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December 13, 2017
5 Qs WITH A DEALMAKER

Susan Lyne has quite the resume. She was chairman of Gilt Groupe, CEO of AOL's Brand Group, president of ABC Entertainment, and CEO of Martha Stewart Living Omnimedia. Most recently, Lyne founded BBG Ventures, an early-stage fund focused on consumer internet and mobile startups with at least one female founder.

 
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"There were a slew of women starting companies who were having a hard time raising venture capital," Lyne told Fortune. "Before they could even start talking about the business they were building, they had to explain to the guys around the table how women thought about their closets or whatever it might be."

So Lyne saw an opportunity to launch a fund with a focus on female-founded companies. She spoke with Fortune about her career path, venture funding trends, and sexual harassment allegations.

Below is an excerpted conversation. Read the full Q&A here.

FORTUNE: You've previously said that you believe the greatest untapped opportunity for venture capital lies in backing women. Can you elaborate on what that means?

LYNE: Every study of consumer buying points to the fact that women aren't just the dominant consumer, but are either responsible for, or have the final say on, 80% of all consumer purchases. The fact that there are women who are building companies that directly address a pain point for that female consumer is a huge opportunity magnified by the fact that the vast majority of the venture world is ignoring them. Even if it's not ignoring them, they're not part of the inner circles. They're not part of the network that venture capitalists check in with on a regular basis to find out who's building something worth investing in.

You've had an interesting career path—from Disney to Martha Stewart to AOL. How has being a lifelong operator affected the way you make investment decisions?

It's probably impacted me for better and, sometimes, for worse. Before investing, I really want to understand that there is a business model here that can work. It doesn't mean that the company has to have revenue right now or even plan to have revenue in the next year, but I want to know that the founder knows what the business is that they're building long-term.

They also need to be very clear about who they're building this for—I think that comes out of operating as well. The founder needs to genuinely understand what need they are filling and how they're going to do it that's accessible.

Your investments include GlamSquad, Thesis Couture, and The Wing. What are some of the key elements you always look for in a founder or company before investing?

There are three or four key areas we focus on. We look for a founder who has done the work, who understands the consumers they're doing this for, and who is utterly passionate about making it happen. It's really hard to build a company. There are always going to be dark days, so if you're not convinced this is the thing you've been put on this Earth to do, you may not make it through to the end. We really look for people who have a vision, a consumer in mind, and that they know that this is the moment for this.

A perfect example of that is Audrey Gelman who built The Wing. When she came in to pitch us, she knew she wanted to create a protective space where women could connect with other interesting women. She was convinced it was the optimal moment to do this.

Female founders received 2% of all venture funding last year. What needs to happen for this stat to change?

The biggest shift will happen when there are a half dozen women-led, women-founded companies that either exited as unicorns or IPOed. One of the reasons why Stitch Fix is an important IPO is because [CEO Katrina Lake] is the first of this new wave of female founders to take her company public. Everything about it is a great story.

Katrina had taken only a little over $40 million in venture funding. With that, she's built a company that will do about a billion dollars of revenue this year, and it will be profitable in a few years. She's been able to continue to grow it by investing free cash flow. It's not only a great business she's built—and she's built it because she understood what women needed—but she created an entirely new business model. She did it in a way that was capital-efficient, somewhat under the radar, and it still has an enormous amount of growth potential going forward.

The second thing that we need is to get more women around the table. We are starting to see some of the all-male partnerships finally bring in a female general partner. Until very recently, most of the women brought in as partners were really just venture partners in that they could share in the profits of whatever they brought into the company but were not really part of the general partnership.

And the third thing that needs to happen is that VCs need to start making it a priority to build broader networks and make sure they are meeting a wider range of entrepreneurs.

What is an investment you decided to pass on that you still regret?

One that we didn't move quickly enough on was WayUp, which is a marketplace for students to find part-time work. It was something where we had to cancel the pitch meeting and re-schedule it. We were not aggressive enough about getting it on the calendar fast. By the time our second meeting came around, it was oversubscribed.

One that we passed on was Parachute, which is a bedding company that has built a significant online business. We passed because there wasn't really any tech. When we launched BBG Ventures, one of our factors was that there needs to be some element of technology. We've since broadened that a bit to take into account the fact that BBG brands are their own animal and when you build them right, there's lots of technology that's involved along the way even though it doesn't necessarily feel like a tech company.

