Insights from LPs Committed to Diversity and Inclusion

First Republic Bank
August 18, 2020

Listen to insights from an expert panel as they discuss the outlook as a Limited Partner (LP) in a post-COVID world, their perspective on leveling the playing field for racial and gender equality, and ways LPs and investors can help dismantle systemic inequity.


  • Leena Bhutta , Senior Investment Officer, Doris Duke Charitable Foundation
  • Alisa Mall, Managing Director of Investments, Carnegie Corporation
  • Lo Toney, Founding Managing Partner, Plexo Capital
  • Anu Duggal, Partner, Female Founders Fund

Read below for a full transcript of the conversation. 

Hana Yang - I'm Hana Yang, Senior Director at First Republic Bank. This topic today is particularly very important to me personally because as the leader of First Republic Bank, Woman Investor Initiative, I've been fortunate to be part of conversations around diversity. And conversations such as today's webinar are especially important during these times of turbulent social and economic times. And it brings us together to discuss and propose actionable solutions. We're very excited to have a panel speakers and we're joined by Alisa Mall Managing Director at Carnegie Corporation, Leena Bhutta, Senior Investment Officer at Doris Duke Charitable Foundation, Lo Toney founding managing partner at Plexo Capital, and this session will be moderated by Anu Duggal. She's Founding Partner at Female Founders Fund. Before we get started, a quick housekeeping note. We will take questions at the end of the session. And to submit your question, please use the Q&A icon at the bottom of the screen. Please enter your full name and your question. And now I'll turn it over to Anu. Thanks, Anu.

Anu Duggal - Great thank you so much, Hannah. And thanks to First Republic for helping us put today's event together. And to the audience, thank you for joining us. So welcome Lo, Alisa and Leena, thrilled that you all could be here today. To start off, we'd love to have each of you introduce yourselves, share a little bit about your backgrounds, your fund strategy, and let's kick it off with Lo.

Lo Toney - Thanks so much for having me. I'm excited to be here. So I'm Lo Toney, the Founding Managing Partner of Plexo Capital. And we are an institutional investor allocating capital globally to the startup ecosystem. The strategy was born out of GV formerly Google Ventures where I was a partner. And we had a strategy to get access to more deal flow by working with initially black GPs, and then expanded to female GPs and people of color that are also GPs of micro VCs. And it was simple. We wanted to access the unique networks and the different lens to be able to identify opportunities and evaluate founders. And then I decided to spin it out. And now we have a whole suite of phenomenal investors, and we access from their portfolios deals that we invested into directly. That's us. Thanks for having me again.

Anu - Great, next up, Alisa.

Alisa Mall - Hi, I'm Alisa Mall from the Carnegie Corporation of New York, which is Andrew Carnegie's private foundation. Thank you for having me. And now I'm very happy to be here. So Carnegie was founded in 1911 with 100 million dollars stock grant of US steel and has grown organically to where we are today, which as I said is three and a half billion dollars, we run a global diverse portfolio across all asset classes. My primary area of responsibility is real assets. I also work on the absolute return portfolio and I lead all of our diversity and inclusion efforts, which is across all asset classes.

Anu - Amazing, thank you Alisa, Leena. Last but not least.

Leena Bhutta - Hi everyone. Thank you for having me. Anu I'm excited as well. I work at Doris Duke Charitable Foundation, which was founded in the mid '90s at the behest of Doris's will, she left her entire fortune to establish a foundation focused on four large mission areas. Child wellbeing, protection of the environment, promotion of the arts and promotion of medical research. Today, we are at one point $1.8 billion and not dissimilar from Carnegie it is essentially a foundation invested in the endowment style across public and private asset classes, alternatives long only. I cover a few different areas and venture is one of my main focuses.

Anu - Wonderful, well welcome, everyone. So Lo, let's start with Plexo. Investing in women and people of color can sometimes be assumed as impact investing versus an alpha strategy. Why do you believe that investing in diversity is a source of differentiation that ultimately will lead to better long term returns?

