Term Sheet — Wednesday, November 22
5 Qs WITH A DEALMAKER
Good morning, Term Sheet readers.
HOUSEKEEPING: As a reminder, Term Sheet won’t be in your inbox this Thursday and Friday because of Thanksgiving. In other words, I will get more than 5 hours of sleep — and for that I’m thankful. If you really miss us over the weekend, tweet at me. Have a great holiday, and see you next week!
Kimmy Scotti, a founding partner at 8VC, specializes in technology companies with a focus on healthcare. She led investments in uBiome, Blink Health, and Honor Elder Care. Before professionally investing, Scotti co-founded Script Relief, a direct-to-consumer healthcare company, and Monthly Gift, a women’s health and wellness company.
In a conversation with Term Sheet, Scotti discusses how her operating experience has helped her investment strategy, why she tells founders to call her in the middle of the night, and what “whisper networks” have done in the Valley.
TERM SHEET: You’ve had an interesting career path starting in fashion, then building companies, and now investing. How has your operating experience affected your investment decisions?
SCOTTI: I feel lucky to have had experience as an operator for the past 17 years. I can spend a lot of time in the trenches with entrepreneurs helping them solve day-to-day problems. The ideas and challenges they talk about with me are not theoretical, but they are more actionable as they are based on my own experiences. It allows me to be very hands-on and have empathy for founders’ situations in a way that a lot of other investors can’t.
You tell founders they can call you at 3 a.m. Why then?
SCOTTI: I call it “The 3 a.m. Principle.” When we’re looking at an investment that I’m planning on leading internally, I try to think about it at 3 a.m. In other words, if this founder was to call me in the middle of the night right now, do I want to pick up the phone for them? If it’s something I’m jumping out of bed for when I'm most exhausted, it passes the 3 a.m. gut check. If I’m not going to wake up for you at 3 a.m. then I really shouldn’t be working on your business.
The reason I think about this so much is that I spend half the time in San Francisco and the other half in New York. That means no one ever really knows where I am. So if you call me at midnight when you are still working or you call me at 6 a.m. when you get up, there’s a pretty good chance you’re getting me at 3 a.m. My phone is constantly ringing in the middle of the night with entrepreneurs who want to throw the ball around on a challenge they’re having that they’re really worried about. I want to be that investor that when they’re having a problem, they’re not hiding from me. I want them to be comfortable enough to call for help.
Do you think your colleagues get the same calls?
SCOTTI: I think it’d be really funny to do an informal survey of this. I think I get more of these than my male counterparts for two reasons. One, as a woman, I’m a bit of a softer landing. I’m a warm person, and that changes your relationship with people a lot. I’m also Italian, and I think that kind of gives you a general warmth — I’ll take your call and I’ll probably make you a meatball or something. And two, because of my experience as an entrepreneur, they know that I’ve probably been in that situation before.
Sexual harassment allegations have recently come to the forefront in the venture community. How can people address and solve this problem?
SCOTTI: Obviously this has been a huge problem for a long time, and I think it’s great that it’s more front and center right now and that women have more of a platform to talk about the issues they are encountering.
Women have been passing along information about who to work with and who to avoid via this so-called “whisper network.” For a long time, women survived on gossip, frankly. We warned each other in a hushed tone — “don’t work with that guy” or “work with this guy because he’s safe.”
Now, with stronger reporting structures for these issues, we’re able to better report sexual harassment and abuse as we encounter it. Obviously, the onus is still on the women to report these issues, and from my own experience, that can be really scary. But I think it’s a better time now than it has been in the last 30+ years to push your challenge out in the real world instead of hiding it in a whisper network. As we have more women in venture and more female founders, I think that’s the only way we’ll see the break-up of the boys club.
You were an adviser to the firm back when it was Formation 8. During that time, founder Joe Lonsdale ran into allegations of his own. (All accompanying legal claims against Lonsdale have since been dropped.) Is there anything you and the firm do differently in your process as a result of that experience?