Based on all the pitches you and BBG Ventures have received since the beginning of 2017, what are some trends you think Term Sheet readers should be paying attention to?

We are seeing more and more companies using machine learning to develop better services and better products. I think that even companies we invested in two years ago that did not specifically focus on AI or machine learning at the time are now increasingly looking at assets that can now become that much more valuable when you apply machine learning to them.

Sexual harassment allegations have recently come to the forefront in the venture community. How can people address and solve this problem?

I've thought a lot about this in the last four to five months since these stories began to break. I think there are certain kinds of industries where very powerful men have direct contact with young women who need a "yes" from them in order to succeed. Those are probably the most dangerous arenas for something like this.

We need to make sure women feel much more comfortable reporting this stuff when it happens. There just has to be a protected space for women to speak up. I do believe that the fact that it has become part of the conversation and that so many women have come forward with their experiences of sexual harassment or sexual assault has already made an impact.

What's the best business advice you've ever received?

I go back to something that [former Time Warner CEO] Dick Parsons said to me when I was a much younger executive. We had been sitting at a table together negotiating something, and he came to me afterwards and said, "One thing to remember as you go through life is that it is always wise to leave something on the table—that a victory for one side or the other is a prescription for failure. So be careful. Just because you can get someone to agree to very tough terms doesn't mean it's going to be in your long-term interest to do that."

Read the full Q&A here.

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GrowthCap's 40 Under 40 Growth Investors. Uber charges passenger over C$18,000 for 5-mile ride, but it's all good. Indiegogo Goes Where Few Companies Dare: Into Initial Coin Offerings. Burbank goes bitcoin. New York City moves to establish algorithm-monitoring task force. Lyft goes international—goes Toronto.

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VENTURE DEALS

iZettle, a Swedish fintech company which offers commerce solutions for small businesses, raised €40 million ($47 million). Dawn and The Fourth Swedish National Pension led the round.

Dreamscape Immersive, a Los Angeles, Calif-based VR startup, raised $30 million in Series B funding. The investors were Nickelodeon, Majid Al Futtaim, VRSense Solutions Limited, and Image Nation Abu Dhabi, Bold Capital Partners, 21st Century Fox, and Warner Bros.

MindTickle, a San Francisco-based sales readiness platform, raised $27 million in Series B funding. Canaan Partners led the round and was joined by investors including Accel Partners, New Enterprise Associates and Qualcomm Ventures.

Skillz, a San Francisco-based mobile esports firm, raised $25 million in Series C funding. Telstra and Liberty Global led the round and was joined by investors including Andy Miller.

Digital House, a Buenos Aires-based group of schools that provide digital skills to Latin America's next generation, raised $20 million in funding. The investor was The Rise Fund, TPG Growth‘s social impact fund.

OTA Insight, a London-based cloud-based data intelligence platform for the hospitality industry, raised $20 million in funding. Eight Roads Ventures led the round and was joined by investors including F-Prime Capital Partners.

FRISS, a Netherlands provider of analytics software for fraud, risk and compliance to P&C insurers, raised 15 million euros ($17.6 million) in Series A funding. Aquiline Technology Growth and Blackfin Capital Partners led the round.

Kasisto, a New York-based creator of conversational AI platform for finance, raised  $17 million Series B funding. Oak HC/FT led the round and was joined by investors including Propel Venture Partners, Two Sigma Ventures, Commerce Ventures, Mastercard and Partnership Fund for New York City.

ESS Inc., a Portland, Ore.-based maker of flow energy storage systems, raised $13 million in Series B funding. The investors include BASF, Cycle Capital Management, Presidio Partners Investment Management, InfraPartners Management and Pangaea Ventures.

Clubhouse Software, a New York City-based maker of a modern project management platform for software development teams, raised $10 million in Series A funding. Battery Ventures led the round and was joined by investors including Resolute Ventures, Lerer Hippeau Ventures, Neu Venture Capital, RRE Ventures and Zeitgeist Partners.

NexWafe GmbH, a German provider of monocrystalline wafers to solar cell producers, raised 8 million euros ($9.4 million) in funding. Saudi Aramco Energy Ventures led the round and was joined by investors including Green Gateway Fund 2 and Lynwood (Schweiz) AG.