Lo - Thanks for asking me this question. It's one of my favorites. So we fundamentally believe this is an alpha strategy at GV when we first implemented it, the insight was around black GPs in particular having this unique path to venture capital and having these amazing networks and then a different lens to evaluate deals and entrepreneurs. And it was successful for us at GV to be able to feel top of funnel with more deal flow that met the criteria that people weren't seeing that we were seeing earlier. So that was great. And at the end of the day, the thing that I realized is that there was a couple of things happening. Number one, we spent a lot of time looking at the power law distribution of early stage returns. And the fact that when you see the median, being so far away from the mean, because of the outliers pulling the mean away from the median, we knew that there was a unique opportunity to work with early stage firms and the additional insight around the networks of women and people of color and identifying those GPs that can lead deals, which allows us to cast a really wide net was really important to us. Now, there is a secondary benefit as well, which is a byproduct of our strategy. And that's the fact that by getting capital from the top of the stack at the LP level down to GPs that are diverse, we know based on the data, that the portfolio's that those GPs ended up being diverse as well. So they're led by diverse founders who hire a diverse team. Once we start to see successful liquidity events, capital will be able to be deployed by angels which return capital to the GPs, and then capital will be returned to the LPs as well, so they'll see it working and start a flywheel. So we fundamentally believe that even though this is an alpha strategy, we are having impact and that is on the vertical ecosystem around black founders, female founders, as well as other founders of color.

Anu - That's great, thank you. Great answer. Alisa, you oversee the Carnegie Foundation's diversity and inclusion efforts. And I'm curious, what strategies have you found to be the most effective in your time leading this initiative?

Alisa - Similar to Lo we view this as a performance imperative. We don't aim to fulfill a certain percentage managers, we don't have a target threshold. We don't have any mission or program related investing. We believe investing in diversity is going to help us outperform as the world becomes increasingly diverse. We believe that teams that have diverse members are going to have a fundamental competitive advantage. So there's a couple of ways I could take your question. One is what strategies in terms of asset classes style of investing. I think slightly more interesting is what we've done at Carnegie to improve our underlying diversity in the portfolio, which I will tell you several years ago was not good. We have a very diverse team we're 10 individuals from a variety of backgrounds, ethnicities. It helps our debate it helps how we engage with each other. We all have very different perspectives. And I think that really challenges us. What we've done as an organization in terms of outreach and trying to change the ecosystem to some extent is the first thing we do is we talk to all of our existing managers that are in the portfolio, about what initiatives they've taken, how they're thinking about this, does it matter to them? What we've started to do is we now actually grade every single manager across all asset classes, you get a score between one and three. One is you don't care about diversity like at all. And three is you have diverse people in a decision making capacity and ownership capacity. And two is kind of everything in between, you're thinking about it, maybe it's not reflected yet in the organization. But we found that forcing this grading really challenged us to look at what our portfolio really looked like. And it helped inform our conversations with managers about how we viewed their organization. So we're having these conversations in an ongoing way, which I think is actually, we're starting to see the fruits of that effort, which is really exciting. As I said, I oversee all the initiative, which means that any diverse manager that reaches out to us I meet with, so the point of that was to ensure that nobody falls through the cracks, everybody gets a meeting, it may or may not end up being a fit for our portfolio. But at least we can spend time with that manager, give them feedback, learn about their strategy, and if not a fit for us, direct them possibly elsewhere. We've also had a number of speed dating style events, where we've invited diverse managers and about 20 of our peers, other endowments, foundations, family offices, and had diverse managers across again, all asset classes meet with all the different investors. And again, the idea is really just to help these groups get exposure, because often just getting a meeting, getting through somebody's email is really challenging. And I think it's so much more powerful when you can put a face to the name and a face to the strategy. So we found that that's been fairly effective. And a number of managers that are categorized as diverse, have gotten some traction out of that and gotten some investors. A couple other strategies that we've done is we have increased our support of organizations that support young women and minorities in terms of growing we hear all the time from managers, "Oh, it's a pipeline problem, "we can't hire the people 'cause we can't find them," So we have put a lot of time into supporting organizations to make those candidates available and accessible. And make the connections between GPs looking to build out their teams. And then the last thing that I'd say we do internally is, and I mentioned this at the outset, we really our CIO is incredible about this. And she is very passionate about diversity inclusion, she has pushed all of us to write down our own biases, and be explicit about it. We only share them with her. So it's not shared by the team. But then to really challenge how we underwrite and how we look at managers, and what our implicit biases that we may or may not even realize we're applying to our diligence and our underwriting and the combination of all those things has been very effective for us in terms of growing, we're at about 20% diversity now within the portfolio, which is a huge difference than five years ago.

Anu - That's amazing. Thank you for that. Leena what about Doris Duke, how do you and the team think about diversity as part of your strategy? And why is the mission component of it important to you?

