“I'd been on the receiving end of traditional venture capital coming from short-term-minded funds… short-term thinking that doesn’t help you build things that last. So I decided to go at it a different way.”
Nathalie Molina Niño is an entrepreneur, builder capitalist (at O³) and tech globalization veteran focused on high-growth businesses that benefit women and the planet. She is the author of LEAPFROG, The New Revolution for Women Entrepreneurs (Penguin Random House, Tarcher Perigee) and serves as a Venture Partner at Connectivity Capital Partners. Molina Niño launched her first tech startup at the age of twenty and is the co-founder of Entrepreneurs@Athena at the Athena Center for Leadership Studies of Barnard College at Columbia University.
Finding issues identifying as either venture or private equity, a group of like-minded entrepreneurs with a passion for long-term vision and sustainability coined a new term: Builder Capitalist. Venture capital too often promoted the kind of short-term think that prioritized quick turnarounds for profit rather than a long-term holistic approach to building. “What worries me is when the Shark Tank effect starts to happen and you have organizations like the media making it seem like it’s the end all, be all for all entrepreneurs.”
Too often entrepreneurs automatically see VC as the best source of funding when a small business loan may be more appropriate. Founders who take on VC can also find themselves receiving the short end of the stick once they come out the other side.
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SPEAKER
Nathalie Molina Niño
Builder Capitalist
O³
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie: (00:07)
Hello, everyone, and welcome back to SALT Talks. My name is John Darsie. I'm the managing director of SALT, which is a global thought leadership forum and networking platform at the intersection of finance, technology, and public policy. SALT Talks are a digital interview series that we launched this year with leading investors, creators, and thinkers. What we're really trying to do during these SALT Talks is replicate the experience that we provide at our global conference series, the SALT Conference, and that's really to provide a window into the mind of subject matter experts as well as provide a platform for what we think are big ideas and people that are shaping the future.
John Darsie: (00:45)
We're very excited today to welcome Nathalie Molina Niño to SALT Talks. Nathalie is an entrepreneur, a builder capitalist, and a tech globalization veteran focused on high-growth businesses that benefit women and the planet. She's the author of Leapfrog: The New Revolution for Women Entrepreneurs and serves as a venture partner at Connectivity Capital Partners. Nathalie launched her first tech startup at the age of 20 and is the co-founder of Entrepreneurs at Athena at the Athena Center for Leadership Studies of Barnard College at Columbia University. She spent 15 years advising organizations ... such as MTV, Mattel, and the Bill & Melinda Gates Foundation. During that time, she co-led the launch and the growth of a multinational technology globalization business with Lionbridge and turned it into a $100 million operation operating in 30 countries.
John Darsie: (01:41)
Molina Niño advises the WOCstar Fund, FullCycle, and BlueIO. She serves on the advisory board of the National Institute for Reproductive Health, WE NYC, which is Women Entrepreneurs NYC, and VoteRunLead, and she was honored with the Schneps inaugural Women of Wall Street Award for her influence in banking and finance and was named among People Magazine's 2019 Most Powerful Latinas. Prior to founding her previous venture, Brava Investments, Nathalie launched Nely Galán’s education venture called Self-Made and stepped in as the CRO of PowerToFly, which is the fastest-growing hiring platform for women in tech and beyond.
John Darsie: (02:25)
A reminder for all of you joining today. If you have any questions, you can enter them in the Q&A box at the bottom of your video screen. We're very excited today to welcome Sarah Kunst back as a moderator for SALT Talks. Sarah is the managing director of Cleo Capital, which is a venture capital firm that she started after a great experience early in her career at a lot of leading venture capital firms. And with that, I'll turn it over to Sarah for the interview.
Sarah Kunst: (02:51)
Thank you. Thanks, John. Super excited to be back. So, Nathalie, I am so excited that you are here today to talk to everybody. We just heard your amazing bio. Nathalie, it'd be awesome to just hear how you got here. We just heard about everything you do, and that is amazing, but I would love to hear about how you got here, and then we'll go from there.
Nathalie Molina Niño: (03:20)
Yeah, I want to congratulate John not just for getting through that ridiculously long bio, which I didn't know we were going to through.
John Darsie: (03:28)
Got to congratulate you for accomplishing all those things. It was hard enough to read it. Imagine doing it all.
Nathalie Molina Niño: (03:32)
I was going to say the pronunciation game is strong.
John Darsie: (03:36)
[Spanish 00:03:36].
Nathalie Molina Niño: (03:38)
There you go, there you go. I'm impressed, I'm impressed. I was actually going to save Sarah from having to do that because it's hard for most people. But, yeah, how I got here is Boulder, Colorado. I was in school at the time, and I sometimes think that ... To date myself, this is in '96, and I feel like anybody who could kind of code was getting money thrown in their general direction, right? This is before Boulder was as much of a tech hub as it is now. It was basically me and five dudes, and we were up to all sorts of things, and one of them was my first tech startup. I think that because anything that is that combination of both really painful and really sexy all at the same time, it is likely to create an addiction, and so it did, and so I started four more.
