Apr 29, 2019 · 45m · 20vc
20VC: Why Lead Lime's Series D Funding Round, Why Engineers Are Underpaid & Why 74% of US Venture Firms Still Do Not Have Female GPs
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In this episode of The 20 Minute VC, host Harry Stebbings interviews Sarah Smith, Partner at Bain Capital Ventures, discussing her path from teaching to venture capital, the thesis behind investing in Lime, modern tech compensation models, and actionable strategies for increasing female representation in VC firms.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 31.7% of the talking time here. How this is scored →
Harry as informed peer 2.7 Guest teaching 3.9 Guest disagreement 0.9 Harry pushing back 1.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:04 Rejecting tokenism fears in venture hiring
Sarah strongly rejects conventional advice that warns women against becoming a firm's first female partner out of fear of tokenism, arguing that shunning 74% of firms hinders progress.
Hardest push from Harry ▶ 24:23 Challenging administrative feasibility of shortened vestingHarry directly challenges Sarah's proposal for 2-year vesting cycles, asking if it presents administrative chaos for startups.
Biggest teaching moment ▶ 15:00 Explaining dynamic capping regulatory mechanismsAfter Harry admits ignorance about dynamic capping, Sarah clearly explains how dynamic capping works as a regulatory mechanism based on daily vehicle trip utilization.
Harry holds his own ▶ 19:25 Pressing on valuation hype and heavy dilutionHarry puts on his investor hat to scrutinize Lime's $2.4B valuation, pressing Sarah on how Bain got comfortable with massive prospective dilution.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Sarah Smith's Unconventional Path to Venture Capital | 1 | 2 | 0 | 0 | Harry introduces Sarah and asks about her path into venture capital. Sarah shares an extended overview of her journey from music teacher to Stanford MBA, Facebook, Quora, and Bain Capital Ventures. | |
| Applying Teaching Principles to Management and VC | 2 | 4 | 0 | 0 | Harry asks how teaching elementary music applies to management and VC. Sarah educates the host on the educational concept of 'scaffolding' and how flexibility was key to operating during Facebook and Quora's scaling years. | |
| Thesis Behind Investing in Lime and Micromobility | 4 | 3 | 1 | 2 | Harry references Peter Fenton's stance on market sizing when asking about Lime's TAM. Sarah reframes the thesis around massive consumer behavior shifts rather than purely market size stats. | |
| Competitive Landscape and Dynamic Capping Regulations | 1 | 6 | 0 | 1 | Harry admits his lack of understanding regarding regulatory caps and asks Sarah to explain dynamic capping. Sarah breaks down the three regulatory models used by cities to manage micromobility fleets. | |
| Hardware Durability, Infrastructure, and Consumer Loyalty | 2 | 3 | 0 | 1 | Harry inquires about scooter durability and whether consumer loyalty exists in micromobility. Sarah turns the question back to Harry's user experience in Paris before explaining proximity as the primary moat. | |
| Navigating Valuation and Dilution at Late-Stage Venture Rounds | 4 | 5 | 2 | 3 | Harry adopts a diligent VC persona to question valuation and dilution risks at a $2.4B post-money cap. Sarah defends the round by comparing it to Facebook's Series D and introduces her contrarian take on engineering pay. | |
| Reimagining Employee Compensation and Vesting Schedules | 4 | 4 | 2 | 4 | Sarah suggests replacing traditional 4-year vesting schedules with 2-year grants and annual refreshers. Harry pushes back on the administrative and technical feasibility of managing such a system. | |
| Addressing Tech Attrition and Realities of Employee Tenure | 3 | 5 | 2 | 2 | Harry asks whether high Valley attrition is a feature or a bug, prompting Sarah to reframe it as a reality to optimize around. Sarah also details systemic barriers like GP capital commitments that limit diversity. | |
| Practical Action Plan for Recruiting Female Partners | 2 | 5 | 1 | 1 | Harry asks for immediate action items for all-male partnerships seeking female GPs. Sarah lays out an actionable four-step framework and suggests creating dedicated farm teams. | |
| Ensuring Long-Term Success for Female Venture Partners | 4 | 4 | 0 | 1 | Sarah advises firms on how to support new female partners while avoiding the 'diversity tax'. Harry reinforces her point on keeping identical investment criteria to protect partner long-term track records. | |
| Quick Fire Round: Reading Recommendations and VP of People Profile | 2 | 2 | 0 | 0 | Harry runs a friendly quick-fire round covering book recommendations, VP of People profiles, board game hobbies, and remote work infrastructure. | |
| Quick Fire Round: Contrarian Views on Tokenism & Bain's Culture | 3 | 4 | 3 | 3 | Sarah rejects the advice telling women not to join firms as the first female partner due to tokenism fears. Harry challenges whether walking into an all-male partnership is inherently daunting. |
Statements from this episode (27)
Smith: Startups growing 1-2% weekly should avoid rigid processes and structures
“When a company is growing as fast as Facebook was or as Quora was, it's really important, I think, not to get tied too much to any team or process. Things are changing constantly when your company is growing one to two percent every single week. You shouldn't …”
Smith: Send HQ veterans for 12 months to align new remote offices
“In opening remote offices, so at Facebook, I really helped open the Dublin, Austin, and Hyderabad offices, and sending a group of people from headquarters to For at least 12 months, to also include a office leader where people report remotely, I found really t…”
Smith: Global first-and-last-mile transportation is a $40B market
“I mean, first and last Fast mile transportation is estimated to be something like forty billion dollars globally.”