Leena - So thank you for that question. So mission related investing, Alisa can probably echo this as well. Everybody who works at these foundation investment offices, I mean, their people tend to be more mission driven. And so our team is fairly mission driven. However, we have actually a mandate from our board for impact investing, which is up to 10% of the portfolio over time. The way impact investing that is defined by Doris Duke Charitable Foundation is actually not with a gender lens or an equity lens. And I can kind of talk about our DIE work in a second, but it is related to our mission areas and the promotion of our mission areas. So when we call something mission related investing, which we have an amazing person on our team who heads that. And she spends all her time focused on those four areas. It is investments that will promote the protection of the environment or arts or the mission areas that we spoke about. DEI is a big value at the foundation and really has been led, I want to say, by the program side of our foundation, where our program staff have really put equity at the center of a lot of their big initiatives, especially in recent years. To be honest, I think on the investment side, we have been slower to adopt a more systematic kind of approach to where we fall on that. Individuals on our team are varying levels passionate about it, and I think we all have agreement that our manager Roster is very homogenous, and we could do better by essentially expanding our networks and as Alisa mentioned, examining our own biases, et cetera. So DEI as a value across the organization, I think the investment function is sort of working towards catching up on it and the mission related investing, there are angles to it, where it overlaps. But I think this sort of has to be unintentional approach sort of separate from our impact investing mandate.

Anu - Thank you note that that makes sense. Lo, Plexo's thesis is that people of color and women have differentiated networks and a different lens in terms of deal evaluation, do you have an example or two about how your portfolio's networks and communities have resulted in direct investment opportunities and an above average returns long term.

Lo - Yeah, I think one of my favorites is well, now let me caveat that by saying that this is like having children, you're never supposed to identify a favorite child, but everyone knows that you have that grandmother that has that favorite grandchild. So there is an example that I like to talk about. And that's Morgan Debom at Laverty. And the reason I like that one is because, I met Morgan a long time ago when she was doing it part time she was on Instagram and it ultimately blossomed into an independent company that what she left into it to pursue. The company is focused on being able to deliver media and entertainment news to a diverse audience, primarily, what I would call Gen Z and millennial women of color, although it expands out a little bit from there. And I knew that she had raised some money from some a couple of the seed funds that are in our portfolio from cross culture ventures and from based ventures and I've been tracking her, knew that she was out looking for a series A and told her that she should go and talk to GV to Google Ventures because M.G. Sigler and John Lyman have good experience in media. Made the introduction and GV ended up leading her series A and then we participated alongside GV. So it's the power that we see in someone like Morgan, who really took the opportunity to identify that there was not an outlet for media that was really serving that audience. And even though others would say, "Oh, there's plenty of other, more horizontal outlets that can serve that audience. She looked at it differently and decided to unbundle that. And now I think when you look at the numbers, given the moment that we're in post George Floyd, they're absolutely amazing. And that's one of the companies that I really feel proud of, because I feel like it's just a good case study. We identified that, surfaced it to GV's attention, it wasn't on their radar, and they got really excited about it decided to leave the round and took a board seat.

Anu - That's fantastic. I guess, kind of building on that. And this question is for everyone, maybe Alisa we can start with you. What gets you excited about a manager that falls into kind of the diverse, whether it's a woman or a person of color, what are you looking for in those managers or in their strategies that makes it interesting for Carnegie.

Alisa - I think what gets me excited, might be a teeny bit different than what makes it interesting. What I get the most excited about is authenticity. And when I meet somebody who they're out there with who they are. It's sort of out on the table. You feel a connection with them. What you think see is what you get in terms of who you're speaking with. I think that's really, really powerful. And I think, in my experience, I see that more frequently in the diverse manager community. I think what makes it exciting from an investment perspective is one, I think, a lot of these managers and this is true of all emerging managers, but tend to be really scrappy. I mean, really hustling, really throwing everything they have at this effort to get their investment vehicle off the ground and just pouring their heart and soul into it. And Carnegie's track record suggests that those types of managers those first time funds, outperform, and I think some of it is their size, they tend to be smaller, and so it's easier to have outsized performance, but I think a lot of it is they're really hungry in the beginning and they're really hustling and you see that, I think you see that a lot in the diverse manager community, there is a real drive to succeed and a passion for what they're doing and a passion for making a name for themselves. And when you can feel that in a meeting and in a connection with somebody, it's a little harder over Zoom, but you certainly feel it in real life. Anu I felt that way when we met. I think that it makes it a really exciting investment opportunity.

Anu - Thank you. Leena?