Upstream Security, a San Francisco-based cybersecurity platform provider for connected cars and self-driving vehicles, raised $9 million in Series A funding. Charles River Ventures led the round and was joined by investors including Glilot Capital Partners and Maniv Mobility.

Gremlin, a San Mateo, Calif.-based firm building more stable systems, raised $8.75 million in total seed and Series A funding from Index Ventures and Amplify Partners.

SevenRooms, a New York City-based reservation, seating and guest management software for restaurants, hotels and nightlife, secured $8 million in funding. Comcast Ventures (NASDAQ: CMCSA) led the round.

Divvy, a Lehi, Ut.-based payments firm. Raised $7 million in seed funding.

GenXComm, an Austin, Texas-based telecom firm, raised $7 million in Series A funding. Intel Capital (NASDAQ: INTC) led the round and was joined by investors including Azure Capital Partners, Bandgap Ventures, Capital Factory, FAM Capital Partners, Lip-Bu Tan, UT Horizon Fund and WS Investment Co.

CrossBorder Solutions, a Menlo Park-based provider of corporate tax software and services, raised $6 million in Series A funding. Kennet Partners led the round.

Aeronyde, a Melbourne, Fla,-based drone infrastructure firm, raised $4.7 million led by JASTech Co. Ltd.

Homeis, a New York-based network for foreign-born communities, raised $4 million. Spark and Canaan Partners  led the round, and was joined by investors including The Chernin Group, Samsung Next, Tim Armstrong, and Adam Singolda.

Slingshot Aerospace, an Austin-based a satellite data startup, raised $3.25 million in funding. ATX Seed Ventures led the investment and was joined by investors including included Okapi Venture Capital, Sway Ventures and NoName Ventures.

Talenya, an Israeli technology-based recruitment company, has raised $3 million in funding. The investors included Lool Ventures and Gal Ventures.

Inflect, a San Francisco-based online marketplace for internet infrastructure services, raised $3 million in seed funding. The investors included Jon Buccola Sr of Greenpoint Technologies and Chris Palermo, CEO of Global Communications Network.

Myonexus Therapeutics, a New Albany, Oh.-based clinical-stage biotechnology company developing transformative gene therapies for limb-girdle muscular dystrophies, raised $2.5 million in seed funding. Investors included CincyTech, LLC, Rev1 Ventures, The Jain Foundation, and GFB ONLUS.

CGTrader, a Lithuania-based 3D tech firm, raised 2 million euros ($2.34 million) from Karma Ventures, Intel Capital and Practica Capital.

Hawthorne, which delivers tailored personal care products for men, raised $2.2 million from investors including Shana Fisher of 3KVC, Comcast Ventures, and Founder Collective, as well as Shan-Lyn Ma of Zola (cofounder and CEO), Kyle Vucko of Indochino (cofounder and ex-CEO), and Sarah Willersdorf of DVF (ex-CMO).

Linear Health Sciences, an Oklahoma City-based developer of safety solutions for medical tubing, raised $1.538 million in funding. The lead investor was i2E Inc.

Heartbeat, a Santa Monica-based two-way brand endorsement platform, raised $1 million in seed funding. Sinai Ventures led the round and was joined by investors including Right Side Capital Management.

Landoop, a London-based provider of data streaming management platform Lenses for Apache Kafka, raised $1 million in seed financing from Marathon Venture Capital.

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HEALTH AND LIFE SCIENCES DEALS

Aeonian Pharmaceuticals Inc, a San Francisco-based biopharmaceutical company focused on age-related diseases, raised an undisclosed amount of seed financing. Apollo Ventures led the round.

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PRIVATE EQUITY DEALS

KKR and FS Investments agreed to form a business development company platform. The platform will have $18 billion in combined assets under management.

Blackstone is acquiring 10% stake in Logicor, a source familiar with the matter told Reuters. Blackstone previously sold Logicor to China Investment Corp. for 12.25 billion euros ($14.4 billion). Financial terms weren't disclosed. Read more.

Warburg Pincus acquired a 20% stake in Bharti Telemedia Limited, the direct-to-home arm of Airtel, an India-based telecom firm. The transaction was worth $350 million.

