the rare female voices and venture capital in Silicon Valley. I'm your host, Kalin Kelly, CEO and founder of Art and Armor, a one of a kind jewelry line investing net proceeds into female founders. Every episode is dedicated to sharing the rare voices of women in VC. To inspire the next generation of female CEOs and to highlight how we lead as examples of female investors in Silicon Valley, because we know that being strong is about wearing it and owning it. We're so thankful to Silicon Valley Bank for sharing the vision of female empowerment for the future generation of wealth.

Today we are joined by Rashmi Gopinath, managing director of M12 the investment arm of Microsoft, formerly Microsoft ventures. Rashmi leads investments in enterprise software, cloud infrastructure, cybersecurity, dev ops, AI and ML for M12 in the US, Canada and India. We begin every episode with earned highlights, praising accomplishments of each phenomenal woman we have here on the podcast.

Rashmi has been recognized by Forbes as a female VC leader, received multiple awards as a business role model of the year for two consecutive years. And has led an impressive 21 investments with 10 exits, including IPOs and acquisitions. Rashmi, thank you so much for sharing your voice with us today in the studio. We're so lucky to have you here.

Rashmi:
Well, thank you so much for having me. I'm super excited to be here and looking forward to sharing my journey and hopefully that can continue to inspire more females to get into VC careers as well. I'm sure it will.

Kalin:
So why don't we start off with, well, I know you have a very impressive background as an engineer. How did you find yourself in Venture Capital today? What led you here.

Rashmi:
I wish I could say it was all planned and charted, but it wasn't. Um, so I started off my career on the product side, built products for Oracle and GE at Oracle. I was building dev ops and database and analytics products and teeing those products out to market. Say Matt geo is building machine learning products specifically in the healthcare domain to predict patient analytics and to predict readmission rates and reduce Um, operational costs for hospitals and make care more uniform across different groups. It was fascinating. And, uh, at GE healthcare, one of the products that we were building was a new product that GE was looking to launch. And as a result of that, I was getting pulled into a lot of business and go to market decisions that on pricing and acquisitions and a customer targeting and messaging and I realized that I could get an a much accelerated path on the business side by getting a business school degree and so decided to get an MBA. Um, I have the option to either quit my job, go full time G Bay graciously offered to sponsor my education if I could stay with them during the time that I was getting my business school degree. So I decided to take that option. And I would say it was really in business school where I got exposed to a wide variety of business options beyond the product and the engineering side that I had exposure to most of my career up until that point, I had the opportunity to do a couple of internships. One was with a growth equity fund, one was with a private equity fund, and got really excited about the whole startup ecosystem and how startups are able to quickly and nimbly like build products and take products out to market that literally. Can change the world and to be a part of that journey and to bring in the expertise that I had accumulated up until that point on product and on business and on execution side, and help them realize their dreams. And as a result of that, return back significant amounts of capital, uh, through an investment strategy seem to be a great fit for what I was excited and passionate about and how I could really have. A much lasting impact as well in, in technology and an innovation. So that's how I ended up here.

Kalin:
Wow. What a unique experience. Just going off the quick and the nimble of each startup. And what would you say influences your position when addressing new investment opportunities?

Rashmi:
So I would say a few different things in general. Uh, one, this is, as investors, we're making huge, huge bets on the team. And so understanding why an entrepreneur is excited and passionate about a particular problem that they're looking to solve. And they all have multiple cushy alternative options that each one of them could be pursuing, but to give that up and go after this very new concept that they want to take into building a big company behind. One is is very scary, but two are the same time. It's very exciting if you can buy into that vision and kind of be part of that journey. So team, I would say it's definitely a huge part of what gets me excited. The second is going after the big problems, um, that are, I would say, still a number of white spaces that exist out there that need to get solved. That again. Not wanting to sound like motherhood and Apple pie, but truly can change the world. Um, if you think about the, the number of industries that are still significantly lagging behind in terms of technical adoption, where even small incremental changes, like bringing in technologies like machine learning or predictive analytics can drive significant automation. And as, as a result of that. Really helped change the way business was done or products were consumed. There's just so much potential in being able to do that. So going after those big, big market sizes, big problem sets, taking on big incumbents gets me really excited. And then third, I would say is on the product and the technology side. I still am a tech geek at heart. Um, I have to stop myself from getting too excited and going into the code when a company's invested.

Kalin:
I'm sure they wouldn't. Right?