Leena - So, I'm going to praise you now and I know you're going to get convinced Anu but using you guys as an example of things that get me excited about emerging managers, diverse managers. So passion is really important to me like I want to see that people are doing what they're doing because that's really the only thing they wanted to do. And I feel like that for Female Founders Fund kind of shines through really well. So I want passion, differentiation. I mean, everybody kind of wants. It's a large portfolio, it's doing all sorts of things at different points in time. And so a strategy to move the needle, in a good way has to bring something different from the 20 other people sending decks. So that is, again, really important on using sort of the Female Founders Fund example sort of creating that community that the firm has managed to create of female entrepreneurs and how valuable that is, to those founders was a real source of differentiation. I thought, so if an emerging manager and everybody talks about how investments is an apprenticeship business, and I'm 100% on board with that. But if you're just essentially kind of copying the person that you're learning from, like then what are you bringing new to the table and how are you moving things forward. So really figuring out what do I bring that's different to the world, I think is an important question. And, again, this applies to you and to everybody else. But with all those things like all competitive people, I like to see a performance driven mindset. So like I want to feel confident that you are driven by performance.

Alisa - I'm going to add one more thing.

Anu- Of course.

Alisa - In addition to differentiation, and Leena is getting at this, but why that differentiation is a competitive advantage and what's going to position you and your strategy better than the 20 other competitors trying to pursue the same thing. And that certainly comes down to strategy but a lot of it comes down to the individuals.

Anu - Thank you, Alisa. Lo, you see so much in terms of obviously both funds that are run by female managers as well as people of color. What gets you excited?

Lo - Yeah, what gets me excited are many of the things that we talked about I think we tried to methodically first start with just understanding the judgment of the GP and that's mainly driven by track record, I would say that we might be a little more flexible than other institutional LPs in this regard. Because unlike trying to put guidelines around seven to eight year track record, or if it's a first time fund, only looking at a manager that has attribution from their prior firm, or not looking at first time funds or not looking at solo GPs, we try to be a little bit more flexible because it's our take that those kind of sometimes artificially or maybe intentionally exclude women and people of color. So we're very flexible on track record, but we do need to see some type of track record whether it be a fund two use so we can look at fund one. Whether it be looking at an individual who left the firm and they have attribution or if they don't have attribution, will talk to the GP to kind of really understand what deals they actually sourced and what role they played in doing the diligence and ultimately cutting the check and any activities beyond board seat or board observer. And then we're even flexible. I'm looking at people that were prolific angel investors or might have put together a series of SPVs. So that's actually a very quick check to go through. But at the end of the day, what we also really like to focus in on is the sourcing that the GP has, because one could have the best judgment in the world. But if there's no ability to apply that judgment, to a robust, sustainable pipeline of deal flow, then it kind of almost doesn't really matter. So we want to understand their sourcing network. And we actually have worked with a couple of consultants on the data science side to help us actually map out their networks, both in terms of kind of looking at LinkedIn, and looking at the types of deals that they've done with GPs or downstream who's followed their investments. And then the other thing we like to do and I think this speaks to the differentiation points that Alisa and Leena talked about is we like to understand the value add network post check. So what is it that the GP is delivering that helps the entrepreneur especially at the early stage with customers, employees or downstream financing? I mean, those are the three things that pretty much an entrepreneur obsesses over. And so we look at the value add network, because at the end of the day, that really speaks to the differentiation. I mean, presumably, that's the ability for the GP to win the deal is because the entrepreneur sees that relationship after the check has been written as being really important. And so we try to really understand the value add network and then at the end of the day, when we know that we're close, that's when we dive really deep into the references, so getting references from both entrepreneurs, as well as other GPS that I've seen the perspective Plexo Capital GP, in action. So those are the things that get us really excited, we'd like to spend about 10 hours with a GP getting to know them. And that process, as you know can take a couple of years, but these GP relationships and LP relationships, they're long term. I mean, when you make a commitment, typically, it's not to one fund. I mean, you're typically thinking about, two or three funds that could be a multi decade relationship at the end of the day. So we like to make sure that we're very methodical and understanding not only the attributes of the GP, to let us know, they're great investors, but then also that they're great people, that there have a vision to build out a franchise that they understand the complexities of building a firm, which is different than being a great investor. And we like to say one of the value adds we'd like to provide as an LP is helping a great investor make that transition into being a great fund manager.

Anu- Thank you. That's super helpful. My next question is specific to I think some of the LPs in the industry who are very passionate about diversity and want to move the needle and see change within their own organizations. Particularly kind of given everything that's happening around social justice right now. I'd love to hear if any of you have advice on individual LPs who can kind of move the needle, how best to do that within their own organizations. Alisa, do you want to start or Leena go ahead?

