Adventures In Transformative Venture Capitalism

In this exclusive Social Capital Q and A, TMV CEO Soraya Darabi candidly shares her passion for investing in purposeful startups that transform the way we live and work. Her own varied workforce history informs her ability to assess and interact with startup entrepreneurs that has garnered an unmatched record in returns.

We honored Soraya in February as one of that month’s Top 10 Social Capital CEOs for her commitment to making sure other like-minded Social Capital CEOs and founders have access to the money they need to get their great ideas off the ground.

This conversation, as with all our CEO Q and A’s, is just the beginning of our series of ongoing articles and interactions with Soraya, and we look forward to her sharing more of her insights on how to do business right in today’s complicated and challenging environment where Social Capital is becoming more and more important.

Chris: What we're really focused on are people who are really making a difference and doing things on a day-to-day basis. What's interesting is, when you find those people and you talk to them, the things they say are so much more resounding than the sound bites that you hear from PR teams.

When we started, we were just reaching out to a lot of people. But now we're getting a lot of pitches and there's a very high bar of what we want. And we don't accept it just because somebody reaches out to us. But when Leah told us all about you, there was a lot of great stuff that she said -- but, honestly, it just tapped the surface of who you guys are. I asked her some more questions and she went back and did some legwork, and then the stuff she gave me back about you, it was like, wow, these are really amazingly neat people -- people we'd really like to have in this movement, in this forum. I'm so glad she reached out -- you guys are everything she said you were, and more.

Soraya: Thank you so much. That's really kind. And that's a really helpful context to have. I can't wait to read, not just this interview, but all the other interviews that you're writing.

Chris: Please do. We're redoing our design right now -- we just started a few months ago and we're constantly adjusting but if you go to our main page, you can see all of our articles. There are so many amazing articles there and interviews. I hate to single anybody out, but there are just some that come to mind: the CEO of Delta and what he's doing, and he’s written a couple of pieces with us now; and the CEO of Chipotle. I appreciate that you have such a genuine way about you, by the way. I have the curse of being really good about just telling things about people quickly -- it's 20 years of being a reporter, but I also have a little bit of a sense about me, and the upside is that I can quickly get to know people. So, you have a very genuinely … just kind way about you, and it's a nice feeling.

Soraya: I'm a mom and I think, like, it softens people to become mothers, fathers.

Chris: How many children do you have?

Soraya: Just one; our daughter's eight months. You might hear her cameos sometimes when I'm on calls. And then, in terms of being a good conversationalist, I was briefly a journalist way back when, but I would never say I was really a journalist. My father was an immigrant and a cab driver when I was a kid. So, I'd sit in the front seat of his New York City Yellow Cab, and I was painfully shy, and my dad would tell me that I could keep the tips as long as I made nice conversation with the passengers in the back.

My mother's family was quite the opposite. They weren't blue-collar at all. They were very well off. And so, from them, I would have finishing classes in the summers. They'd pay for me to learn how to be polite and so on.

I believe that everyone who works for our firm should have some blue-collar work on their résumé. I don't care if it's waitressing or folding clothing or dishwashing -- I did all of it, by the way -- but I want to work with people who've been humbled by customer service. I think it helps you identify the types of folks you'd want to do business with yourself.

Chris: That's actually a great segue to one of the questions I was going to ask you, but that background is fascinating. I didn't know you did all those other jobs, which gives us something in common.

Soraya: Dishwashing should be on my LinkedIn, but, you know, I took it off.

Chris: I had 12 jobs in college, and one of them -- which I was proud to have on my résumé for many years, even into my professional career, was gondola driver and singer. I rode a gondola at the Hyatt Regency, which is one of only four places in the United States that has genuine Venetian gondolas, and sang Italian arias. That was a heck of an interesting job. But, you know, I was a waiter, I drove a van, I drove a cab, I did all kinds of things in college. It does humble you. And it also deepens you to understanding others. And that makes sense as to why you have a very open perspective on people and a caring perspective on people. What I was interested in is how you got from that journalism career to founding Zady.