Rashmi:
They wouldn't, but I think at some point I might be stepping on too many tellers. Um, so for me, being part of that and really seeing how rapidly technology is evolving, and even if you think about Hadoop, which only came into existence not more than eight tiers back as already legacy. So the pace at which things are changing and the pace at which new technology solutions are emerging as mind boggling, and to kind of be at that tip of the spear in terms of getting a bird's eye view into what is happening and what's changing. Is this really exciting. So I would say those three things get me very excited about new investments.

Kalin:
I love that you mentioned tip of the spear as Art and Armor. Very, very apropos. So I hear, I hear a lot about your background and to hear how excited you are about the future of technology. I'm so curious about what would you say is the unique strength that you bring to the table as a female GP, as a female VC to these teams, taking on those big challenges that you want to say.

Rashmi:
Absolutely. So I would say that. Um, my background is a little bit unique than most investor backgrounds. And even if I look within the funds that I have worked at, or the folks that have been on boards with, most folks, I would say come from a very typical investment banking, then moved into Venture Capital kind of background, or folks may come in directly from an operating side. I would say I had. The luxury of having an uncharted path is I built products, I took products to market, I have run businesses, I've run sales and go to market for startups. And now on the investment side, I kind of, I would say bring together a pretty nice mix of all of those skills. And so for my portfolio companies, if you ask my founders, I can dial up or dial down different aspects of those skill sets depending on what stages they're in. So for early stage startups, um, I'm talking more of the pre-seeder seed stage startups where they're still heads down into product building mode. I can tune in more of that product aspect. And how do you identify capabilities for an MVP product and what, how do you gauge customer demand and what are those first three customers that you need to and like how do you close those, those three deals?

Bringing that to bear is super helpful at that point. And then for my growth stage companies CD and beyond. It's really putting on my business development and go to market hat and identifying what are some inorganic ways and how we can really help accelerate the top line growth. And how do you make sure that your operational expenses are aligned with how you're growing. And so I would say it's different skills and different expertises is that I can tap into a different points in time that. Makes it a little bit unique. And for my technical founders, it's great because I speak the language and so they don't have to worry about bringing an investor on board who has no clue on what the product does, but is excited about the business metrics because we, we can talk in that language. We can talk about technical challenges, we can talk about what are some new strategies on the product side that they should consider and what features would appeal and would not appeal to a broader set of audience. So that I would say. Say definitely gets me fairly differentiated from most investors and on the table. And then the second I would say is, again, this though is a common thread between folks that have been operators in the past. Is the tremendous amount of empathy that you have for founders. It's, it's really easy to sit behind closed doors and advise companies on what they should do and what they shouldn't do. When you walked those, walked in their shoes and you've, you've got those battle scars as well, and you've made those mistakes too. It becomes a lot more relatable to the founders because. They see you as that, that safety net, if you will, where somebody understands your journey and somebody's been through that too. And when you're going through those lows is going to be a partner and help you get out of that and not just point fingers and like figure it out. Like, you know. What the next steps need to be.

Kalin:
No, you're an absolute partner in that journey. I exactly. They're very lucky to have you.

Rashmi:
Oh, I'm lucky to be working with them too. 

Kalin:
I think for all the portfolio companies listening, she's very lucky and very happy to be working with you.

Um, my other question, I think, you know, stemming from this background that you have and looking at the future of venture capital, the industry as a whole. It's evolving hopefully, right?

With more women at the table over the last decade, we're still seeing the same kind of statistics. The percentages have not increased to where we would ideally like them to be.

However, if there was some kind of piece of advice that you could actually lend to more women to follow in your footsteps, becoming a rare female GP, what kind of advice would you give them?

Rashmi:
It's interesting. We were in fact just, um, talking about this a few weeks back as we just launched our second female founder competition. Um, a few weeks back. Yeah. So one of the statistics that we were talking about on why the number for female founded companies is that low, is that, the number of females in those decision making roles at VC funds is really, really low. It's less than 2% of female check writers and VC funds worldwide are females. And so I think the, the one of the ways in how that number can change both on the founders side as well as on the VC side, is really being more thoughtful about building a truly diverse team. And it's not just diversity in gender diversity and race, it's diversity in thought, it's diversity in backgrounds, diversity in experiences. It's really easy for everyone to kind of go to those same schools for recruiting and go find people that have the same backgrounds as you, but as funds are starting to build their team, really think outside the box and think about what perspectives are we missing as a team and how do we bring those folks in?