Leena - Yeah, I can start. When I think it's a very interesting time and a painful time in so many ways, but I think folk sort of in our seats, have a few different constituents that we're sort of dealing with, right, within an institution. And I do think it's important at this time, and kind of keeping all those efforts in a sustained way to communicate, not only with the senior leadership of our organizations, but board members as well. I mean, in some ways, sometimes the onuses, sometimes, you have boards that are super forward looking and kind of pushing the agenda. And we've been fortunate in so many respects that we have a board like that. And sometimes I think the onuses is really on folks like myself and Alisa and Lo, who are closer to the GPs, who have to kind of bring up these questions and bring up conversations around the fact that we could really show leadership in this. So I think communicating with boards, communicating with senior folks at whatever institution you work for, whether it's university or a foundation or any other kind of endowment. Because the deal flow sort of, the manager flow comes through our desks. And so but to being able to kind of make the point that some of us have talked about that these are alpha strategies, expanding your world will lead to just expanding return opportunity. That is, I think the onus is on us to get those conversations started in a meaningful way so that capital can eventually follow the conversation.

Alisa - I think so critical to this conversation is making it very clear that this has really driven in the pursuit of performance that this is not... you're not settling, you're not doing this to feel good. I mean, you are you do feel good about it, and it does have a larger societal benefit, but I think to really move organizations and some of the constituents that Leena mentioned, boards, investment committees, senior leadership at firms, you have to make it clear that you're doing this to generate returns. And this is going to be the best way to do it. Because this is how you're going to get better performance. And in a changing world, you have to be positioned to take advantage of that and to gain those perspectives. And the only way to do that is to invest with people who look different, who come from different backgrounds, who view the world through a different lens than perhaps those people do. And I think that's how you really get people on board with the initiative that it's of course, accomplishing a larger social good and diversifying the investment management industry, which is grossly, grossly non diverse, but also that it's going to make your performance over the long term.

Lo - Yeah, I think that those are all spot on. And the only thing I would add is, we're just really excited about the fact that we can have this byproduct that I talked about earlier, which is kind of really kick starting the flywheel within the black ecosystem for entrepreneurs, females and other people of color. I just really strongly believe that the returns are the key element to this, because that's going to set down, that's going to start a path of wealth generation, for founders, and even for some of the employees. And if those employees can start to write those angel checks, they're going to likely number one, be diverse, because the CEO and founders diverse, and then they'll probably write checks to diverse founders, there are going to be some employees who because they'll have a stronger financial position, they will have the confidence to go out and start their own companies. So that will be additive to the ecosystem. And then obviously, the wealth generation for both the founder of the company with a successful exit as well as the capital that goes back to the GPs for their portion of the proceeds of the profits, helps the GPs down the path of wealth creation, and I really believe that, these vertical ecosystems around either gender in the case of females or ethnicity in the case of black or other people of color. I mean, that's really not dissimilar to what we see in other ecosystems outside of the Bay Area and how they develop, right? You have some great anchor companies like Microsoft or Amazon in Seattle that spawned off both a lot of angel investors, entrepreneurs, as well as even as GPs. And so that's how we view this. It's an additive byproduct of our alpha bay strategy to be able to deliver superior returns.

Anu - Great, now thank you, all of you, super helpful. In today's audience, I think we have a great mix of obviously, both LPs as well as fund managers, in particular, diverse fund managers, so sitting from your seat, what advice would you have for these fund managers in terms of being able to access LPs that are interested in diversifying their portfolios. The LP world is famously opaque and difficult to kind of read through so. So any advice for the fund managers listening in?

Alisa - I have a few tips. One is be persistent because many LPs receive just dozens and dozens of inbound requests and it's hard to keep up and often, and I'm so guilty of this. We don't respond and it's not because it's not interesting or we're not potentially interested. It's often just because we're overwhelmed and understaffed. The second piece of advice that I have is when you embark on this fundraising slog that it is, be prepared, be emotionally mentally prepared for the slog that it's going to be and also for the types of questions that you could get. One of the things that we come across with a lot of emerging managers across the board is some have really done their homework and they're set up really well and they've thought about what the operational requirements and institutional investors are going to have, what all the back office requirements are going to be and they are sort of ready for prime time so to speak. For large institutional LPs like us, Leena, others who don't have sort of the luxury I think that Lo has to take more of a chance on groups that maybe aren't as proven. If we're going to back in emerging manager, there is more, I don't want to say career risk for us but there is nobody ever faults you if you're like, "Oh, I gave you know Blackstone money or Goldman Sachs money. Nobody's ever going to say, 'Well, that was really dumb." When you back a first time manager, you're taking on more risk. And so my tip would be to just be really prepared in terms of thinking about what is required to be sort of, quote unquote, institutional, if that's the audience that you're going for. So that when you go into those meetings, you're ready, like you have those answers to DD cues. And you can show and demonstrate that you've really thought through all the implications of being a fiduciary and what that means and what running a business means. Because it's different to make investments and then to run a fund. Those are two super different things. And not everybody is good at both. They're both very challenging, but it takes, it's a different mindset to be a fiduciary and to run a business that is managing other people's capital.