Soraya: Yeah. I was the co-founder of two startups and I worked for one. So, how did I get from working in media to venture capital? The interesting thing is, some of the venture capitalists I look up to being either world-renowned, like Mike Moritz, who was a reporter for Time and did a big interview with Steve Jobs (which was his foray into venture capitalism) all the way to more modern examples like my friend Alexia (I'm an LP in her fund), who was the editor-in-chief of TechCrunch before starting her Dream Machine -- what I think is similar about journalism and venture is that you need to be curious. First of all, because if you're not a curious person, both journalism and venture will wear you out pretty quickly. And I do think there's an element of being a people person for both.

It's not that you wouldn't survive as an introvert in either profession, but if you're going to be meeting people and interfacing in an industry predicated upon relationships, it's probably a good idea to like people. So, that's the natural bit, but the route, the circumvented route: I left The New York Times, where I was manager of social media and digital partnerships, which I always have said was a dream job. I worked with my heroes -- people I still keep in touch with; people who I read religiously. It was a great, great, great job. But I was too young to be teaching for a living. My mother is a professor and teaching came naturally. It was my job as the digital native in the newsroom and in the marketing department to tell world-renowned journalists what this is, what Twitter means, or this is what Facebook means -- to communicate to corporate development that this is how we communicate our journalism on these platforms and how we get money.

It wasn't as exciting to me as learning about how to code and convergence and the lean startup method and how agile product development will actually transform the world. I wanted product experience. And so, I left my job at The New York Times to work for a friend, who then introduced me to his business partner at a cloud computing startup which sold to Facebook. Having been there for just a few months and then seeing them exit to what was then pre-IPO Facebook was enough of a crash course in startups to tell me that I wanted to be doing this for the rest of my life.

And so, with some friends in Silicon Valley, I co-founded an app that was the first app in the Apple store to show you where, if you loved food (which I do), based on your location, what the nearest greatest dish is. My grandmother used to proudly keep the Michelin guides every single year, in order, 1950 to whatever. We were sort of like that, but based on not just what Michelin thinks of as the world's greatest Coq au Vin but, instead, what does Joe from the Bronx think is the best cannoli on Arthur Avenue? We created an app that used visual images of dishes, and Food Spotting would let users upload a photo of great cannoli on Arthur Avenue and then show you, based on your location, how far you are away from it. We sold the business to Open Table and then Priceline bought Open Table.

So, there was some liquidity for the first time in my young life; in my 20s, I had capital. I reinvested that capital into startups. So that makes sense in how I became a venture capitalist. But, going back to Foodspotting, I wish it still existed, and I'd probably invest in the person who comes back to me with a modern, better Foodspotting. That’s just sort of how technology works. We were Apple's app of the year and, you know, bigger companies take note and they think, “I want the technology.” What happens, in retrospect, is they either amplify you and they blow you up, or they don't. And it'd be so cool to have a second shot at that company at some point.

But it wasn't my idea. I wasn't the CEO. I was just a happy co-founder and bystander. So, after that, I co-founded a company that focused on sustainable fashion, right around the time of the Rana Plaza collapse in Bangladesh. I was reading these harrowing stories, as did my partner, about what was happening to these poor, mostly women and children, who were being paid like a penny on the hour for their work. Beyond unfair labor practices, it's beyond a pollutive industry. Fashion is probably the most pollutive industry in the world and people weren't talking about it. Everyone was just excited to buy fast fashion from the big manufacturers all the way to big box retail in the U S. We wanted to start a brand that stood for something, and we raised venture capital for a brand that stood for something.

I don't want to dwell on it too much, in part because I can't -- the business no longer exists. We really put ourselves out there in a pretty vulnerable way, saying we wanted consumers to vote with their dollars and choose fewer things but nicer things, and to pay an accessible luxury price point for items that we guaranteed were made ethically and sustainably.

That's what launched some of my interests in sustainability, but it wasn't a huge departure in terms of who I am, because in high school I started a club called Human Rights Advocates, HRA. HRA was really just a vessel in high school for kids to stand up for what they believed in for human rights. My big campaign was taking out the tags of our clothing if they were made from brands that used maquiladoras or sweatshops.

Everything in life comes full circle. I learned a lot from operating that business for four and a half years as a co-CEO and left also with just a myriad of lessons. At that point, I had been in the startup world for eight years, and I started writing down all of the lessons gleaned from being a product person -- from being at The New York Times to being a founder of what people perceive to be a very successful company to being at the helm of a company that folks thought was more like a plateau, and understanding what it was like to try to be a founder who not only wanted to make a lot of money but also wanted to do good in the world.