Nathalie Molina Niño: (04:32)
I spent about 15 years pretty deep in the trenches of tech, and, specifically, as John mentioned, tech globalization. So the latest venture in the space, one that probably is more my claim to fame, is we helped build the algorithm for Google in 42 different languages around the world, right? Obviously, Google needed no help in building the algorithm in English, but once it came to Croatia and Xhosa and Quechua and Spanish and French and Italian and Hebrew and Arabic, that's where we stepped in, and so pretty deep in the trenches there for a long time.
Nathalie Molina Niño: (05:09)
Left tech and found myself paired up with an amazing woman, Kathryn Kolbert, actually, who argued Planned Parenthood versus Casey, which is amazingly detailed in a recent documentary called Reversing Roe. She put a fire under me and just said, "You can't have spent 15 years in the tech industry and now disappear into the ivory tower of an Ivy League." As fun as it is to teach, you've got to get back in the game and you've got to leave it a little bit better than you found out. Of course, if you look at statistics, even 10 years ago, it wasn't better than I found it. We had results across all vectors, right, especially with women in engineering, we have half as many women graduating as engineers today as when I was starting. So I didn't leave the industry any better than I found it. You could argue I left it far worse. So she inspired me to get back in the game. I didn't want to get back in the game in the way that I had worked in it before, so I decided to do investing.
Nathalie Molina Niño: (06:14)
In 2016, I became a full-time investor. I launched my first platform, and I say platform because, as you know, Sarah, I'm not a big fan of funds. I'd been on the receiving end of traditional venture capital coming from short-term-minded funds my entire adult life at that point. I didn't really enjoy the process. I felt that they were more than just a cultural problem, which I think you and I are pretty deeply familiar with. There was also just a structural problem, where even the nice guys are subject to a structure that I think encourages bad behavior. By bad behavior, I mean short-term thinking, things that don't help you build things that last. So I decided to go at it a different way.
Nathalie Molina Niño: (07:00)
Then, to my delight, I found a bunch of other people who served as mentors and as inspirations for me who have actually been doing investing the way that I want to do it for a really long time. I thought I was inventing something new. I wasn't. Turns out there was a whole community of us, and we all struggled to articulate what it is we did. So last year, a bunch of us got together and we were like, "You know what? This is silly. People ask us, 'Are we venture? Are we private equity? What are we?' And the answer is we're builders." So we coined the term builder capitalist. We built an organization to connect us all so that we can share our best practices and so that founders can also find us, and, more importantly, so that we can put out into the world the idea that there is this other asset class. It's an alternative to venture capital. It can coexist. It's not about better or worse. But it's something that, for me, as somebody who has way more experience building things than flipping things, it's just more compatible to who I am.
Sarah Kunst: (07:59)
I love it. I also love that I've known you for so long and I think that's the first time I've heard the whole story because I think last time we were hanging out in person running around Davos, we did not get to those details because we were very busy doing other very important global things. Yeah.
Nathalie Molina Niño: (08:17)
Yeah, that's nice code for the fact that at a party that you invited me to, I accidentally punched a billionaire.
Sarah Kunst: (08:23)
That is true, but next time punch him on purpose. Just joking. We love billionaires as long as they're investing in us. So you've been a founder, an investor, and now you're a builder capitalist. You must just love venture capital, right? This must be your favorite asset class and you just want to see things go from zero to unicorn in two years and then SPAC out, right? Tell us how you really feel about VC and what doesn't work and a little bit about why because I think we all ... Clearly, I've drank the VC kool-aid, and I think we all just get used to thinking, "Well, that's great. You got a markup. What more could you want? You want to mark it up as much as possible in as short as time as possible. What could go wrong?" So tell us what could go wrong.
Nathalie Molina Niño: (09:11)
I think most founders know exactly what can go wrong. I will say this. Anybody who knows me is chuckling right now because they're like, "Oh, she's about to lay into Sarah. She hates VC." The truth is I don't hate VC. The truth is the metaphor that I used recently in a conversation that I had with Latin American investors, who, by the way, are so excited and are so drinking the kool-aid of the PayPal mafia and reading all of the back editions of Entrepreneur and Inc. Magazine ... They want to bring Silicon Valley to Latin America, and the fact is, is in Latin America, we have a long history of building things that last for generations. So I worry that people perceive me as hating VC. I do not. But I do think, and this is what I said to this audience, was, "If you were to give me a head when I have, sorry, an aspirin when I have a headache, I would be so grateful. Thank goodness I have an aspirin when I have a headache. But if I'm diagnosed with cancer and you hand me an aspirin, we're going to have words. It's inappropriate to give me an aspirin when what I need is something else."