One thing that I try to do a lot myself and I want people to pay that forward as well, is how do you ensure that there are more females, um, in those associate and the senior associate and the principal roles, and how do you give them visibility and how do you give them experiences that are outside of the defined roles and responsibilities that really positioned themselves well to move onto that partner role, to move onto that GP role. And I think the onus is on all of us because we all have 500 things to do but between those 500 things, just take a look around ourselves and see who are the other folks on the team that we should be doing more for. And especially as we think about adding more females into those decision making roles, both as CEOs and founders for our portfolio companies, but also on the GP and the partners side is how do we give opportunities to more females that, um, that should be doing that. Even if we think about portfolio companies that have had exits, um, those founders have the ability to now become check  writers either for themselves as angel investors or come into another VC fund. And how do you encourage them to think that? Because it's not, it's not a natural step that anybody would think is, that's the next thing I want to do, but why not?

And if you've been in that journey, you've seen a successful exit. Um. If you've got that, I would say that the gut sense to figure it out on how do you identify the next entrepreneur that has the vision to do something and how do you help them become successful in doing that and sharing your journey and sharing your perspectives in those becomes really helpful.

Kalin:
That gut sense leads me into the next question. Do you go with your gut feelings in terms of investment opportunity? Have you faced any walls within that structure of going with your gut feeling on something?

Rashmi:
So that would say that, personally for me, it's a balance of both gut feeling and, um, of a rational metrics driven person. And that comes from the engineering training that I have. Of course. Um, and so for me, uh, I would say that. It historically, it has been a mix of both. If I think about my evolution on the venture side. When I started off nine years back, I would say that it was definitely a hundred percent rational metrics driven. Um, if the numbers make sense, that's the company to bet on kind of a, um, an evaluation process versus now. I would say that having had more experience and maturity and, um, having been in 21 deals there, there comes. I would say a point where the gut sense becomes as strong as, uh, as the rational side as well. Of course, this data that's backing that, that gut feel as well. But if you think about, take a step back and think about as investors, what do we have to do. We're funding these companies in most cases, like pretty early on at the seed or series A or the series B stage driven, and then we're partnering with these founders for the next 7 to 10 years, which is many cases. I mean, it's as long as a marriage would last. And so really identifying if this is the team and this is the company that you can work with for the next seven to next decade, there's no, there's no going out. Like if you are joining a company thinks on work or do you always have the option to leave and go do something else, but you can't do that with a portfolio company. And so that's what I would say that gut field really comes into play is, is this a team that you can work with? Are these people that you can get along with? You bind to their vision and you're there to support them and partner with them for the next 10 plus years?

Um, that I would say combined with all of the, the numbers and the metrics on the business side that gets everyone excited about the deal is I think what gets an investor at the end of the day to say yes to a deal.

 

Kalin:
Very well said. So in terms of walls, I think a lot of the women that listen to this podcast A, are super excited to hear that there are women sharing their stories in Venture Capital that have been rare and have been unique and have been so accomplished in what they're doing. They also really want to know what are the walls that you've faced as a female in Venture Capital. Of course, you can highlight any obstacle that you've overcome that you've pushed through, that you've really battled with, but in a way that you've already, you've already come on, on top, you're here. 

Is there any story that in particular that sounds something that would be inspirational for women to just keep pushing through to get into venture capital?