And I recognized that, for non-obvious founders -- and I'll put myself in that category because I'm a Middle Eastern woman (most young founders in Silicon Valley look more like Mark Zuckerberg) -- if you're not that young guy in a hoodie dropping out of Harvard, and not just raising capital for a business that will make people a lot of dough and that's it, and if you're not just raising capital for money that's like tech on tech on tech (meaning a SaaS enterprise play for dev tools) -- which is what every VC wants to see -- then you're kind of three times out of category. And then you add to the mix that you’re looking to be a double- or triple-bottom-line business, you're sort of stuck because there's patient capital out there, but it's small. It's from people who really believe in benefit corps; people who really walk the walk. But their capital back when I was starting my startup wasn't as rapid to access as VC.

And then there is venture capital, which, by a former notion, was really there to accelerate companies and to put them on -- some would say the fast path, some would say a bulldoze path and some would say a hamster wheel, but venture capital is there to position companies for a particular type of success, meaning an IPO. And I knew there had to be a way to merge the two. So, when Marina and I got together in 2016 to think through an SPV, which at the time I did for a company called FIGS -- it's a scrub that nurses and doctors wore to feel more comfortable at work and to be more functional at work, and that company is doing very, very well right now. Around that time, I became an investor in their earliest institutional round and recognized I loved working with my business partner Marina, who has a very different background from me.

She, through her own route, came to be passionate about sustainability, and she knew she had the power at a really large, sort of like global, level to make some big changes. We got together and we said, “What if we don't go banging on drums for Fund I?” We're impact investors. What if we simply say, “We're looking to accelerate companies to change the way we live and work”? And then we look for companies that are both venture backable and are doing good, but we create our mandate based on real investments that we've made in the technology sphere.

And so, the mandate for Fund I was tech-enabled sustainable solutions, technology re-inventing 200-plus-year-old industries, specifically focusing on the way we live and work and what we call the care economy -- healthcare, childcare, elder care, pet care. We made a lot of our decisions on what we would invest in based on census data, what we were seeing in terms of data, predictive analysis, the trends that are coming around the bend. And then we made astute decisions of how to reinvest our first fund into companies that met our matrix for success, but also the industries. And that ended up being very, very successful.

Chris: You're absolutely brilliant, by the way. I love the rhythm of words, especially when they're words that are well thought out and well researched. And that's the journalist inside me as well. So, what's fascinating about you in the space you're in and what you both are doing is the origins and the applications. I love what you told me about founding that organization in high school, because that's your spirit; that's your, you know, you. You have this soul of wanting to help people and wanting to make life better. And then you took that inspiration and that desire, and you coupled it with your practical knowledge and ideas and factual knowledge you could find to figure out where those circles were concentric, so to speak, and found that sweet spot. So, I love what you're talking about.

We just interviewed Mike Brady, who ran Greyston Bakery. This company was actually started by a Buddhist monk and then he took it over after that guy died. And their big thing was “We don't hire people to make brownies; we make brownies to hire people.” And the whole idea of the company was open hiring, where they would hire anybody who walked in the door, and they hired a lot of convicts and hired a lot of people with very, you know, “sketchy backgrounds.” It worked like wonders, and the company just succeeded by leaps and bounds. But one of the things he talks about a lot is that they didn't just do this to be nice.

They do this because it works. And because there was such an incredible economic opportunity as well as a humanitarian opportunity, and that doing business that way worked like gangbusters for them. So, his big thing that he always wants to drive home is that this is real and practical and it works. It's a capitalistic solution that works if you do it right. So, yes, you've got to have a reason for wanting to do it, but it's not something that flies in the face of profits and Capitalism, and people need to stop thinking that. And that's what you're speaking to in a big way here -- finding the intersection of those two, because both are necessary. We need more people like you who can do that, obviously. So, now you're in this space where you're able to kind of find that sweet spot.

What are some of your takeaways now from the companies you've started? How many companies have you guys helped get off the ground now?

Soraya: Thirty from our firm and another 24 investments I've made personally. It's a lot, and we'll be investing in another 20 over the next two years.