Nathalie Molina Niño: (10:22)
I think that when you look at the popularization of an asset class that, let's be really clear, represents .5% of all business financing, and of that chunk, we take 100% of that .5%, the majority of that chunk goes to later stage companies, not what we would strictly call startups. That's what the data shows us. Then, if we take again that whole, that entire chunk of money, which again represents .5% of the whole industry, and we think about where it goes, it goes the vast majority into software companies, software, period. We can slice and dice that. We can say some of it goes into fintech, some of it goes into mobile, and everything else. But it's software, right?
Nathalie Molina Niño: (11:08)
So what worries me is that when the Shark Tank effect starts to happen, when you have organizations like the media making it seem like the end all, be all for all entrepreneurs, not .5% but all entrepreneurs, is to get VC, then you have a situation where you're giving me aspirin when that's not what I need. Not only that, but you're making me believe that the only thing in the world out there available to me, which is the part where it gets really dangerous, is aspirin, right? That's my beef with VC. It's not that it doesn't belong. It's not that there isn't a place for it. It's just that it's been misbranded as the end all, be all.
Nathalie Molina Niño: (11:50)
It has also been put out there as if there are no pitfalls, and there so are. Most people don't want to be fired from their own company. Guess what? If you're taking VC, you're probably going to get fired from your own company. Most people don't want to be in a situation where they have no control even if they are allowed to stay because they own such a tiny share of the company. Most people have this romantic idea of what it means when you exit when, in fact, in most cases, the founders end up getting the pretty short end of that stick. The only way that you can counter that is by retaining ownership, and the fast-track VC path is not the way.
Nathalie Molina Niño: (12:24)
I don't want to equate VC with fast because the fastest-growing woman-owned company in the United States is owned by my friend Nina Vaca. It's called Pinnacle. It's in the tech industry, and it didn't take one penny of VC. Microsoft didn't take a penny of VC. When Bill Gates finally allowed a VC to come in, it wasn't because they needed their money. It's because they fell in love with the Silicon Valley guy who was going to be a really great advisor and they let him have 5% of the company, which, P.S., they never even used that money. Another little software company that never took VC is WeChat in China, probably the single largest and most important piece of software in the world today, and they were funded by a builder capitalist firm that functions in a holdco, not in a VC fund.
Nathalie Molina Niño: (13:08)
So my beef is really just let's make sure that founders and the world at large, especially aspiring entrepreneur, sorry, aspiring investors, know that, yes, VC is an option. It's a very specific niche for a very specific purpose, and, P.S., there is a wide world of possibilities that are bigger and, actually, in a crisis like the one that we're in, where millions of companies are going under, way more relevant.
Sarah Kunst: (13:36)
I can't even disagree, even though you're talking against my book. But that's exactly the point, right? I have conversations with amazing budding entrepreneurs all the time and they say, "How do I get ready to take VC money?" I say, "Well, here's your business, right?" "Yeah." "Here's how you want to run it, right?" "Yeah." "What do you need the money for?" The conversation I have a lot with founders is, "If I gave you a million dollars right now, how would you start spending it tomorrow?" A lot of times, to your point, they don't really have a need for it or the things they'd spend it on should be financed via accounts receivable loans or whatever else. It's just, to your point, the thing everybody thinks they need to do.
Sarah Kunst: (14:17)
I also think, on the far other side of it, and I'd be interested to know if you have any thoughts about this, that right now a bunch of VC-backed companies are trying to go public via SPACs because that's the new aspirin, right? If you did take VC, now you're like, "Well, I should probably go public." Taking VC is great, obviously. That's what I do. Going public can be great, right? But just because you're a company who can get those things doesn't necessary mean, to your point, you're going to be happy on the other side of it. It doesn't mean your investors are going to be happy. Yeah, it is interesting how myopic I think people are about it. I see founders who chase and chase and chase trying to get funds raised for businesses that don't need outside funding, and they're founders who would probably be pretty miserable if they took that money.
Nathalie Molina Niño: (15:05)
You know what I also think it does? It lets the rest of us off too easily because the people who are out there providing debt, the people who are out there providing lines of credit, the people who are providing lots and lots of financial asset classes that are actually more relevant to most entrepreneurs, we're not getting the heat, not nearly as much heat. So we need to be stepping up, too. What are our numbers? What's the numbers for the other 99.5% of business financing, and who are they financing? Are they doing the same thing that VC is doing? And, by the way, yes, the answer is yes. They're excluding women, they're excluding people of color, they're excluding other sectors that are maybe not as sexy as some of the sectors traditional financing likes, not just software but some of the others like biotech and some of these others that are certainly not up there with software in terms of the amount of capital that they get but definitely up there.