Lo - Yeah, I totally agree. This is the common from the more experienced LPs. I mean, Alisa's point is spot on, what I hear is that it's rare that a mistake was made selecting a GP, because they weren't a great investor. Of course, not everyone pens out and delivers great returns. But what I hear more from LPs anecdotally is that the firm just wasn't prepared to be institutional grade. And it's that fund management piece. It's that firm building piece. Again, it's that transition from going from a great investor, to being a great fund manager. And that's pretty challenging. The other thing I would add in terms of being mentally prepared is also being financially prepared. What's really interesting is that when one looks at the process for a first time fund in particular, I mean, that might be a twist, we always tell GPS prepare for a 24 month fundraising process from the time the documents in the data room, including the LPA are complete, not from the time you first start having soft conversations, but from the time people can actually go and by the way, I don't think one should have soft conversations if the data room isn't ready to go, because that is another sign of being institutional grade, and ready, but that 24 months means going without salary, right? It means that you're going to have to pay out of pocket for all of your travel. It means that if you decide to hire someone or hire any other services that has to be paid out of pocket, and even when the first close happens, then maybe or recoup 200 or 300K of fun formation expenses, most of those are likely going to be on the legal side. So say goodbye to your salary, right, that was lost, and one has to maintain some level of living as well. And for the people that have the track record to be able to go out and do this, they likely were leaving a salary probably, I don't know 500K or more, you're not going to be able to pay yourself 500K off of the management fee if you've got a couple of people or 750 or whatever that number is. And so one is taking a lower salary. Oh, and then by the way, you have to turn around and pledge 1% for your GP commit. We look at this as like a million dollar proposition and I don't say that to make this sound daunting or dissuade people, I actually want more people to come into the business because like Alisa said, we'll take a risk on a first time funder solo GP, but I think one just needs to be prepared just mentally, as well as financially.

Anu - That's super helpful, thank you Lo. So I think we have time for one more question before we move into audience Q&A. And I'll end with if there's one point that you'd like our audience to walk away with, that you think is insightful related to, moving forward with a more diverse strategy. What would that be? Alisa?

Alisa - Did I raise my hand or you just call it on me?

Anu - I'm calling on you.

Alisa - I think the point that I'd like to get across, which has been mentioned several times is and Leena captured it really beautifully, a performance driven mindset. And that you have to show your prospective investors that you're like in it to win it from a returns perspective, and that you're driven, you're hungry, you're differentiated, and you have a competitive advantage. And because of that, you're going to generate really strong performance. Because I do think and this has come up a lot, but there is a misconception. I think that with some of the diverse strategies, it's not for performance, it's for impact, or it's for mission. And I think so key to changing the ecosystem and really moving the ball forward is demonstrating that it's really about returns.

Anu – Leena?

Leena - So I think a couple things, one on the LP side. And this includes I mean, I have to do this for myself, I think, let's keep checking ourselves to see what is an authentic effort on our part, and what is a performative effort? Because I think everyone wants to do the right thing. And sometimes efforts can kind of go the route of tokenism, even if that was not the original intention. So let's all be I'm constantly kind of questioning ourselves about that, like what is real and what is not. And then on the manager side, and I think at some point, Alisa, I had mentioned that authenticity matters, sure and I 100% agree and just stay authentic to what you want to start out with, stay passionate. And the money follows, and it doesn't necessarily follow so easily, but money will follow performance. So stay authentic.

Anu – Lo?

