Technology entrepreneur JC Herz talks about what it takes to build a scalable cyber security enterprise software business, how to raise venture capital, and her transition from journalist to pioneering big data geek as the COO of Ion Channel. A Crossfit expert and enthusiast, JC shares some lessons learned…from her time on the Harvard men’s crew team and beyond.
Melinda Wittstock: Welcome to Wings JC.
JC Herz: Good to be here.
Melinda Wittstock: It's great to talk to another serial entrepreneur who has come through journalism to get there. Tell me a little bit about your background and how you came up through writing, writing books, writing articles, into big data and technology.
JC Herz: I think the key to it is that I was always curious and adventurous. Being a journalist is a good license to be curious and adventurous and call strangers, who you have no right to talk to and ask them questions and expect them to give you answers.
Melinda Wittstock: Right.
JC Herz: But I started because I was in college. I went to college. I was young as a college student and I looked even younger. I loved music and I realized that a fake id wouldn't work for me because I looked about 14. So the next insight was if you're on the press list, they do not card you. So I became a journalist.
Melinda Wittstock: What a great inspiration. Now that's entrepreneurial, right there, that's a great hack.
JC Herz: Absolutely. There you are. All you need is to be on the press list, you have a clipboard, you have a microphone, you act like you belong and there you are. All of this was just license to go and have adventures and have someone pay me to go on them. And then figure out what it all means. And the storytelling, which is a big, big part of business.
Because everyone is in a story in every corporation in every organization in the world. And venture capitalists are in story-telling mode too. They want to know if you've got a good story. Understanding what a story actually is, being in an editorial, meeting at the New York Times and having an editor tell you, “No, that's not a story. That's just an idea.” That's amazing.
Melinda Wittstock: Yeah, you got to picture stories just like you have to picture company.
JC Herz: Yep, and every company is a story.
Melinda Wittstock: Right. So are there any differences between pitching a story to the New York Times and pitching one to a VC?
JC Herz: I think the fundamental elements are the same. The old chestnut is that conflict is a trauma. A venture capitalist is looking for the company to be at a zero. And there has to be conflict, therefore drama. You have to be willing to tell a story about how you're going to compete and win. I think that's where a lot of women pull their punches. Because a lot of women can explain how they're going to do well. But they're reticent to explain how they are going to do well at other companies’ expense. Because that's straight up competition!
Melinda Wittstock: That's right. You know, it's very interesting, actually, when you talk about that. That so many women that I've interviewed for my book on female entrepreneurship have a background in competitive sports. You learn how to duke.
JC Herz: Not an accident.
Melinda Wittstock: Right. Because you have to be willing to compete and make the tough decisions…
JC Herz: Oh yeah. I can go one better. My competitive sports experience freshman year of college, I was the coxswain on the Harvard men's crew team.
Melinda Wittstock: You were on the Harvard men's crew team?
JC Herz: Yes. I was the person in the back of the boat who steers and yells. And this is actually my biographical sketch to Springboard. Where I said, I was the coxswain on the Harvard men's crew team. On the crew team we got an elite athlete, about 6'4″ 200 pounds, eight of them. They have to do what you say and you have to be right.
Melinda Wittstock: Wow. Apart from anything else, the confidence that you must have gotten from doing that…
JC Herz: Yep. Being on a men's sports team. And in a command position!
Melinda Wittstock: Right. And they didn't shy away from doing what you said?
JC Herz: No. But I had to be right. And these guys were not wannabe also-ran rowers. Two of them went to the Olympics. And then there were a whole bunch of Norwegian junior Olympians who these guys were elite.
I only got onto the team 'cause it's tough to find a guy under 125 pounds. They couldn't find one. So they were just casting their net really wide. Come, be a coxswain. Which, I went to the meetings. I was coming from Texas, so I wanted to be open-minded and explore Yankee culture. And crew was the Yankee-est thing I could think of.