Nathalie Molina Niño: (15:59)
So I think that that's the other thing that it does. When you shine a light in one teeny-tiny niche's direction, we're missing the opportunity to shine the light on the others. I would've told you a year ago that this is a thing that bugs me, and the reason that I'm so passionate now and that my level of how much it bugs me went from a two to a 10 is over 500 billion dollars of federal stimulus went out over the course of the last six months, and it went out in the most horrific way. It was designed from the beginning to be distributed through the same banks that exclude all the same people from the loans that they already have been giving for decades. So it was really engineered by design to exclude the same segment of the population that is the most entrepreneurial and then needed the help the most.
Nathalie Molina Niño: (16:47)
So what I worry is that that was a bomb that got dropped on entrepreneurs in the United States to the tune of millions of them. When you think about the fact that the average American doesn't have savings to last them two weeks, when the average family doesn't have $5000 in their bank accounts, that's something that makes giving people money with their [inaudible 00:17:11] in the world or what they want to do with their businesses, it went from being that's not a good idea to now going to, wait, this is dangerous. It's actually going to hurt the economy.
Sarah Kunst: (17:20)
Yeah, yeah. I totally agree. I've heard from many founders over the years that they were building something, if it started as something that was a small business before they took venture, and a lot of them end up taking venture because they can't get a small business loan. They literally can't get a quarter million dollar loan against their accounts receivable, even if they've been running the business for a couple years, especially if it's largely online. So then they go raise venture because they need money, right? That point certainly hits home that there are tons of businesses ... If you are a high-growth software business and you want to raise venture capital, that's probably going to work, right?
Sarah Kunst: (17:59)
But if you're not at all in those categories and you just get forced into it or shoehorned into it, I see this all the time with beauty brands, fashion brands, it's impossible if you're a loan officer who's a 70-year-old dude and someone's trying to explain to you how popular they are on TikTok or Instagram and you're like, "What?" Whereas if you're a VC, you see that and you go, "Okay, you're going to be able to move product. I'll invest in you." But then, if you're a VC, you say, "Okay, you didn't 100x sales year over year because you are not a highly scalable software platform. You are a beauty company." So there's a little bit of that disconnect. It's almost like when you take some of those early stage VCs and get them into business, a small business loan, people who provide small business loans.
Nathalie Molina Niño: (18:43)
You know what? I've been finding those that ... This is why the energy being directed in one direction or another worries me, is that if those same founders that you and I are talking about spend half as much energy as they do reading every classic VC rag and understanding what Andreessen and Sequoia are doing and understanding who the players are and reading their blogs and listening to their podcasts, if they spent half that energy getting to know every single loan officer in their city, I think we would see some different outcomes. It's not to say that there is enough of alternative capital, but I don't think that we're spending the energy.
Nathalie Molina Niño: (19:21)
If you see a press release about somebody closing a series A, you're not even remotely surprised because those are popping up all the time. But when have you ever seen a press release because somebody landed a million dollar line of credit? For the future of the company, that line of credit is so much more promising. They've not given up equity, it's non-diluted, it's likely to be something that gets replenished all the time and allows them to really grow at a faster rate. There are a million reasons why that line of credit is happier news for that startup than perhaps that closing of the series A, but you're not going to see a press release about it. So I think, on our end, we're celebrating the wrong things, and on the founder's end, we're expending energy also in the wrong places.
Sarah Kunst: (19:59)
Yeah. So tell me a little bit about ... With builder capital, is it just debt? Are small business loans the answer? Dig in a little bit about the differences between maybe ... We know what venture is, we know that that's not what you're doing, we know what loans are. Where do you sit, or what's the difference?
Nathalie Molina Niño: (20:20)
Yeah. I'm glad you asked, especially the thing about the small business loans. One of the misconceptions about builder capital is that the big, or at least intending to be big, companies that are on a fast track belong in VC and somehow the small businesses belong in builder. Builder is an alternative to venture, which means that we're talking about fast pace, we're talking about high growth. I'll give you an example of a recent exit from my mentor, who's a builder capitalist, is AppNexus, and it sold for 1.4 billion, and nobody would call that a small business, right? The other example, of course, that I mentioned earlier is Pinnacle or Tencent or even the last round of financing to Uber came from a holdco, not a venture fund, right?
Nathalie Molina Niño: (21:02)
So I want to dispel the myth that builder capital is another way of saying, "Hey, small business." We're talking about similarly ambitious, high growth, fast growth, wanting to be big and take over the world kind of companies, but, from an investment standpoint, I see the biggest difference being if you're more of the banker and you are much more interested in playing the numbers, which is fair. It's a high-risk asset class. You have to play the numbers. Modern portfolio theory is that, right? Modern portfolio theory is having you put a bunch of your energy in as far or wide a direction as you can and then knowing that only a subset of those are going to succeed.
Nathalie Molina Niño: (21:45)
I only quote him ironically, so if anybody thinks that I'm actually saying that I respect him, Peter Thiel calls it spray and pray. I find just about everything that comes out of his mouth offensive, but spray and pray, while it's offensive in my opinion, it is partly true, right, in the sense of you're spraying money in as far a direction as you can and then you're praying that some subset of those are going to survive. It's confirmation bias. People talk about people using spray and pray as a strategy as being really good at picking winners, when, in fact, what we know is that they pick their favorites really early. You cannot possibly put a lot of energy into 200 companies, right? So you're going to pick your winners really early. You're going to put love and energy into those winners. Then, surprise, those tend to be the pool where success comes out of.