Rashmi:
I would say that that are way too many, but, um, a few that have been, I would say life changing or directional in some cases. Um. There was one where, um, I was told that I was too aggressive in my current job and then things that I had put down for myself in terms of what I saw myself in the next, uh, thing. I was 24 to 36 months. And I had written down a list of things that I wanted to do, including an investing career as an option. And I was told why I would never do that. And this was a time when I was an engineer and why I would never be good at that and why I'd never be able to do that. And coming from somebody who was several levels senior than me. At some point, you do think that maybe that person's right, maybe that person knows because I mean they're that much more experience, but at the same time doing a little bit of introspection and reflection and there's really nobody that can tell any one of us on what we can or we can't do. And knowing your own capabilities and what gets you excited and passionate about things. Um, and figuring out a way to get there. I think if each one of us has that drive, we will eventually get there. And so the one piece of advice that I give, um, to everyone, including like folks who work for me is don't let me tell you what you can or cannot do. It's for you to chart your own path. And figured out who are those mentors and who are those sponsors. I actually liked the word sponsor a lot better than a mentor is because a mentor gives you advice and guidance in a certain way, but as sponsor ensures that you get there and so finding they're more invested in you and they have an action to take as well. It's not just showing you the pattern for you to figure it out, but. Really identify who are those sponsors who are really going to have your back and who will get you there and making sure that you're working with them to figure out how to get there. Um, and the best thing I would say is have great role models, and there are already people doing the things that you wish you would be doing and who you want to be when you grow up. And so if you can find a way to get to them, in many cases, they're more than happy to share, and they're more than happy to pay it forward and give back too. And I've had the, I would say the, um, the amazing, uh, fortunate thing of being in the presence of many of such sponsors. And. I would say those have definitely helped me, um, in, in my journey and helped me get here. And in many cases, those are people I still reach back out to when I'm bouncing ideas and when I want to take that detour and that different path. Um, those are the folks who will give me a pretty. Um, an adulterated advice. It's, it's not going to be sugarcoated. It's not going to be, um, told in any politically correct way. It's, it's given to me as us, which I really appreciate. Um, I remember when I was at Intel Capitol. And trying to figure out what I wanted to do next. I could stay in winter for a long time, or I would say one of the things that I had observed for myself was I had never been at a startup before Intel. I was at Oracle and GE. And the investors around the table that had been operators in the past had that extra credibility and that extra trust with the founders. And that's something that I believe would make me a better investor. And I decided to get that experience and it was a very risky path to let go of my winter path that I was on and take that intentional detour for the next four years on the startup side. And still believe that I could come back and get back into venture because again, it's a, it's not a job where jobs are ever posted and it's not one where you can really time when you can get back into it or not. But knowing that I had built enough into, um, enough trust into the network that I'd built up until that point, that these new experiences would help me become a better investor. And that I had the ability and the confidence to get back into it when I knew the time was right. That I would say took, um, a fair amount of thinking. It took a lot of, I would say, these brainstorming sessions with my sponsors and mentors and coming back through that. I would say that that experience has definitely been the most transformational in my winter experience and the value that I can now provide back to my portfolio companies and to my founders. Is, I would say a thousand times better than what I had when I was at, until like prior to my operating experience. 

Kalin:
Wow. Are there any specific sponsors of yours that you'd like to personally think that you have the opportunity to on the Earnings Podcast?

Rashmi:
There's a lot of people. Um. But yeah, I mean, a few that I would definitely call out is the folks at Intel capital that have been my mentors and sponsors and those dead mash talker who's one of the GPs at Battery Ventures, uh, can Canada fund and Rob regard to where the GPs at Sorenson Ventures. These are folks who I started my venture career with and I learned the ropes of the trade from them and they were kind enough to. Not surely, I would say box me into any particular slots or things because I was just getting started off, but I have the ability to push my boundaries as much as I wanted to. I'm back at my dream days bolster wall, who was the VP of engineering for GE was the one who really pushed me into thinking about a business school degree and why that would be. Be the right thing to do at that point, and why G would be supportive and I could just go do whatever I chose to do after that. Um, so yeah, there's, there's too many people. I'm gonna miss a lot of names, but yeah, those folks have been, they've been really instrumental in my journey.

Kalin:
It sounds like it, it sounds like you've had a lot of amazing opportunities in the last 9 years. That's. It's very profound. I'm, I'm thinking about what has been the biggest learnings for you as you're sharing all of your stories specifically in leadership.

And these sponsorships that you're talking about, your portfolio companies, is there three or are there three core elements that you would say you've witnessed in your portfolio? Companies that highlight leadership capabilities that you look for in future follow on or follow up investments?

Rashmi:
Absolutely. So if I look back at my portfolio companies and I look at The CEOs or the founding team members that have had, I would say, the biggest successes and, um, the best execution that I've seen till date. I would say a few traits really stand out. One is, um, really having the ability to sell a good story. And that comes into play when you're fundraising. That comes into play when you're recruiting and building a team that comes into play when you're, um, selling the company and looking for a strategic exit, sort of an IPL, and being able to very concisely communicate what the product does without getting too technical or too deep in the weeds, um, and being able to both go into that 50,000 foot level, but then dive down into that 50 foot level when you have to is a great skill to have. So being able to be a good story teller, I think is crucial and it's critical to succeed. Um, as a VC, as a, as a founder, as anybody, I would say in any professional setting.

Kalin:
Um, the second class is what you're saying.