Melinda Wittstock: So I can imagine you telling this story 'cause you have raised money from venture capital, which is very difficult for women to do. A lot of women struggle.
JC Herz: I haven't gone for venture money. I've worked at startups that have been venture backed. So my current, the startup that I did an exit out of, that was a data visualization startup was bootstrapped. My current startup was a bunch of government money to solve a really acute and severe terrible cyber security problem. I haven't gone the venture route as a founder. I have worked on product at a couple companies that were venture-backed.
I worked for GNS Healthcare, which was a big data analytics company in healthcare. I called it minority report for adverse health outcomes: we could tell which person was going to keel over if they didn't take their medication. I also did some early consulting in the early days of Kaggle, which is the data science competition site. Those guys were venture-backed.
Melinda Wittstock: When women do go to raise money. Presumably, if you were standing in a room in front of a bunch of top tier VC's, what would be the first thing out of your mouth? Would you tell that story about being the coxswain?
JC Herz: They're typically not interested in your personal story, although they are. They interested in the story about how you are going to turn the whole market upside down, invent a new market and just ruthlessly crush it.
Melinda Wittstock: Exactly, yes.
JC Herz: And beyond crush it; crush your competitors. The thing is, that there's an expression in football. You got to want the ball. The thing about these venture meetings, and I've advised venture capitalist, I've done due diligence for private equity firms, I've been on the other side of the table as well, assessing things, especially from a technical perspective…
The venture capitalist who is going to put his chips down, they want to see that hunger and they want to see that aggression. They want to see an entrepreneur say things like, “We're going to screw our competitors in the eyeball, and here's how.” And women.
Melinda Wittstock: Women don't say that.
JC Herz: And that's probably a good thing.
Melinda Wittstock: Right.
JC Herz: But there is this aggression, there's this hunger, drive that someone who's investing money, wants to see in your eyes. And that's a fact.
Melinda Wittstock: Women entrepreneurs often have that hunger but whether they express it in a way that a man is going to understand. Do women have to talk like men to succeed in that case? Or can we express an authentic feminine power or in a different way? And still be understood?
JC Herz: One of my, I have some touchstones from the movies. We all have our favorite movies. I think a lot about Trinity in the Matrix. Trinity is badass. She's powerful. When she walks in, you know there's a serious person coming in. But she's not masculine. She is herself. So I think that you have to be really grounded. Your heels have to be screwed into the floor. There's kind of a strength that you can own. It is a drive and there's a chicken egg between people thing where is that masculine? I don't think it is. I think there's kind of a warrior spirit that a man or a woman can own or not have. But I think that you have to have that. But it doesn't make you mannish.
Melinda Wittstock: And yet women-
JC Herz: It just makes you warrior.
Melinda Wittstock: Right. So what I've noticed though, and I've seen this in myself at times too, is that I think we're so focused as women on relationship and we're also more likely to be a little bit more fearful of not being liked. Is that the thing, that sort of wiggle niggle or little fear of the B word. Kind of if you're strong and you take no prisoners like that. Even if you are being authentically feminine. That's [crosstalk 00:10:34 but that's-
JC Herz: Team things. That's why so many of these entrepreneurs are people who've been on teams. Is that you work together to move the ball forward. You're still trying to beat he other guys. But you're working together to move the ball forward. I think there's a difference between being driven and being adversarial.
Melinda Wittstock: Right.
JC Herz: I think that, that's a distinction that gets lost. If you are adversarial, and you come in, people are going to think you're a bitch and they'll probably be right. There are moments for that, to be honest. But you don't have to be adversarial. Part of that is just owning the idea that you belong. You actually are entitled to this seat at the table. If you're secure enough in that, you don't have the insecurity that makes you fearful.
There's this little vicious cycle where if someone doesn't believe they really belong there, they're on edge and they exude this insecurity that invites attack or invites interrogation. And then there's an overreaction to that. And that's what creates this terrible dynamic. It's a dog. You go to the dog park, there'll be a dog that comes in there that projects vulnerability or fear to every single dog. They're all kind of like, pile onto it.