Nathalie Molina Niño: (22:35)
If you're a builder, you're less interested in the numbers in terms of modern portfolio theory and you're more interested in being an operator, which means that your portfolio is smaller. You probably have 10, 15, 20 companies, and you're going really deep with a no fail perspective into each of them. AppNexus's founders and the funders who were involved, the builder capitalists early on, AppNexus was not going to fail, right? What's interesting about having a concentrated portfolio where you're very operational is that you're also taking large stakes.
Nathalie Molina Niño: (23:11)
So in a holdco environment, you're essentially structurally ... For anybody ... I know this audience is technical. You have a holdco, and then you're raising on an SPV basis usually, on a deal by deal basis, which means that if it's a healthcare company and it has that longer horizon and the time of maturity for that company is more like 10, 15-year range, you've got an SPV that doesn't dictate an arbitrary timeline the way that a fund does. But then you've got another company, say, [inaudible 00:23:36] security company in another SPV, and that cycle is more similar to maybe traditional VC. Maybe it is a two to five-year cycle, and that company is either going to acquire an IPO or they'll take the SPAC route, but it's got a shorter cycle by virtue of what it is.
Nathalie Molina Niño: (23:52)
The difference, I would say, from an investor standpoint is if you're the kind of investor, like me, that sucks at being a passive investor and you need to have your hands in there because you're just an operator through and through, then you're more likely going to be happy being a builder capitalist. If you prefer to play the numbers and do modern portfolio theory, that's exciting, too. That's about quantity. It's about volume, it's about scale in your portfolio. From a founder standpoint, the difference between venture capital and builder capital is what you can imagine, right? You're not having a cap table that's filled with a lot of different people. You're probably not giving them as much equity. But you are going to have to play nice with this builder capitalist that's basically going to sit with you and help you grow your company. If you don't want the investors to meddle as much, that might not be the model for you. But if you really want to partner with an investor that's going to sit right next to you and help you blow up your company and make it massive, then that's the trade-off.
Sarah Kunst: (24:46)
Yeah, yeah. No, that makes a lot of sense. I think a lot of founders, there used to be a thing in Silicon Valley, I guess it still exists, called party rounds, and it's like, "Oh, we have all these great people in." Then you pick up the phone when your phone's dying or when your company's dying and no one answers, like literally-
Nathalie Molina Niño: (25:04)
Or during a pandemic, I mean.
Sarah Kunst: (25:05)
Yes, no one answers. Yeah. For me, I've been surprised. As a former operator, I always want to be really helpful to companies. I don't invest in companies if I wouldn't be excited about helping them. So it always surprises me when I'll think, "Oh, I love that company, but I haven't had the chance yet to be super hands-on." Then I'll get an email from them that's like, "You're our most helpful investor." I'm like, "This is terrifying." If I'm the most helpful investor when we're still at a point where I dig in a lot on marketing and fundraising, and so when we're not at those points, I'm a little bit less involved, and if I'm still your most helpful investor before I've started to, in my opinion, help you, God help you because I don't know who else is going to. It is [crosstalk 00:25:53]-
Nathalie Molina Niño: (25:53)
Yeah, the bar's pretty low. The bar's pretty low. I will say again, for all the people that I think I just poo-poo VC all the time, it's not really the fault of the VC, per se. The model is designed to be ... Again, it's modern portfolio theory. It is about managing the portfolio of winners and knowing that there are going to be losses, right? But when you look at the structure, for example, the 2% fund structure allows you to have a pretty limited staff. So how is it possible that somebody who has 200 companies in their portfolio could possibly do the sort of hands-on founder first, all the things that everybody has on their website that says that they really spend a lot of time and energy with the founders? But how do you do that when you look at their website and they actually have two or three principals, maybe a couple venture partners, maybe a couple associates? How do five or six people pay lots of attention and give lots of love to a portfolio of 200? It's physically impossible, right?
Nathalie Molina Niño: (26:47)
So I think, for founders, there's a little bit of do the math, see what's actually there to support you, and see what's viable and what's real, and be realistic, right? All of these different forms of capital come with their pros and their cons. Again, my beef is just let's make sure that we educate founders so that they know, exactly to your point, that person probably was better off getting a line of credit or a loan. Let's make noise. Let's talk about all of the people in the small business loan or in the line of credit space or even in the venture debt space, and let's make noise about who they're serving and who they're not serving and how they need to do better. But let's not guide everyone towards this, I think, dangerous VC-only world.