Rashmi:
I don't know if classes would be the right way, but again, this is where. You can watch people. Um, as, I mean, if you've got like role models of people who you really admire from a communication standpoint, again, watch them and you can start picking out like. Tiny nuggets, what works really well for them, and try and incorporate and inculcate into what you're doing and get feedback from, from folks, and test it out and see. And obviously you have to do things that match your style so you can't be somebody else. But at the same time, you can maybe tweak how you're communicating or change the messaging in a certain way and see what, what resonates and what sticks. Um, but yeah, storytelling ability. Uh, the second I would say is definitely on the empathy side. And this again, goes into, VCs as it goes into startup founders, it's, it's how do you, how do you attract and retain the best talent at the end of the day? I think. What people remember the most is the experience that they've had with you. They're not going to remember, I closest $5 million deal three quarters back. They're not going to remember that I, um, had this great pitch and this person gave me $10 million in funding. Well, they're going to remember is what was their experience in working with you. And if that experience is positive, and if that experience was create, they will be your spokespeople and they will make sure that you get that, um, the visibility and the awareness or whatever it is that you need to succeed. But doing that without the expectation of getting something back under done as as critical. So I would say empathy is, is again, a great skill that I've seen leaders who I respect and people who've been successful, like consistently demonstrate when nobody's watching. And that's, that's important too, is you're not just doing it to kind of be in the limelight. Exactly. You're doing it because that's what you do. Right. Um, so that, that I would say is the second, um, most important skill as a leader. And then, um, the third I would say is, um. Knowing when to be quiet. And, um, this is, I would say not a very obvious one because again, we expect leaders to always be vocal and always talk about, um, you know, their thoughts in a variety of different topics. But I would say having great listening skills and knowing when it is okay to speak and when it's just best to. To not say anything. I mean, just because you don't have to say something just for the sake of seeing something. And this I would say is commonly what we see in board meetings where everybody wants to get their voice heard and everybody wants to say something. But, um, at the end of the day, if whatever you have to contribute is not going to add to the net value of the discussion or the meeting that you're in, um, you don't have to say anything. And that, I would say shows you. Even as a better leader and as a, as a more experienced and mature person than the person who may have too much to say. Um, so I would say that's another skill that I have seen with, uh, with great leaders is, um. Knowing when not to say anything and being good listeners.

Kalin:
Well, I think everyone is listening right now, so everyone's a great listener at this moment in time sharing these stories with us. So thank you. I think we'll close out with the most memorable investment you've made.

Rashmi:
Um, each one of them. It's like asking me to pick my favorite child. Please don't do belts. No. Each one of them. 

Kalin:
Maybe most memorable moment you've had with one of your favorite investments.

Rashmi:
Um, so I'm going to talk about one that, um, is closest to heart for me. And this is because, uh, the company that I invested in, they are building the exact product that I was building when I was at GE healthcare. And we did not quite succeed at doing that. So for me, it was redemption. Um, and almost DataRobot was, so this is a healthcare deal that, uh, I did earlier this year. Uh, the company's called Innovator. They provide a digital health platform that aggregates data from a variety of different sources and provides the analytics on top of it to ensure a value based care and to ensure that, um, the care coordination across different groups is done in a seamless and effective way. So going after, really the big challenge of healthcare is fragmented. It's broken. And how do you fix it? Uh, obviously they're not looking to boil the ocean and do everything, but, um, bringing significant savings into the healthcare system and providing a level of visibility that did not exist before. Um, the team I would say is one, if the. Um, best hustling teams I have ever seen. It's a first time founding team. Uh, super young. Um, the founder is under 30 years of age, but the level of maturity and experience that they bring in building a team and recruiting the best of the best from the healthcare world. I would say it's completely unheard of. And every quarter when I look at the kind of logos that they are able to land, um, in an industry that is extremely slow to move, for me, that's always surprising. But at the same time, I know there's this, I would say 200% effort that's going behind it to make that happen. Um, so I'm really excited about the team. The investment syndicate is create, uh, the challenge that they're going after is big. And there's also the big, I would say, societal impact of what they're doing is just beyond, I mean, there's obviously the money-making aspect that gets investors excited, but beyond that, it's really. Making an impact on the healthcare system that we know needs a big overhaul and how this company that started off in this very tiny origins back in India moved to the States and now have established themselves as a market leader here, how it can really make a difference. I think that as investors, we don't get to do that too often, so I get really excited about that.

Kalin:

So hustle hard and work even harder.

Well, it sounds like you've chosen a lot of amazing portfolio companies based on your ethics, your resources, your due diligence, and quite frankly, your gut. Thank you so much for being here on the Earnings Podcast.
It's been a delight and hopefully we'll hear from you again soon.

Rashmi:
Absolutely. It's been a delightful being here on the platform and talking to you and I'm excited about the initiative that you have. I definitely think that we need more female VC voices to be heard, um, and anything that I can do and help towards that. I'm excited about that.