Melinda Wittstock: Oh man, I totally agree with you. I've seen that. I have a dog and I've seen that. But it's also I think what you're saying is that you get what you're thinking. Deep down, the inner beliefs that we have about ourselves manifest outwardly. What's awkward about that is sometimes we have beliefs that we don't even know we have.
How important is mindset in your career? Really working hard to get out of your own way or get into that consciousness? I know so many entrepreneurs that I interview talk about meditation and all sorts of techniques that really help them get that inner confidence that's going to manifest outwardly.
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JC Herz: I'm terrible at meditation. I can't sit still. I'm good at meditating as long as I'm moving. I garden and that's my meditation, 'cause I'm pulling the weeds. There's nothing really going on in my head but I'm active. And cross fit, to be honest. There's this thing that you have to do when there's a really sucky workout. You just have to get it done or there's a bar on the floor that weighs about as much as you do and you've got to get it up to your shoulders or over your head. Or you just got to pick it up and get it done.
The concept of working your weaknesses: That's the beautiful thing is, most people are afraid to think about their weaknesses because they feel threatened in even acknowledging them. It's great to have a discipline that says, “I'm going to find out or the workout's going to find out for me, what my weaknesses actually are.” Those are the things I'm going to concentrate on and improve and own them and drive out that weakness through practice.
Just the humility to do that, you need a strong ego, a truly strong ego to be able to understand that you have liabilities, you have weaknesses and admit what they are, understand what they are. Then start to work constructively to strengthen those areas, and be very secure to do that.
Melinda Wittstock: I believe that's true. Entrepreneurship is a really interesting thing. It's almost like therapy. Because on any given day, within any given hour, you can feel elated, you can feel absolutely devastated, multiple times within the hour. That kind of up and down; It leads you, I think, or at least it's been true of my journey, to get that not only personal strength, but increasing self-awareness where you literally do have some … I agree with you wholeheartedly, that you have to understand your weaknesses.
There are a couple of approaches there. There's one, as you say, it's like double down and fix your weaknesses. On the other hand, you could be like me and say, “You know what. I'm going to hire my weakness.” Absolutely.
JC Herz: Work your weakness is not an HR strategy by any means. I think it's more about those interpersonal situations where you felt like you slipped or you lost it. Something happened, or there was a person you just couldn't quite deal with. Why is it that I just can't seem to deal with this person? There's something in them that's triggering me or vice versa.
Melinda Wittstock: Right, isn't it testing psychologically though, to be an entrepreneur? It takes people to this new height of consciousness. I've recently come to this conclusion, that the very best entrepreneurs are operating on this other level. Figuring out, not only what your true purpose is in life and getting into alignment with that and surrounding yourself with the right people. Being a good enough character judge to be able to build the right team to actually succeed. To be able to make the decisions of when someone's working out or someone's not. To be able to show up in that integrity and alignment is not easy. It implies a level of personal growth and [crosstalk 00:16:28
JC Herz: Yeah, for sure.
Melinda Wittstock: Trajectory. I know with each business, like I said, I'm on my fourth one now, I just keep growing as a person. I will say that entrepreneurship has been my best therapy in that sense.
JC Herz: Yeah, and there's a maturity factor. Let's not forget, if you're an entrepreneur, you're operating in a high level of risk, personal, financial, reputational, all of that. When you're out there, your butt's out there, your neck is out there. You're very much more alive 'cause there's stuff at stake. But you're not just collecting that pay stub every two weeks necessarily. Or if you hit a cash crunch, you're going to be the last person paid because that's what it means to be an owner or a founder. You got to pay the cost to be the boss.