Chris: Wow. So, it's exploding. I mean, this idea is not just working, it's exploding. How are these doing? Obviously, these companies must be doing well or you wouldn't keep doing this.

Soraya: A lot of them are. I mean, the industry has pretty high stakes. A traditional VC -- once they get to know you well -- might say, “We have a 3-3-3-&-1 rule where we think three of our companies will be absolute disasters, might not even get to launch; three of them will plateau or fail; three will be modestly good; and one will be so good it can return the whole fund.” That's something you'll hear. Some investors I've heard behind closed doors use really mean terms like, “Oh, those are our dogs” -- meaning those are the bad companies -- “And these are the good.” We treat every company we invest in like a partner. And we believe that we, as VCs -- the five partners at TMV -- we believe that we are in the services business and we have a marketplace. And there are two clients on either side of the marketplace.

One is our investors. Those are LPs -- limited partners. People who trust us enough to be stewards of capital and to invest their money in businesses that are not only groundbreaking in terms of their potential to return the investment but also we promise they will be businesses helmed by founders that are diverse. We have a lot of diversity capital in our fund, and businesses that also mean to make an impact in the world in a positive way. There are ways that we measure that.

On the other side of the marketplace, our founders are entrusting us to add value to them, to be their Jerry Maguire -- to use an L.A. reference. We trust that our founders are picking us for good reason because they aligned with our values. And because they think we're nice and sensible people. And so, we're not going to only pay attention to them if they're just crushing it.

And I think that's what really separates us. So, when the investor folks ask us, “How do you get durable and differentiated deal flow? And how do you get all these founders coming to you first when they have their pick of the litter of fancy brand-name firms to turn to if it's a competitive deal?" We say, “Because they were referred to us by other founders, and because all of the partners at TMV had been founders before. And because we talk to them like human beings, and we present them a very clear plan of how we'll add value.” We operate with integrity so that when they go through our program, that batch says to the next round of founders whom they know, “Go work with TMV.”

So, it's really cool that we're in our rhythm now. We're in our fifth year of business, which means that we're going through, not growing pains, but we're growing up in stature and we can prove by citing real companies that we invested in before anyone knew who they were and now they're well-known entities. We can say we had conviction, whereas when you're first starting a fund, it's all speculative.

Chris: So, I'm sure you love all the companies that you've worked with. Are there some anecdotal examples, though, of some things you've seen that are just absolutely amazing?

Soraya: We were fortunate to be among the earliest investors in a company called Parsley Health. The founder, Dr. Robin Berzin -- who's become a good friend -- believed that too much of medicine is reactionary. Like, my dad had foot surgery today, and just getting an answer from the hospital as to how's he doing, how's he recovering and all that, is just a nightmare. And the surgery was very much in reaction to severe pain my dad had in his foot, but in talking to the doctors over the last month, I asked if there was something they could have done all along. And they said, “Oh, yeah, your dad should have been doing these stretches over the past five years.”

And the majority of the types of illnesses, or treatments that we get at the doctor’s, are sort of late-stage -- they've diagnosed a problem well after it's meant to be diagnosed. Dr. Berzin believed she could build a practice that was one part medical doctors -- MDs who went to the best schools and were very credible -- and one part nutritionists who believe that food is medicine, and in general practices of wellbeing, like teaching folks to meditate and to stretch, to drink water and to take supplements. By paying a subscription fee, you get 90 minutes with the doctor as an intake so they can understand you and your family history, get a sense of things you might be prone to, and then they check in with you every couple of months. In between that time, every month, you talk to a nutritionist to get a food-as-medicine plan.

They can come up with, not necessarily a diet just to lose weight, but just a general diet that works for you based on a lot of different factors. Before I invested, I went through Parsley Health. I paid for the subscription and Dr. Berzin was my doctor. And she diagnosed me with an autoimmune disease that I didn't know I had. Since I was a kid, I would fall asleep in the afternoon and just take naps every day, thinking that was normal. Now, I'm on a medicine that keeps me alert until 10 o'clock at night, plus I take the right supplements for it. It was really a transformative experience. So, I can say, having been a client and an investor, that I understand why this company has now grown leaps and bounds. She's launched telehealth practices that are now live in 48 states.