SCOTTI: Those allegations were pretty quickly dismissed. They were egregious and untrue. I was just an adviser during the F8 days, but the same was true then as it is now — we treat all founders that come in and pitch us with the same respect. That’s a point that is really important to us. We don’t treat our founders differently based on gender. For us, the playing field is level.
In terms of sexual harassment, I think there’s a clear way to report issues if you’re having them. If a female founder was having a challenge, like many other female founders that aren’t in our firm but are friends and colleagues of mine, they would reach out to me for help. I’m a woman and a partner, and I have to believe that would make reporting an issue a softer landing.
THE LATEST FROM FORTUNE...
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• Uber is getting sued over its gigantic data breach (by David Meyer)
• Tesla should stick to cars (by Tony Hughes)
• What’s going to happen to the economy next year (by Matthew Heimer & Anne VanderMey)
The Boring Co.’s ‘Initial Hat Offering’ raises $300K for digging in hat sales. Oil heads to a two-year high. Trump says AT&T plan to buy Time Warner 'not a good deal.’ A website that generates apologies for men accused of sexual harassment.
• Divergent 3D, a Los Angeles-based technology development and licensing company focused on the car industry, will raise up to $107 million in Series B funding. Investors include O Luxe Holdings Limited, Horizons Ventures, Shanghai Alliance Investment Limited and Altran Technologies.
• LeafLink, a New York-based marketplace for wholesale cannabis, raised $10 million in Series A funding. Nosara Capital led the round, and was joined by investors including Lerer Hippeau Ventures, Casa Verde Capital, Wisdom VC, Phyto Partners, TIA Ventures, and Brand New Matter.
• HopSkipDrive, a South Pasadena, Calif.-based ride service for children, raised $7.4 million in funding. Investors include FirstMark Capital, Upfront Ventures, Skyview Capital and Halogen Ventures.
• Kona Deep Corporation, a Kailua-Kona, Hawaii-based bottled water company, raised $5.5 million in funding. Investors include Danone Manifesto Ventures and Grand Crossing Capital.
• Lightform, a San Francisco-based augmented reality startup, raised $5 million in funding, according to TechCrunch. Lux Capital led the round, and was joined by investors including Dolby Family Ventures, CrunchFund, Comet Labs, Presence Capital and Anorak Ventures. Read more.
• PacketZoom, a San Mateo, Calif.-based mobile application performance company, raised $5 million in Series A funding. Baseline Ventures led the round, and was joined by investors including First Round Capital, Tandem Capital and Arafura Ventures.
• ADAY, a U.S. and U.K.-based direct-to-consumer fashion company, raised $2 million in funding. Investors include H&M CO:LAB, ADG, and SoGal Ventures.
• Overclock Labs, a San Francisco-based developer of tools for automating distributed cloud infrastructure, raised $1.3 million in seed funding. Investors include CrunchFund.
PRIVATE EQUITY DEALS
• Alpha Source Inc, which is backed by Baird Capital, acquired BC Technical, a West Jordan, Utah-based medical imaging services provider. Financial terms weren't disclosed.
• Morgan Stanley Energy Partners acquired a majority stake in Durango Midstream, a Houston, Texas-based provider of midstream services to oil and gas producers. Financial terms weren't disclosed.
• IK Investment Partners agreed to buy Studienkreis GmbH, a Germany-based tutoring services provider. Financial terms weren’t disclosed.
• Gulf Energy, Thailand’s third biggest power company, raised $733 million in an IPO. The company is expected to list on Dec. 6, Reuters reports. Read more.
• Ion Investment Group will buy a controlling stake in Dealogic, a U.K.-based provider of financial content and analytics, from Carlyle Group LP and Euromoney Institutional Investor, according to Reuters. Euromoney said it would sell its entire stake in Dealogic to Ion Investment for about $135 million. Read more.
• CA Ventures appointed Nishant Bakaya as chief investment officer. Previously, Bakaya was at Evercore Partners.