Melinda Wittstock: It's funny, 'cause that takes me back. We started out talking about journalism. That takes me back to my days on the times of London where I was 22, on this tape as a financial correspondent and I really was told, it's such a cliché, Melinda, you're only as good as your last story. And you know-
JC Herz: Yeah, but you're not. So this is the funny thing is, and it's a perspective of life stage thing, is you're not because you do have a track record. I think that's the greatest inspirer to act with honor and integrity aside from your personal code or your faith, is that the world is small and life is long.
People remember, they absolutely remember and there's way to fail with honor and integrity and to get some really constructive lessons out of it, and to purport yourself in a way that people want to work with you again. Or conversely, you can win in ways that no one wants to work with you again. So you have to-
Melinda Wittstock: Thank you for saying that. It's so true.
JC Herz: Yeah. I think about there's a lot of difficult situations and conversations that I've been in; business situations that I've been in. Ultimately, it gets down to this, five years from now, ten years from now, if I wanted to work with this person who I respect, would I have acted in a way that they would want to work with me? That's what you do.
‘Cause it all could crash and burn in the end, your relationships and your professional relationships, not just your personal relationships. That's what matters. It doesn't matter how many connections you have on LinkedIn. That's not a reputation. That's just a “personal brand” which is bullshit.
Melinda Wittstock: Yeah, a lot of the time it can be, absolutely. Folks who do step into their authenticity in that are rare, but increasingly valued. And how you show up and what you do on a day-to-day basis is ultimately what's going to count. Especially, entrepreneurship, when there's so many things that are beyond your control, from idea to the innovation, getting a product right, getting the product market fit right.
All the different external trends, all the different things that could be happening, that are completely beyond your control, all the way through to exit. There are so many things that can go wrong. The only thing you can really do is stand up and be your best self and create the relationships. I think as you're saying, extend beyond the life of that particular startup. Whatever happens to it; it's such an evolution in process, in fact. Going back-
JC Herz: I think this is one area where my entrepreneurial story isn't necessarily the same as people who are doing other things. Is that for me, mission is very important, and the consequences of mission. I've worked in National Security. I've worked in healthcare. Both of them: life or death. I was security, cyber security. This is serious.
There are a lot of companies and people who treat it like dental health, they don't really attend to it until something goes terribly wrong. But it's serious. It matters. And if you can do something in your field, that improves the marketplace, you have actually done something that is objectively helpful for society.
That's different than running the world's greatest handbag company, which is also awesome, don't get me wrong. But for me, that's part of what keeps me grounded is that there's a consequence to the areas that I find myself in, because all of the technological change is creating new kinds of negative consequence out there that a lot of brands, beyond mine and the people in my company are necessary to fight back or establish a new kind of beach head.
Melinda Wittstock: The cyber security piece is obviously so important. We're in the middle of all these big investigations into the Russian hacks on the American election in 2016.
JC Herz: Or even Equifax. This is the thing. Companies like ION channel, automate the updates. You read these headlines of, ‘oh man, you didn't patch software’? There was a known vulnerability. So you look at all this process that people have been doing manually. It's like the sorcerer's apprentice. It's impossible now, for any human being to keep up with this.
Being part of this drive towards automation, that's really exciting. In some ways, it's wonky and boring, 'cause it's infrastructure. There are not a lot of people who are riveted by tectonic shifts in infrastructure. I happen to be one of them. But that shift, it's like the electrification of the world that happened in the 20th century. It's
Melinda Wittstock: [crosstalk 00:23:13
JC Herz: Shipping containers. This is part of what the 21st Century is about is automation of all this digital and information technology. Our acknowledgment again, our weakness is that you can't just do it with human beings looking at things. You need to hand to the computers, over, the things that they do well.
Melinda Wittstock: What's wonderful JC is to hear the passion in your voice as you talk about this vital mission. It is vital and it's something that is, say, invisible when it's working well.
JC Herz: Yeah, absolutely.
Melinda Wittstock: When it goes wrong, all hell breaks loose.