Sarah Kunst: (27:33)
Yeah, no. The thing is anybody who's making that commitment, it is 10 times bigger of a commitment than a marriage. You can divorce anybody any day of the week. Getting an investor out of your company is nearly impossible. So, to that end, people should be super thoughtful about it, and if it's the right thing for them, great, but you should go in with 100% conviction, not just ... Literally, it's funny because the average age of founders, which ageism in tech is also very much a thing, but the average age of founders kind of correlates with the average age of people when they get married, right, or [inaudible 00:28:11]. So you see these people who've been dating somebody for five years and then they're engaged for two years and it takes them forever and then they go out and they raise money from a lead in a three-week process, and you're like ... My opinion is you're probably wrong on both ends, right? You're way too slow on one end, you're going too fast on the other. There is a time that makes sense for both of these things, and you are off. So that resonates a lot with me. We're going to have people drop questions into the Q&A.
Nathalie Molina Niño: (28:43)
Ooh, fun.
Sarah Kunst: (28:44)
It's going to be very fun. But, before that, we have a few more questions, or I have a few more questions for you. One of them is tell us about your book, why you wrote it, what it's about, where people can buy it, and everything like that.
Nathalie Molina Niño: (28:59)
Yeah. I'll start with the last, which is timely, as we are in the middle of an election. People can buy it everywhere, but obviously buy it at your local bookseller if you can. Leapfroghacks.com is the website, and it directs you to all the traditional places where you can buy the book. But proceeds of the book go to an organization called VoteRunLead, which VoteRunLead is in the business of getting women into elected office. They got Ilhan Omar in. They are responsible for training some of the most amazing people that are currently household names. They have a success record that is better than any VC fund that any of us has ever seen. Their win rate is pretty astounding.
Nathalie Molina Niño: (29:39)
But, yeah, I wrote it because if you and I just take, which is, P.S., a chapter in my book, this conversation around funding, around the fact that there's a world that is bigger and wider than just VC, I was just finding that as a founder, I think, like all founders, I inhaled every business book known to man. I got to the point where I would be pretty happy if there was a chapter or two that were relevant to me and the rest was honestly trash. I don't mean trash as in bad advice. I just mean not applicable to me, right? The whole chapter on friends and family round, I'm like, "You could have immigrants that grew up in the sweatshops of Los Angeles." Who are these friends and family that are supposed to be writing hundreds of thousands dollars' worth of checks for me? But I accepted it because I thought I'm an anomaly.
Nathalie Molina Niño: (30:28)
Then it wasn't until I went to the Center for Women's Leadership at Barnard and I was suddenly in a research institution and I was neck-deep in data that showed me my experience wasn't an anomaly, my experience is the experience of the vast majority of entrepreneurs in this country, and the literature out there just isn't speaking to us. The fact that we in our industry have the gall to call that entire round of financing the friends and family round in a country where most families do not have $5000 in their savings account just shows how out of touch with reality we are. Bottom line, I wrote the book because I realized that the majority of entrepreneurs were feeling what I was feeling and I was like, "What would it be like if an entire book, from A to B, spoke to the reality of most entrepreneurs?"
Nathalie Molina Niño: (31:17)
What would it look like if all of the examples were from people like Nina Vaca, so many others that have built their companies the way that most people have built their companies, right? Sometimes fast, sometimes slow, always retaining as much ownership as you can, being thoughtful about the fact that you are living in a world that you have to wake up in the morning and look at your neighbors and have some semblance of integrity and ethics in what you're doing. Most people do actually build businesses with that in mind, even if it's just about I have a local store and I [inaudible 00:31:51] with the neighborhood, right? So that was the motivation. I ended up packing it with stories of 63, I think, in total, amazing entrepreneurs so that it's not just me giving advice. It's me saying, "This is a really good idea, and, P.S., here's an example of somebody who did it and you can copy them." Because I think that that's the best sort of way, right? Just don't take my advice, here's an example of somebody who did it.
Sarah Kunst: (32:15)
Yeah, that's amazing. That is awesome. And what's your favorite leapfrog hack?
Nathalie Molina Niño: (32:24)
They bleeped my favorite one, and it's exactly what you and I just talked about, which is F-word the friends and family round.
Sarah Kunst: (32:32)
I like it. I like it. Yes, I agree. That is awesome. Oh, actually let's start with questions, and then I have a few more questions for you. But Paul [Teiland 00:32:47] asks, "What would an ideal exit be for a builder capitalist?"
Nathalie Molina Niño: (32:52)
Oh, I love that question. The last chapter of my book is probably also one of my favorites. It's called ... It's really about the idea of an alternative exit. In this case, and this is not my answer, but this is another ideal example. But it is just an example of the fact that exits have for some reason ... Again, going to that topic of being myopic, we think exits are IPOs or acquisitions, and there's a world way beyond just those two options, right? In the case of Hanky Panky, which is a 42-year-old iconic brand ... If there are any women on this call, I guarantee you they're probably reaching out touching their thong right now because it is a cult. Hanky Panky, people are obsessed with it. It's a highly successful brand, and two years ago, for their 40th anniversary, they announced to their 140 employees, they're entirely made in the US, they have an office in Park Avenue, and they're manufacturing in Jamaica, Queens, that they were handing the company over to their employees in an ESOP. That was their exit, right? And the founders are doing-
Sarah Kunst: (33:53)
What is an ESOP?