The business has really found a product-market fit, and in large part, that's because Dr. Berzin has tapped on something, which is that American healthcare is a bit backward. We're not assessing the root problem when we go in to get diagnoses, we're just trying to find band-aids or quick fixes.

Separately, we were early investors in Cityblock Health, which has a different mandate. It's about bringing premium healthcare to inner-city neighborhoods. They launched in Crown Heights and the Bronx and now they're in Washington, D.C., addressing a majority of patients who are minorities in America, Black or Latinx, who, until Cityblock, weren't able to have high-touch healthcare in their local neighborhoods. That's why it's called Cityblock. They've partnered with insurance providers, and I think they’re going to be among the earliest companies in our portfolio to IPO.

We were also early investors in a privatized recycling business called Ridwell that makes it easier to recycle more than just paper and plastic. You basically upcycle. It’s live in four different geographies and growing. We were early investors in a company called Thryve, which is microbiome and gut health testing, and early investors in a company that allows big ships to stay off the water longer so they reduce the fuel emissions they're releasing into the air. So, really, it's a hybrid of businesses leveraging technology to do everything from reducing carbon emissions to helping us recycle better to help us with our own healthcare. And that's why we say we're basically investing in businesses that transform the way we live and work.

Chris: I love that story about Parsley Health. That was one of my favorite companies that I saw in your portfolio. And that anecdote about yourself -- that's extraordinary because that personal connection, obviously, the medical maintenance (that's kind of what I call it or see it as) seems so logical once you actually see it done right. But it hasn't been done right. Until it is, it's like the wheel -- once you see a wheel, you're like, “Oh, that makes sense.” So, I love that personal anecdote and that personal connection you had to that. You've probably got a lot of stories of people who have been transformed -- the founders you've worked with. I'm curious, though, about the investors. From that perspective, are these investors who came along because they liked the idea of the humanitarian or the goodness aspect of it? Or did they come from you convincing them that this could make money? Or both?

Soraya: I think it has to be both. And I think it has to be money first, if I'm being very honest. I mean, there are very few people who are so wealthy they’d say, “I don't care if you give me a return or not.”

We're not trying to be a corporate social responsibility; we're trying to be responsible corporates. And we have every intention of having top-tier returns in our fund. And the first fund has demonstrably good results. So, we lead with the metrics and we say, “Hey, look at our track record from our first fund: already two unicorns that we can point to.” Which, you know, in the tech world means companies valued over a billion. And they won't be the only ones. We're investing early. We're taking board seats of these companies at the seed to series A stage. We're shaping the founders and setting them up with everything they need, from coaches to teammates who are aligned with their vision of how the world should look. We're also taking a stance that not all of these dollars should go to young white men in hoodies. Sixty-five percent of our founders are women and diverse. We link to census data on our website and we say, “That's the way the world actually looks.” I think there are different types of investors, LPs, who find us. There are the people who say, “I love the diversity element”; people who say, “I love your returns”; and there are folks who say, “I've been looking for a fund that gives us all of these things in one package.”

Chris: One last quick question for you, about the typical investors or the typical founders. You guys are not going after the typical founders. It sounds like a lot of the founders you recognize are in it for the long haul. And that's interesting to me because I think this is a space that has a lot of one-, two-, three-, five-year exit people involved in it. But it sounds like a lot of the people you're helping out are people who are devoted to this and dedicated to this for the long haul. Is that right?

Soraya: Yes. I mean, so far we only have what's called a loss ratio of 8%, which means only 8% of our companies from Fund I have folded or sold for whatever they need or want to sell for in order to make a living. And we respect and admire the choices that the founders who have folded their hands have made. It was right for them in their life. But what that really shows us is that our founders are persevering, and those statistics are rare, but I think when you are value-aligned with what you're building, it's easier to justify how this could be the next 30 years of your life. Certainly, it is for me with TMV, which I want it to be the next 30 years of my career, because I just wake up every day loving so much what I do. I think you can relate to that, going back to the beginning of our conversation.

Chris: Yeah. I love that. That's a wonderful answer. Thank you. I hope this is one of many conversations we can have about a lot of things as we invite you to continue to contribute.

Soraya: I'd love to.