JC Herz: Yeah. And in order to implement it, you have to get yourself through some content that's pretty eye glazing, I have to tell you. I have a routine; I have a ritual. Every time there's a new national institute of standards documents the standards, like 179 pages of just watching paint dry, I make myself go get a pedicure. ‘Cause I know, the only way I'm going to sit and read this, is if I can't get up from the chair. So I read the newest standard and my toes look amazing. That's what I get out of it. I can go forward, execute against the mission.
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Melinda Wittstock: Now, that is work, life balance right there I call it work, life integration where it's just really juggling all these different things. A lot of women will say, “Oh my goodness, how do you manage? How do you do a company and have kids and a dog and get your nails done?” How does your personal life go?
JC Herz: It comes down to control of your schedule. You have to control your schedule to make it work. There's just no way to get it all done if you're punching a clock and don't have discretion over your schedule. You can be productive as hell. But in order to get all the work done and get the kids to soccer practice or whatever, you've got to be able to flex. You've got to be able to pick up from school, take to practice, do the work in your car in the parking lot during practice. And then get to dinner, fix the dinner, put the kids to bed. Read your story. Get back online, answer emails. Get back to your developers on slack. Mine are on the west coast. So I'm going late. You have to be able to control your schedule.
Melinda Wittstock: Yeah, the schedule is a really great point. I used to be one of these people who wrote lists. And then I discovered that apparently, just writing out a list of things to do releases dopamine. Makes you feel good, even if you don't do any those things on the list. But if you get to the end of the week and you haven't completed your list, that's not great.
I found that my productivity wildly improved when I started prioritizing my schedule. Like, if it's not on my schedule, it doesn't happen. I had to put all these visible things in there like driving, the school run. Things like getting my haircut. Or I'm actually going to go have a massage, every Friday morning because I do my best thinking. I have a lot of big inspired thoughts about my business, about a lot of things, when I'm actually not working. So creating those-
JC Herz: Yeah, I think it's a balance with teams. And I think the balance in this and the balance in my own company, is that we have a norm in the company that work from home isn't the answer if you have a team because there's a centrifugal force where if you have a team and an office and no one's at the office, that doesn't work. It's really more about flex.
I have an employee; he has two little kids; his wife's on a schedule. It turns out, its ‘come in early, leave early’. It's the eight to two. Versus nine to five and then check your email later in the evening. Because six hours of face time is all you ever need, really, with your team. There are always a couple of hours when you just have to be in front of a screen looking at stuff and doing stuff. That can be done from anywhere.
The priority is, for the things that you have to actually be in a room with people to do or have some kind of synchronous contact with people to do, make sure that those are done, that, that's given the time that it needs and that you're really focused and present in those times. The things that are you in front of the screen taking care of stuff, that's not necessarily location dependent because it doesn't rely on others and the interaction of others. That's the sort of stuff you can flex around.
And people, here in Washington, the traffic's so bad it seems like everyone is on flex time of some sort. They're either, coming in at the crack of dawn and leaving early or they're coming in late, leaving late. But as long as there is that core time when you can be with people and just don't schedule a bunch of useless meetings and don't necessarily assume that meeting has to be an hour. Meetings don't have to … That's ridiculous. And so-
Melinda Wittstock: I set up calendar meetings for 15 minutes. And with a buffer on the other end in case it has to over run. But yeah, meetings can suck so much time and a lot of people end up in meetings that don't actually have to be in the meeting. Maybe this is a function of getting older, or maybe it's just an entrepreneurial thing. But this appreciation of time being a resource that you don't get back: You can always make more money. But you can't make more time. And how you spend that.
JC Herz: Well and then also figuring out where you are cognitively when you do your best work. You can do the most cognitively intensive things first and then what happens to me on any given day is you have to ratchet down. You've done the really hard stuff. Or you had the very intense conversations or the pitch meetings or the project meetings or whatever it is that's taken a lot of mental energy and there's a thing of just keep moving.