Nathalie Molina Niño: (33:55)
Sorry, it's essentially handing the shares over to the employees in a structured not really buyout but a transition. At the end of the day, the employee stock offering program, I believe, it might be. I might have the acronym wrong, which is thank you for calling me on that because I hate when people use acronyms and they don't actually know what they mean. But that's one option.
Nathalie Molina Niño: (34:19)
I would say that for builder capitalists, the big thing for me, I always call it the third option that nobody talks about, and that is that builder capitalists have traditional exits. They IPO. One perfect example is the builder capitalists who built 1-800-Flowers, right? The McCanns built that company. It's a family-owned company. They IPO'd it. It turns out, even despite the IPO, they retained majority ownership of the shares, and so it still very much is a family-owned business in many ways. It was built by builder capitalists, and it's still majority owned by builder capitalists. So IPOs are totally within the realm of possibility, and if that's what's right for a company, awesome. An acquisition, same.
Nathalie Molina Niño: (34:58)
The third option that I would say builders are obsessed with the thing that people like Warren Buffett are obsessed with, which is holding. If a company is growing and delivering to you quarterly dividends that you are happy, smiling all the way to the bank to the cash, why the hell would you let it go? Keep it.
Sarah Kunst: (35:19)
Sorry, as a VC, I don't know what word means, holding.
Nathalie Molina Niño: (35:24)
I know.
Sarah Kunst: (35:24)
I've never heard of it.
Nathalie Molina Niño: (35:25)
I can see your head exploding a little bit. Yeah.
Sarah Kunst: (35:27)
[crosstalk 00:35:27].
Nathalie Molina Niño: (35:27)
I have to say almost every successful VC that I have spoken to about this has that story. And they usually have a lot of stories like this, but they have that one story of that one that it's like, "If I didn't have a fund cycle that required that I deliver this IRR in this time frame, that one, we would not have pushed to sell or to IPO. We would've held longer. They would've probably doubled, tripled their returns, and I would've been a far richer, most cases, man."
Sarah Kunst: (35:59)
Yes. And it's interesting because you see, I think, with the private equity starting to get more involved in VC ... Because private equity, which is a very different animal, is in some ways similar to builder capital towards the end, in that they're starting to be the vista equities of the world, where they want to buy something and hold it for a while and make money and maybe hold it for a really long time. So there is an understanding of that. It just isn't in the venture class, the venture asset class right now.
Nathalie Molina Niño: (36:30)
I think I know what you're talking about with some of the folks that are holding for a little bit longer, but if you look at the actual fund cycles of private equity over a VC, their cycles are usually shorter.
Sarah Kunst: (36:41)
Yeah. No, they're [crosstalk 00:36:41]. Yeah, yeah, definitely, yeah.
Nathalie Molina Niño: (36:41)
A lot of the times, they're even shorter. They're talking about two-year turnarounds, right, especially when it's distressed assets or something like that. So that's the big difference, is that it's about cash out, it's about having the liberty structurally to be able to take one company, say, of the portfolio of companies and say, "You know what? This one, we're going to hold it, and we can because our structure allows us to do that."
Sarah Kunst: (37:03)
Yeah, yeah. So Rafael Febres-Cordero has a question. "Are you involved in businesses related to the Hispanic market in the US and Latin America, and then what is the best way to connect with you?"
Nathalie Molina Niño: (37:19)
I suppose I am, in that I am pretty visible in talking a lot about capital and where it's getting channeled and the fact that the single most entrepreneurial group in this country by any statistical measure is Latinas. Really close up there in terms of volume are Black women, and if you look at percentages, Black women beat everyone, which include, obviously, Black Latinas. So I would say, yeah, it's an area of interest, but I don't ever invest because of who the founder is, I invest on where the impact is.
Nathalie Molina Niño: (37:58)
The example that I give people, if a group of all-white male founders came to me with a company that is curing breast cancer and another group of all, say, women of color come to me with a new interesting lipstick line, both might be great investments, both probably deserve to be invested in, but I'm going to choose the breast cancer one because I can fix a leadership team, I can fix a lack of diversity on a board, I can't fix a business model that has limited impact. If you ask me to measure the impact between the lipstick company and the cure for cancer, there's a clear winner for me. One of them is going to impact the lives of millions and millions of women around the world, and the other one will probably make a handful of women rich, which is great, but I'm looking for scale, right?
Sarah Kunst: (38:56)
Yeah, yeah. Totally agree with that. Well, in our last couple of minutes, I want to [crosstalk 00:39:02]-
John Darsie: (39:02)
I have a question, Sarah. I'm raising my hand.