Lo - Yeah, I think just to be persistent. Persistence can actually overcome resistance often. So I think Alisa made the comment earlier, we just get a lot of inbound and we're happy to take a look at inbound, I mean, feel free to submit on our website, we actually try to level the playing field taking a page out of the K four capital playbook was one of our LPs where everyone that comes through has to go through the same process, and we firmly believe that as well. But just stay persistent. Believe, and look, this is like I find myself flexing way more of my former entrepreneurial muscle even though most of that has atrophied. Then I do the VC muscle, particularly when I was at GV and we really didn't have to do any fundraising. I'm an entrepreneur. Instead of building a company, I'm building a firm and I'm trying to build it to last. So be persistent. Have the vision, show that you're different. And just don't give up.

Anu - Great, thank you so much everyone. This is wonderful. I'm going to actually hand it over to Hannah now, and she will go into some audience Q&A. Thank you guys.

Hana - Thanks, everyone. Thanks Anu. Great, so this questions coming from and I apologize in advance if I'm not pronouncing the name correctly, but Tiana Peire and Titi Naomi Dukes. This is for everyone. So feel free to jump in here. But how do you all make a purposeful and inclusive cast on what diversity looks like beyond some high visibility demographics? Might anyone have recommendations for pre-seat resources with black and Trans queer individuals in mind?

Alisa - Hannah, can you repeat the question?

Hana - Sure. How do you all make purposeful and inclusive cast on what diversity looks like beyond some high visibility demographics? Does anybody have recommendations for pre-seat resources with black and Trans queer individuals in mind?

Alisa - I can't speak to direct resources, but we define diversity as historically underrepresented groups. So we include we include LGBTQ, we include Native American, I mean, anything that is underrepresented. So it's not just obvious demographic groups per say. I don't know if that gets it, the first part of your question.

Lo - Yeah, I think for us, it's what we did is we took a look at the representation within venture capital for different gender and ethnic groups and that's kind of how we define it. And then I would say, there's actually, I'll send a link that Inc. has of some what I think are pretty good resources, probably or have already been seen, but for LGBTQ entrepreneurs.

Hana - Thank you Lo, we'll make sure to circulate this with the audience. Next question. And this was actually directed to Lo and kind of the current climate here, but related to this was from Hillary Rameau. Related to those respond, how have your relations and performance assessments and investment of the GP change due to COVID? Are you still open to new GPs?

Lo - So definitely have not changed our criteria, have looked at some of the GPs and just to understand how the GPs think, we've asked them about what are some of the tail winds that they see pushing, areas that were already getting traction pre COVID, what's accelerated? And then we also ask what they're seeing as new opportunities based on the behavior that might persist in a post COVID world. But that's primarily just a better understand and get to know the GPs to see how their thought process goes. And then with regard to the second part of the question, yes, absolutely. We are still looking at new GPs. I will say, I'm on a couple of LP chats. And one of the things that keeps coming up is I think a lot of LPs are struggling to identify the best process if their process was fairly rigid and required in person meetings or on site visits or presentation to an investment committee. I think people are trying to get their arms around how do they change the charter of their investment committee to accommodate what we're experiencing right now with the social distancing? So that is a real challenge. And I think, this is why it's so important for GPs to really try and go and meet people in person, even if there is knowledge that okay, this might not be the right GP for this time, because what I suspect is happening based on some of the institutional LPs that I've talked to, they're continuing the process with the GPs that they've already met in person so they're kind of accommodating that piece. But GPs or excuse me, I should say LPs are just, they're struggling trying to go end to end without meeting someone, that's tough.

Hana - Ashley would like to hear from Alisa and Leena as well. Are you guys open to intros at this moment during the COVID time?

Alisa - Leena you want to go first?

Leena - Sorry, am I open to meeting people in person during COVID time. Was that the question?

Hana - In person I guess, you can answer, are you still taking into...? How active are you during these current climate?

Leena - So I'm doing work on new managers, it is definitely easier to work on managers where I had many points of contact with them previously, and had met them in person or stuff previously, and so I can finish up the work, but they're new to us on the portfolio. The longer we live in these crazy times, the more probable it is that from start to finish we're going to have to do investments over Zoom. I'm not I'm not meeting people in person.

Alisa - Like Leena, I'm also doing lots of meetings for the first time. But I think what Lo said about the challenges definitely applies to us. Historically, our process required several in person meetings, including an in person one with our CIO before anything came into the portfolio. And Lo mentioned 10 hours that he likes to spend with groups. Consistent with that we like to have lunch and dinner and really get a feel for who somebody is. And it's a great way to judge somebody's judgment and integrity when you get to spend time with them outside of a work meeting. So this is, I mean, it's going to be really challenging for us as we think through how to do this. And this may go on for a while. I know at Carnegie even when we return to the office, we're not going to be permitted to take outside meetings. So I think we're going to have to really challenge ourselves to think about how we mentally get in the right frame of mind of embarking on what could be a multi decade relationship, like Lo said, with somebody that we haven't met in person, so for sure the groups that we had contact with prior to this, I do think have a little bit of an advantage because there's already been that interaction. But we are looking at new things. And the onus is on us to figure out how we're going to make it work. Because as it appears right now, we might be in a long stretch where we just have to figure out how to make it work.