Belcan, a portfolio company of AE Industrial Partners, acquired CDI's, a Philadelphia-based defense contractor, aerospace and industrial equipment business unit. Financial terms weren't disclosed.

On Location Experiences, a portfolio company of RedBird Capital Partners, Bruin Sports Capital, and 32 Equity, acquired PrimeSport, a Atlanta-based firm providing direct access to sports and entertainment events. Financial terms weren't disclosed.

Care Advantage, a portfolio company of BelHealth Investment Partners, acquired Care Solutions, a Hampton, Va.-based provider of home personal care services. Financial terms weren't disclosed.

Onex Corp acquired SMG Holdings Inc, a West Conshohocken, Penn.-based manager of convention centers, stadiums, arenas, theatres, and other venues. Financial terms weren't disclosed.

G.E.T. Enterprises, a portfolio company of Olympus Partners,merged with Winco, a maker of kitchenware and tableware. financial terms weren't disclosed.

Strategic Health Services, a portfolio company of MBF Healthcare Partners LP, acquired Jesus B. Menendez-Rivera, M.D., P.A., a Miami-based primary care medical practice. Financial terms weren't disclosed.

T.F. Hudgins, a portfolio company of The CapStreet Group, acquired Texas Rotating Equipment, a Dayton Texas-based repairer of industrial steam turbines and pumps. Financial terms weren't disclosed.

Rogue Wave Software, a portfolio company of Audax Private Equity, acquired ZeroTurnaround, a Tallinn, Estonia-based provider of software tools for Java developers. Financial terms weren't disclosed.

CORE Industrial Partners agreed to acquire Prototek Sheetmetal Fabrication, a a Contoocook, N.H.-based company prototyping CNC machined and sheet metal fabricated parts. Financial terms weren't disclosed.

Clearlake recapitalized Knight Energy Holdings, a Santa Monica, Calif.-based firm focused on the oil and gas industry. Financial terms weren't disclosed.

Drillinginfo, an Austin-based SaaS and data analytics company, agreed to acquire Pattern Recognition Technologies, a Dallas-based energy forecasting firm. Financial terms weren't disclosed.

Joulon, a portfolio company of KKR, acquired Harris Pye Engineering Group Limited, a U.K.-based provider of engineering and project management services to the marine, offshore and industrial sectors. Financial terms weren't disclosed.

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OTHERS

Hayfin Capital Management, London-based business lender, agreed to acquire Kingsland Capital Management, a New York-based investment manager specialising in CLOs and leveraged credit. Financial terms weren't disclosed.

Aeroports de Paris, the French airport operator, may have picked Bank of America-Merrill Lynch and/or BNP Paribas for a potential privatisation from the government, Reuters reports citing sources. Read more.

The WESROC division of Independent Technologies agreed to acquire EnerTrac, a Hudson, N.H.-based fuel delivery and monitoring solution, from Senet. Financial terms weren't disclosed.

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IPOs

BK Brasil Operacao e Assessoria a Restaurantes SA, the Brazilian operator of Burger King, is expected to price its IPO at the high end of its range, people with direct knowledge of the matter told Reuters. Read more.

GFL Environmental, a Canadian waste management firm, is reportedly planning an IPO raising up to C$1 billion($778 million) in Canada, Reuters reports. Macquarie backs the company. Read more.

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EXITS

APG agreed to acquire infrastructure assets from Ardian for over 1 billion euros ($1.2 billion) the private equity firm told Reuters. Read more.

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FIRMS + FUNDS

Alpha Venture Partners, a New York-based firm, raised over $28.3 million for its second fund, according to an SEC filing. Financial terms weren't disclosed.

Lime Rock Partners, a Westport, Conn.-based private equity firm, raised over $337 million for its eighth fund out of a $1 billion target, according to an SEC filing.

Gigafund 0.1, a Redwood City, Calif.-based venture firm, has started fundraising, according to an SEC filing.

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PEOPLE

David Hodgson was named vice chairman at General Atlantic. Previously, he was a managing director.

High Alpha, an Indianapolis-based venture studio, named Jeff Slobotski as an entrepreneur-in-residence. Slobotski will continue as managing partner at Router Ventures.

Felix Capital hired its first Entrepreneur In Residence, George Pallis and hired a new Associate, Emilie Spire.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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