Smith: Data and market experience drive micromobility utilization more than capital
“The company who has the most experience in the most markets are also going to have the most data to use in optimizing and driving the highest utilization.”
Smith: Cities will regulate micromobility using dynamic capping based on utilization
“In the end, most cities are going to regulate the market with this dynamic capping system.”
Smith: Proximity, not brand loyalty, drives consumer choice in shared micromobility
“The bigger driver is really going to be proximity and location. So when you step out and you're trying to get from point A to B, you're going to really just care about which one is the closest to you.”
Smith: Optimized fleet disbursement will determine the winner in micromobility
“Our view is that really, again, this comes back to the fleet that is best to Optimized in terms of its disbursement of the vehicles throughout the city. We believe that that is the player that's going to win the most revenue and the most trips”
Smith: Lime is the first company since Facebook to show such hyper-growth
“Lime is the first company I have seen since my time at Facebook showing that kind of sort of tornado of growth and insane momentum.”
Smith: Lime could become the world's largest transportation company
“I believe they have a shot at being the largest transportation company in the world.”
Smith: Bain expects Lime to generate a 15x to 20x return
“My bet was really believing that Lime is the ability to get us positive economics and more than 15 to 20 X from here.”
Smith: Software engineers are underpaid because salaries haven't adjusted to demand
“Everyone knows this is a super tight market, and in that type of world, you have to think there's gotta be some more regulatory mechanism here to balance things out. And really just, I think means that price has not risen enough to drive enough of the supply. …”
Smith: Startup employees treat equity as a lottery ticket with zero value
“If you think about how most engineers, or really a lot of individual employees in their risk profile, how they think about equity, if you talk to many of them, even the most savvy people often really think of equity as a lottery ticket. And if you think of it …”
Smith: Startups should raise capital to pay higher salaries instead of equity
“Why wouldn't we instead go raise some additional capital from people who adequately value it or value it at least at a higher rate and instead convert that money that we get from investors into higher salaries to make us more competitive? And so I'm surprised …”
Smith: Four-year equity vesting schedules are an outdated legacy model
“Four year vesting schedule is really outdated and sort of a legacy from somewhat like 20 years ago when companies typically went public more in like four to five years.”
Smith: Average tech employee tenure in San Francisco is 18 months
“The average tenure of an employee in a competitive market like San Francisco is about a year and a half.”
Smith: Sudden equity vesting drops drive attrition; use annual refreshers instead
“What you want to avoid is these rapid step function changes or decreases in someone's equity vesting, because that does actually drive attrition. So if you have maybe a two-year or three-year upfront grant, and then you offer annual refreshers, you're in much …”
Smith: Tech workers rationally switch startups frequently to diversify equity portfolios
“It's not irrational that some individuals decide to take, you know, one to two, maybe three years of equity at a few different companies to sort of build their own equity portfolio over time.”
Smith: LP capital commitment rules restrict diversity among new fund managers
“LPs do look to new fund managers to commit a certain percent of their own capital to the fund. So if someone's trying to raise a fifty million dollar fund, for example, that could mean that there's this expectation of a one to two million dollar GP commitment,…”
Smith: Aspiring angel investors should budget $100K for $25K early-stage checks
“They can get started just by writing 25 K checks into early stage companies, maybe budget a hundred K sort of quote unquote tuition, sort of learning the world of investing and going through the motion.”
Smith: 74% of US venture capital firms lack a female General Partner
“In fact, 74% of firms in the United States do not yet have a female GP.”
Smith: VC firms worried about lowering diversity bars never set evaluation standards
“Oftentimes when people talk about diversity, this whole notion of quote, lowering the bar, not lowering the bar comes up. But when you actually sit down and look at it, most groups that are, have not been very diverse or even set a bar in the first place.”
Smith: VC firms should create $250K–$1M investment farm teams for female executives
“So you could actually put some star women, baby execs in your portfolio and business, Potentially set aside 250 K to a million for them to invest on your behalf to get them some reps.”
Smith: VC firms must maintain identical deal standards for new female partners
“After mentorship, I'd recommend that you maintain your investment criteria. I think this is really hard sometimes when you bring in a newer member, certainly from an underrepresented group, there could be temptation to let the first few deals through or, you k…”
Smith: VC firms must protect new female partners from the diversity tax
“I'd also recommend you not give her the diversity tax. So it's really common. I think good intentions. People say, great. We have our first people partner. Will you now mentor all the women in our firm? If you think about that, you know, that's really putting …”
Smith: Quora found many female users struggled to publish written thoughts
“At Quora, we discovered that a lot of women struggle to really write and put their thoughts out there”
Smith: Remote companies must gather the entire team in person annually
“I think you also need to be prepared to invest in travel and really bring the whole company together in person at least once a year.”
Smith: Female partners shouldn't avoid joining VC firms that lack diversity
“I hear people tell women not to join a firm as the first female partner for fear that they will be, quote unquote, the token partner. I think that's I don't know how we're gonna change things if we shun the 74% of U.S. Firms who don't yet have a female partner…”