Hana - Thank you, everyone. This is a question around performance, asked by Emmett Sharma. Performance has been mentioned a few times in this webinar. What specific metrics thresholds do you look example, IRGDPI when evaluating performance past or projected?

Lo - All right, I can speak to this somewhat. I don't know how much we differ. But the three metrics that we tend to focus in on the most kind of almost any priority our TVPI, DPI and then IRR. I think TVPI is kind of for us the ultimate apples to apples comparison total value to pay it in, that's a net number, as opposed to MOIC the multiple on invested capital. That's a little bit of a tougher one because it doesn't give us the differences between managers in terms of their management fee and how well they manage their fund expenses. So we prefer to TVPI and then I would say, the DPI is an important number. I like to say, as Chris from Ahoy Capital says, it's the Moulin the cooler, that's what pays the bills. So you could have great markups, but if there's no realizations it kind of almost doesn't matter to a degree. And then IRR we do, but that's a trickier one, it starts to get more relevant towards the end of the fun life. Early on there's games you can play with IRR and IRR might look funky, sometimes just based on how certain events perform but long term, we do look at IRR kind of like the five year mark, it starts to get a little more real. And then I would say all those together, we look to underwrite funds that we believe can at least deliver us a three x net return. And we really are looking for like a four or five x return but we have to underwrite to at least a three x so we spent up we have a new financial engineer and he's done some great work on modeling so that we can better understand through some simulations and looking at the portfolio construction and the thesis, the likelihood of that actually happening.

Leena - So I think different asset classes, different performance measurements, 100% agree with LO on VC, where TVPI is sort of like the ultimate and then DPI sort of, well, is it real and how real is it and when does it come to me because that's how it grants are going to be made. And IRR is great but IRR is not paying for the grants. And so, on the public market side, it's obviously an easier calculation. I, as a historically public markets person, I find that easier to put my arms around. I mean, projected performance. I mean, it's so any sort of real performance that you have is all historical. And then our job is to figure out sort of the leading indicators that the projected performance is going to hopefully translate, say, in a similar way to historical performance. I kind of don't pay too much attention to simulated projected performances.

Alisa - One thing I want to add, I echo all those points, with respect to past versus future, one of the things that we invest with managers then or one of the reasons we do is we're relying on them for the buy and the exit, right? Like we make a commitment to a fund and we are interesting that the general partner knows their market, knows their strategy. They know when the entry points are good and when the exit points are good. So we do really need to see some realized investments for all the reasons Leena and Lo mentioned. But all that reflects judgment about a market and knowing sort of when to hold them and when to fold them. So if somebody has no realized returns, it would be really tough for us to underwrite that manager.

Hana - Thanks, everyone, last question from the Q&A. Have you seen any mandate or creative strategies to democratize access to VC as an asset class in order to engage a more diverse LP base and this came from Krishna Patel.

Leena - I could start there on this one, there is one manager that we invested with, who had a very interesting and intentional approach to it. And I really appreciated that. So the firm is called unusual ventures and their actual sort of bread and butter investing is essentially seed investing and enterprise software for the most part. And so that has doesn't have a DEI lens to it necessarily. But they took what was a capacity constrained, highly sought after fundraising process and intentionally took it to historically black colleges and universities and incur and sort of went through the process of Let me tell you who we are, what our background is, what venture capital can do for an endowment. And that was probably one of the more interesting intentional efforts that I had seen to give access to LPs that they don't necessarily benefit from VC returns.

Hana - Thank you, Leena. Well, I guess that wraps up our discussion. Thank you, everyone for joining us in our webinar. Thank you speakers for sharing your insights to create a more diverse, equitable and inclusive community. Thank you, team, Female Founders Fund behind the scenes of all the marketing, and especially Anu for moderating discussion. We will follow up with a recorded link to this webinar as well as materials discussed in this session. And this concludes the event. Everyone have a nice rest of the day.

Lo - Thank you.

Leena - Thank you, Hanna, thank you, everyone.

Anu - Thank you.

Alisa - Thanks, everyone.

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