So you downshift into something that's less cognitively taxing and that might be some administrative thing that you have to get through your whatever it is. But you're getting it, it's on the list, you're getting it done, you downshift and downshift and downshift so that you're leveraging your own brainpower throughout the day until you just can't anymore. And then you workout; you get a boost. And then you can do something else.
Melinda Wittstock: You do Crossfit. And you do it every day?
JC Herz: No. God my body couldn't take that.
Melinda Wittstock: That would be intense.
JC Herz: Yeah, well you have … And this is the thing: as you get older is you need to really pay attention to recovery. The biggest difference between the 40 year old and the 20 year old isn't necessarily strength or stamina or any of that, 'cause you can keep getting stronger. It's recovery time. It's like partying. The 20 year old is going to get up the morning after a huge blow out and be like, “Oh yeah. I'm fine.”
Melinda Wittstock: Oh yeah. I remember those days.
JC Herz: 40? No. No. Not going to happen. I usually hit about three workouts a week and then I do something else. Also, gardening. I'll tell you, digging is pretty intensive when you have to do that. But yeah, the high intensity workouts are good, whether you're running and you're doing sprints or you're just doing something intensely 'cause you just, there's a hormonal affect that you get when you go to near maximal. You get your heart rate up. You're lifting something heavy. It might be that your brain works better afterwards or it might just be it's stress reliever.
Melinda Wittstock: I found that. I do this thing where I do yoga early in the mornings. When I wake up, I do yoga. I do yoga and then I do a little bit of meditation, which I also used to be horrendous at. But I have actually gotten better over time. I just wasn't really focusing on it. But then, most days kind of mid-day, I will go out and I will do a burst of weight lifting for 20 minutes or a half hour. It's not constant, but it's fairly high intensity.
I find that I don't have the same afternoon drop off that I used to have. I find that I'm just more level through the day. I can get a lot more done. I get a lot more done as long as I'm really disciplined about taking those breaks. It actually-
JC Herz: Yeah, and pay attention to your nutrition and make sure you've had enough to drink. Being an entrepreneur, you almost have to think of it as an athletic challenge. Because you do need to make sure that you have proper nutrition. You do need to make sure that you're having enough to drink because … And this is the greatest lesson of having kids is when you have toddlers, if they're tired, hungry or thirsty, you see what happens to behavior. We're just the same; we just have more self-control … over what comes out of our mouths.
Melinda Wittstock: I think that's so true. There's a much higher degree of consciousness around all of that. It's not necessarily work harder; its work smarter and get that balance in your life. What other things do you do just to let off steam or just, do you have time? Personal time for yourself, focusing your calendar?
JC Herz: You know, the gardening ends up to being my alone time, which, I'll have to tell you is the one biggest thing that I miss from being single was just puttering around the house alone and just having the quiet. That is an essential nutrient for me. I think it is to varying degrees to people. I think that is actually the hardest thing to get because you have the work and you have the family. And you this spouse, who you also want to pay attention to. The time to just be alone falls away. It's restorative. That's the thing that I end up having to claw back.
The one thing that is great for my mental health is, I have two gigantic dogs and they're so sweet. They're mostly mastiff and part labs [inaudible 00:35:29 the mastiff, Labrador combo. My boy dog is about 120 pounds of pure marshmallow. And my girl dog is about 92 pounds. Her name is Angel and she's the naughty one, of course.
But, having a dog, it's so great. It's an emotional safety valve because no matter what you've been doing on any given day, they look at you and the empathy is amazing. You just love them and they are there for you. And they're there for your kids. I have a tween. I know that having a dog in the house is a great thing for our family. I think that dogs are amazing. I'm definitely in the same camp as Jeff Bezos when it comes to dogs as promoters of good culture, good company. I was in an Amazon office the other day, here in the Washington area and there was a big bowl of dog treats, right on the reception desk. I was like, “That's great.”
