Money Talks: Lotti Siniscalco on combating bias in venture capital

As the first and only female partner at Emergence Capital Partners, Lotti Siniscalco is fighting the underrepresentation of women among VC firms and the founders they fund from the inside.

Siniscalco spent some time working for Goldman Sachs in New York but eventually got sick of being on the East Coast. So she headed west to California — where the olive oil ranches and vineyards reminded the Milan native of Italy — to attend Stanford’s Graduate School of Business. She joined Emergence in 2018 as a senior associate and was promoted to partner within a few years.

I spoke with Siniscalco recently about investing in early-stage startups, the challenges faced by women and immigrants, and what venture firms need to do to combat their own biases.

Tell me a little bit about your background. Where you are from and what led you to the world of venture capital? In case my accent doesn't give it away, I'm Italian. I was born and raised in Milan, and I was there until I was 17. Then I hopped over to the U.S. to go to college at Penn, studied finance and that's how I got into the world of investing. I had a very early internship in venture capital back in 2008 in Italy. I emailed every single VC firm in Italy and just really wanted to see what this venture thing was all about. Most of them told me "you're crazy," like we're never going to hire people like you. But two of them gave me an offer and those were my first very first steps in venture.

Emergence Capital is focused on enterprise cloud software, right? We were born right after the dot-com bust with the belief that software was meant to move from on-premises to the cloud. That was the initial thesis. On the back of that belief, we made an investment in a company called Salesforce and we began a series of funds that were laser-focused in B2B software companies. So not just enterprise. We are a highly focused team. So we believe that to be excellent at something, you're going to have to pick a segment. I really subscribe to that.

And the firm is on its sixth fund. We also recently just raised our first opportunity fund with the goal of investing in our most successful portfolio companies. It’s a $330 million vehicle to invest in our portfolio companies who are getting well above up where we typically invest, which is Series A and Series B. So when a company's gonna reach a Series D or beyond, that's where the opportunity fund would come into.

You're also the only female partner on the team at the moment. What are some of the biggest challenges that women face in the industry? One is something that's very intrinsic in the nature of VC, which is, VC is a fairly slow-moving industry. The way the actual partnerships work is old school. By the time you're promoted to principal and then partner, it typically takes a really long time. Emergence has a pretty uniquely well-defined path to partnership. Also, no one likes to be the only anything in a room. As proud as I am to be the first female partner (at Emergence), I know I'm not going to be the last and I can see internally how hard we're working to make it so that our pipeline is going to have a lot of really strong female investors. VC is also a very network-based business. You get your deals because someone sends you a text message or someone takes you out to dinner. But I'll tell you, there's a whole cohort now of female investors that's coming up. The camaraderie among this group is really heartwarming. For example, VC mom's groups. We share anything from deal flow to advice on which pacifier you should buy. So I'm trying to cultivate more of that. But it's not about the breadth of the network, it's about the depth.

This is why women have been locked out of so many industries and opportunities, right? Not just women. People of color, immigrants, LGBT folks. If you're not part of that network, it's hard to connect. Exactly. So I now as a partner at Emergence have the power to bring in an entrepreneur in front of my partnership without asking permission. It starts from there. But then who are the people in the cap table? Who are the co-investors that we bring in? Are they diverse? Or is the cap table all white men who went to Harvard? That wouldn't be a successful outcome.

Why do you think this is both the best and possibly the worst time to be a female founder? There are a lot of studies that show that during Covid the percentage of female founders receiving VC funding really shrunk. I'm at home right now with my child. If I didn't have a supportive partner and the luxury of child care, I wouldn't be able to do this interview with you. By default, the load of the work at home and with children fall on women. So we're in a moment where there's no support because there's a pandemic.

There's not a lot of infrastructure to allow women to take a big leap of faith starting a company. It's a big leap of faith. There's a lot of risk built in. And so that's why I think it is not the best time because the appetite for risk coming out of a pandemic is not necessarily the highest.

Having said that, I really believe that human ingenuity is created in moments of difficulty. The pandemic really highlighted some specific gaps that we need as a society, particularly around tools that allow families and workers to have flexibility and work remotely. It just opened this whole new way of living life. The other thing that makes it a perfect time to start a company: There's so much money right now going around, which is great for entrepreneurs. It's less great for VCs because the competition is stronger than ever.

That's the paradox, right? There's all this money, and yet still only about 2% of the funds are going to female-led companies. I believe that the tide is turning in two ways. One is, we're in a war for talent, and most of them are now Gen Zers. And they care a lot about diversity, they care a lot about not working for companies that are all white men. So I think it's very strategic to think about building diversity within the company from the beginning.

Second, LPs are starting to care, as well. So investors in venture capital funds are starting to ask a lot of questions about diversity both within the partnership and also at the portfolio level. We see they're starting to feel this pressure from two sides. We know it's gonna take a long time. We're so far away from where we need to be, but I'm optimistic because these are powerful forces.

What are some of the things that you're doing specifically to help bring about these changes? I used to be an investment banker, so I am really quantitative in the way I think. If I can't measure my progress, I feel like I'm spinning my wheels. The first thing that we did internally at Emergence was starting to measure the benchmark of how many women and people of color we are bringing in at the top of funnel. How many are presenting to the partnership? How many are in the portfolio companies? How do the boards look like? We did this twice last year, and we did this very thorough analysis to at least understand where we were starting from, so that once we did these other activities, we could measure and improve.

And I spend a lot of time trying to cultivate a community of B2B software founders that are women. The other part is that I'm working with founders who are not founders yet. I have a whole group of women that I often have events for or interact with that I think could be founders. I see the creativity in them, I see the drive. And I try to provide them with the support that they will need to make the leap of faith to become an entrepreneur, because that's the most delicate part. Especially when you have three kids at home, you feel the responsibility of having something stable and making that leap of faith with entrepreneurship can be very scary.

And what are some of the biggest challenges that immigrant founders face and how can VCs support them, as well? This is a little different with (the Biden) administration, but securing the right visa to actually get things off the ground is incredibly stressful and a lot more complicated than it should be. I know multiple people who, especially during the past administration, were not successful in securing a visa and ended up starting the company somewhere else in the world. Having to be worried about your ability to exist in this country occupies such a big part of your brain that makes it very hard to be 100% focused. I was almost deported multiple times. When I was hired by Emergence, originally I didn't have the right visa, and it was such a difficult moment to have uncertainty. I was a salaried employee, I was not even a founder. And if you haven't lived in this country for a long time, and you didn't go to a fancy school, who's your network? Just like women, immigrants lack that in-group. And some people might discount what you're saying because you have an accent.

Can you talk about combating bias in those rooms where the decisions are being made and checks are being cut? The same thing that I said about how to move the needle with female founders. First thing comes from a business sense of self awareness: measuring. You need to know, at a minimum, what your biases are in order to be able to act on them. And that's just a very painful, awkward process. I think inviting someone to maybe be a silent observer and giving you an honest perspective, or starting to measure, for example, do we tend to judge more harshly women than men on the way they present? Do we tend to ask the same questions? It's very easy, but you could have a junior analyst just literally writing down every question that you ask a founder and then compare men and women. Do they always ask the same things or not? It needs to be an active effort and come from a place of curiosity as opposed to a place of feeling defensive.  

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