#17 - Aileen Lee and Kirsty Nathoo at the Female Founders Conference

**Craig Cannon** (0:00)
Hey, this is Craig Cannon, and you're listening to Y Combinator's podcast. Today's episode is a conversation between Kirsty Nathoo and Aileen Lee. Kirsty is a partner at YC, as well as the CFO, and Aileen is the founder of Cowboy Ventures. This conversation was recorded at our fourth annual Female Founders Conference, which took place here in San Francisco this June.
Okay, here we go.

**Kirsty Nathoo** (0:20)
So I'm Kirsty Nathoo. I'm a partner at Y Combinator and also the CFO. And our next speaker is Aileen Lee. And Aileen is the founder of Cowboy Ventures, which is a fund that invests in seed stage companies. Before starting Cowboy, Aileen was at Kleiner Perkins, and she's also spent time at Gap and Morgan Stanley.
Aileen is also famous for coining the term unicorn, which you probably sick to death of hearing about now.
And we actually invite Aileen to talk to our founders at YC Every Batch. And the reason why is that we just love that she gives this amazing, no-nonsense advice to our female founders about talking to investors. So I'm excited to be able to chat with her today in front of everybody.

**Aileen Lee** (1:17)
Thank you.

**Kirsty Nathoo** (1:21)
Okay, so Aileen, I gave a little bit of your history there, but why don't you go into a little bit more detail about what made you decide to go off on your own and start Cowboy?

**Aileen Lee** (1:31)
So Cowboy Ventures is still kind of a startup. We started five years ago, and I had been at Kleiner for a long time, actually almost 13 years.
And part of the time, from 7 to 09, I actually kind of left part time and went to go run one of our portfolio companies as CEO. And when I came back, I just had a different feeling about the firm and the work, and I found that I was fortunate to be a senior partner at Kleiner at the time. And for these large firms, just like large companies, as you kind of get into senior management, you spend more and more of your time in meetings, less kind of doing the functional work and more around kind of trying to help run the firm a bit. And I just really love working hands on with founders and with portfolio companies. And I just felt like our firm had kind of grown quite large, and I was spending more time on internal meetings than actually just spending time with companies. And the industry had changed a lot, too. I mean, as you all probably know, there are a lot more funds now. There are a lot more startups. They can be all around the country. And so venture investors really have to be kind of open for business and available to meet with companies all the time, because you just don't really, you know, you never really know what's under the hood unless you have a meeting and you get to meet people. And so I just I felt like having a job where all I really did was just meet with companies, get to know talented people who might start companies, who might want to work at portfolio companies and helping portfolio companies is really all I wanted to do with less overhead.
And seed was this new category that was still pretty small in terms of the number of firms and also the number of well respected brands in the seed category that were known for giving hands on help.
And yet it was it's the biggest, it's kind of the biggest part of the funnel. And so it seemed like a great opportunity to both start something new, make it more personal, make it very small with very little overhead, where really all we do is very pure and very focused.

**Kirsty Nathoo** (3:29)
And so what did you what did you see at Kleiner and places like that, that you decided you were going to do differently with your fund? Anything?

**Aileen Lee** (3:37)
It did get quite large. And I think this isn't specific to Kleiner, but in general, the math of venture capital is such that venture capitalists make money through a combination of fee income and what is called carried interest, which is basically profit sharing with their investors once you've returned the capital. And when you do the math on the funds, if you have a five hundred eight hundred billion dollar eight hundred million or billion dollar fund, the number of multi billion dollar companies that you have to be an investor in per fund is quite large. It's when you do the math, it seems very unlikely that most venture capital firms will be able to generate the kinds of returns to investors and to themselves that they have in the past.