Sarah Kunst: (39:03)
Yes, okay, [inaudible 00:39:03], you have a question. What's your question?
John Darsie: (39:03)
I have a question.
Sarah Kunst: (39:03)
You have to ask it in Spanish.
John Darsie: (39:10)
Nathalie, [Spanish 00:39:10]-
Sarah Kunst: (39:13)
Even I [crosstalk 00:39:13] that one.
John Darsie: (39:13)
... [Spanish 00:39:13]?
Nathalie Molina Niño: (39:13)
I feel like I have to be the translator here. What's the impact of the pandemic on people looking for jobs in big companies, and is it versus small, sorry, big cities versus small cities, or-
John Darsie: (39:34)
[Spanish 00:39:34]?
Nathalie Molina Niño: (39:34)
Yes. I love that because I'm a little bit obsessed with the trajectory of cities that we have historically ignored. I have done a lot of work in places like Detroit and Baltimore and New Orleans, places with thriving economies, cities like New Orleans that are majority Black, Baltimore, right, but not enough capital has actually gone into the local community to build it out. New Orleans is particularly interesting because you've got a lot of startup activity but not necessarily the capital going into the people who were born and raised in New Orleans. So just because capital is going into a smaller city doesn't necessarily mean it's solving any of the problems in the city, which I would caution people to think about. But I still think that proximity to seeing capital and jobs and things being freed up to go into the smaller cities is really exciting.
Nathalie Molina Niño: (40:36)
I think it's exciting both from a business standpoint, because that means that there are all these undervalued assets in cities all around the country that we as investors can start to pour money into and see some really serious upside, but in terms of politics, I have to admit that's the other reason I think it's exciting. If we see more and more people who are educated at the best schools and who have learned to run businesses, mentored by some of the best people in the world, moving back to those cities or for the first time to those cities that have historically been ignored and under-invested in, then we're going to see a total change in the landscape of what the country looks like and maybe even start to see that predominantly red map turn a little more blue.
John Darsie: (41:19)
That's all I got. It was a great answer. Thank you.
Sarah Kunst: (41:20)
I love it. Great job. Perfect.
Nathalie Molina Niño: (41:23)
Amazing Spanish skills.
John Darsie: (41:25)
I know. It's deep in the back of my brain.
Sarah Kunst: (41:27)
[crosstalk 00:41:27].
John Darsie: (41:27)
Once upon a time, I was fluent, but when I'm forced to speak it, I can sometimes dig up some words. But I'd like to use it more.
Nathalie Molina Niño: (41:35)
I thought Sarah was just being mean, but you delivered.
John Darsie: (41:37)
Yeah.
Sarah Kunst: (41:39)
Good. He did it, he did it. And there's one last question that we're going to sneak in there and then we're going to end. Humanitarian Productions says, "Thank you very much for being such an inspiration to us Latinas, especially in the current US divisive climate. Question, what are the main distinctions between your approach and the traditional CSR approach?"
John Darsie: (42:00)
Oh, I want to give them, maybe while I'm talking, an opportunity to explain what they mean by CSR. I know that-
Sarah Kunst: (42:08)
Corporate social responsibility.
John Darsie: (42:10)
Yeah, corporate social responsibility, but I wonder if the person asking means ESG. Corporate social responsibility, if you think about the percentage of investment into the business community that's coming from corporations, so corporate-backed venture funds, for example, it's pretty negligible. So I don't know if that's what the person asking the question really means. But I don't know that I believe in corporate social responsibility. I think that it's a wing of the marketing department or it's a wing of the R&D department. I think the best form of corporate social responsibility or the best form of philanthropy, because a lot of the times, corporate social responsibility programs are heavy on the philanthropic side ... In my view, the most thoughtful and the most egalitarian and participatory form of philanthropy is called pay your taxes.
Sarah Kunst: (43:10)
I love it. I love it. Great. Well, you did a great job answering that, and you did a great job with all of this. We're so excited to have you here, so thank you, thank you, thank you. And then I think now to give it back over to John.
John Darsie: (43:23)
Nathalie, I just wish you-
Nathalie Molina Niño: (43:24)
Thank you, John.
John Darsie: (43:25)
I just wish you had stronger opinions, really. It would've made for a more interesting talk. But thank you so much for joining us. And, Sarah, it's a pleasure to have you moderating some of these talks. You bring, obviously, great knowledge and perspective to everything that we talk about, and you introduce us to people like Nathalie, so we're very grateful for your participation.
Nathalie Molina Niño: (43:43)
People like Nathalie who would never have said less unless it was Sarah asking.
John Darsie: (43:48)
Of course.
Nathalie Molina Niño: (43:48)
So Sarah's an asset. Sarah, thank you for inviting me.
Sarah Kunst: (43:50)
Thank you. Thank you, guys, so much. Yeah.