Venture Capital Investing in FinTech
January 19, 2023
In this episode of Engaging Alternatives Spotlight, Elana Margulies-Snyderman, Director, Publications, EisnerAmper, speaks with Rachel ten Brink, General Partner of Red Bike Capital, a Latina-led seed stage fund based in New York investing in fintech, ecommerce infrastructure and future of consumer. Rachel shares her outlook for investing in those areas, including the greatest opportunities and challenges, her experience being a woman investment manager in the industry, how the firm is embracing DEI and more.
Transcript
EMS:
Absolutely. So to kick off the conversation, tell us a little about your firm, yourself, and how you got to where you are today.
RTB:Sure. So I'm Rachel ten Brink. I'm the general partner of Red Bike Capital. To give you a little background of my career, I started my career in consumer. I spent 15 years building billion-dollar brands. I was Estée Lauder, L'Oréal, Elizabeth Arden, and then in 2014 started a company called Scentbird. We were backed by Y Combinator, raised 29 million in venture capital, which actually makes me one of 90 Latinas that's ever raised over a million dollars. Scaled that business and then started to spend a lot of time advising companies. I was on several advisory boards, started to do a lot of angel investing, was quite successful, and that led to the start of Red Bike Capital.
EMS:Very interesting and unique background, Rachel. So to segue into the conversation, given your focus on investing in the sectors I mentioned, FinTech, eCommerce infrastructure, wellness, and more, I wanted you to share your overall outlook for those spaces.
RTB:So we broadly define our thesis as powering the economy and improving people's lives. We see digital transformation as progressing rapidly with many legacies, businesses just starting to be transformed by the capabilities of technology. There are companies being built today that are solving real problems and are just starting to scale. And despite all the economic headwinds and the fact that it seems pretty grim out, there are always opportunities for those that are ready to grasp them that have the right focus, talent and execution. So we actually think it's a great time to be investing in building an early stage portfolio, specifically within the sectors that we invest in FinTech. We are particularly interested in how technology has enabled alternative underwriting models of credit and risk that are inclusive of underserved creditworthy sectors of the population that are often excluded in traditional risk models and business practices.
These underserved sectors of the population are disproportionately diverse and affect their access to credit and financial services and therefore limit their financial mobility of minorities. The second segment that we're really excited about is within SaaS. We like technologies that are specifically optimizing specific verticals like online and retail sales acquisition, improving efficiency and increasing sustainability and decreasing waste Within eCommerce. We also think about how AI can empower better decision-making across all areas of commerce.
And finally, health and wellness obviously impacts all of us. There are large knowledge to directly improve access, care and outcomes. We look for startups that have the potential to significantly improve people's lives and particularly care a lot about women and minorities. We're excited about the next generation of telehealth and home testing companies that are going above and beyond. It's connecting those dots between healthcare and consumer and for authoring better outcomes.
EMS:Very interesting. Rachel, on the other hand, I wanted you to address some of the greatest challenges you face looking ahead and why.
RTB:So I think that beyond sort of the macroeconomic conditions, and I think it's impossible to ignore the challenges, but as I said, we also look at it as great opportunities for early investing. I think personally for me, it's time management. Venture capital is sort of seven or eight jobs rolled up into one. And so number one, first and foremost for us, and for me personally, it's how can I add value to my companies? We're very much, I would say, the prototypical operator led fund. My areas of expertise are revenue and growth. And so for example, Monday I spent an hour and a half with one of our portfolio companies really jamming on their acquisition strategy and how they can think about their customers. So that's first and foremost.
I think the second part is connecting with my LPs. How can I help them? How can I help their objectives, their priorities beyond just financial outcomes, which obviously is a number one, but how else can I be truly valuable to my LPs? So that's just two jobs, right? Then comes the other piece of it, which is looking at new companies, meeting with new founders, identifying opportunities, understanding the marketplace. So that takes a lot of time in how you nurture. And I would say finally, there's a whole part that is around brand building for the firm where great opportunities like this are very helpful.
EMS:Rachel, being a woman money manager. Clearly, you're an inspiration to so many others in the business. So I'd love to hear your experience being a woman and what you're doing to inspire other younger generations to follow in your footsteps.
RTB:I think it's something that as the more I've been doing this, the more conscious and the more thoughtful I am about it. I think for most of my career I just put my head down and worked. I built brands, I built companies, and I really focused on delivering results and building businesses. Yet the reality is here I am one of 90 Latinas that's ever raised over a million dollars as a general partner. I am literally 0.1% despite the fact that Latinos represent 20% of the US population. One in four babies born in the US today are Latino. So I represent a huge community, a huge economic force that has so much potential, and yet I know how tough and lonely it is to be the only one in the room. And so I'm very deeply committed to develop diversity. I think that the reality is its good for the tech ecosystem and it's very good for returns.
So I think that besides my day job as a venture capitalist, I think it's really important to give back to the community and to be a visible role model. I joke that my aspiration in life is to be a professional door opener. And so first of all, I'm proud to be a mentor in several accelerators and also taking every opportunity to talk about how diversity really can add value to business.
EMS:Absolutely, Rachel, and that segues nicely into the next question I have for you about how your firm is addressing or integrating DEI, both at the overall firm level and also at the investment level.
RTB:So the way we think about DEI is, we don't really think about DEI as such. I think about it as growth and opportunity. I think it's very much in our DNA, we are two Latino general partners, which is obviously a rarity, and we know that it is proven that diverse teams perform better. So for us, when we look at companies we're investing in, when we look at investors we want to partner in, we know that diverse teams, and that can be very broadly defined. It's not just gender or age. It can also be experience, it can also be life perspective. We think it's very important as a woman in a Latino-led fund, I really see it as a superpower. I get to sit in rooms that others don't. I get to see opportunities that others underestimate. So it's always sort of a unique power.
And what I'm also finding is the smartest founders know there is power in that. And so we're seeing that really smart founders actively seek out diverse investors because they know that they're going to get that value add, that they're going to get that perspective as a woman, as a Latino, as an operator, as a CMO, as a CRO, that can really help them scale their business. When I think about building Red Bike, it's not just about fund one, it's really about building a firm and becoming a permanent voice in the VC ecosystem. I think to truly bring diversity to the tech ecosystem, we need to be best in class and not just raise fund one, but a firm that transcends. We invest in the best founders and are proud of our track record in diversity. 80% of our angel investments prior to launching the fund had a woman or diverse founder, and so far, four out of four investments that we've done in fund one have had a woman or diverse founder.
EMS:Rachel, we've covered a lot of ground today and I wanted to see if you have any final thoughts you would like to share with us.
RTB:Sure. Our objective is to provide risk adjusted returns to our investors. We expect to achieve this goal with a two-pronged strategy, so we invest diligently in promising startups at attractive valuations. We expect to leverage our networks to source some of the best-in-class companies and founders that will translate integrate success stories. But I think the second piece of that is to improve our investment odds and outcomes by proactively investing our time, our network, our Rolodex, to mentor and help our portfolio founders succeed. Really leverage our operational expertise in large network. In the end, our vision is to build a lasting firm that delivers real change in the VC ecosystem.
EMS:Rachel, I wanted to thank you so much for sharing your perspective with us today, and thank you for listening to the EisnerAmper Podcast series. Visit is eisneramper.com for more information on this in a host of other topics, and join us for our next EisnerAmper Podcast when we get down to business.
Transcribed by Rev.com
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