Melinda Wittstock: It is the best in the world. I'm a big dog freak as well. I have a second Golden Retriever, Josie, who it's so interesting how they have different personalities. She was a rescue. She was actually a stray puppy and between about five months and eight months. An amazing story: She has this tenacity. What I love is she's a little bit older now. She's almost nine. So sweet, but you know what? They live in the present moment.
To watch a dog and how they deal with life in this non-judgmental way they really understand that the power that they have is in the present moment, 'cause that's where your future is being created. When I'm with her, I can get into that kind of Zen state. And it's spectacular. I agree with you about the kids as well. Yes, all offices should have dogs. They absolutely should.
JC Herz: Yeah. I think also, being a parent. You get a perspective. A patience and facility for talking to people who may not be their best self at that particular moment. And that's practice, that's something that people who don't deal with kids or very difficult kids on a regular basis, don't necessarily have. I know that there's just a lot more than I could grapple with having had two kids and taking them up to grade school level than I certainly could have as a single person. Part of that's just getting older. Part of that's being a parent.
Melinda Wittstock: Of course. I want to turn the conversation back a little bit to the differences between men and women in entrepreneuring: The sort of strengths that women bring to the table, whether knowingly or unknowingly. There's obviously some things that we do that sometimes undercut ourselves, we don't ask for enough money or don't ask for the, in an employee context, don't necessarily ask for our worth.
Or, as we were talking about it in the beginning of the conversation, really not showing that we're going to take no prisoners… There are some things like that where we can be at a disadvantage.
On the other hand, there are so many strengths that women bring to the table. What are some of the things that you think that we do extremely well that we should be doubling down on?
JC Herz: Preparation. I think that one thing that women do is they prepare adequately for the challenges that they're facing. Men sometimes have the tendency to wing it. This is a double-edged sword because men will go for the promotion if they're 40% sure they can do it. Women have to be 100% sure that they can do it in order to ask for it. And that's a bad thing.
But the flip side of that is if you're going through a really challenging situation, doing your homework tends to help promote success. There's a tendency to do the reading, figure out what are the challenging things they might as. Or what are the downside risks here?
It's not being negative. It's contingency planning. I've worked in the Pentagon. But this is the contingency planning. What's the fallback to the fallback to the fallback? That whatever comes up, you've thought through those scenarios. The separation, the wanting to be 100% sure tends to drive women to prepare more thoroughly for whatever's about to happen. That's a great thing.
Melinda Wittstock: Could this be why so many businesses, there's been some research done not so long ago that Springboard venture form that you referred to a little bit earlier were both alums, for those of you listening who don't know Springboard, it's an accelerator of sorts for entrepreneur women who need some help figuring out how to get the businesses funded. It's a great organization; it's been going on since 1999. It really helps women like us get access to capital.
They shared some research that shows that startup teams that have women on the founding team, survive. This actually goes on to say, NASDAQ and DOW quoted companies. If there are enough women on the board, enough women on the executive team, those companies have better results as well.
I was speaking to a school teacher who said, “You know what, I'll ask a question and before I've even finished asking the question, the boys will have their hands up. But the girls will wait.”
JC Herz: I think you're right. Because when you're an early stage startup raising capital, you are raising your hand before the question has been asked. You definitely are.
Melinda Wittstock: And there's more that you don't know than you do. Yeah, sure, you think you do. You go in there, the other thing that's interesting is that men will go in with all those hockey stick numbers that the VC's automatically discount. Whereas, women will go in with more realistic numbers, because they've done all the preparation and the VC's discount those numbers. Just even being aware of how we're even being perceived by the men, like using our empathy to get in their heads to actually understand they may be hearing something different than what [crosstalk 00:43:27 been hearing.
JC Herz: Well also, don't forget, VC has its own crazy distorting lens: The VCs who are actually convincing themselves of things that can't possibly be true. Every time they make an investment. It's a distortion field. They actually practice believing things that can't possibly be true. Because that's the only reason you can invest money in something that's oh yeah, it's going to be 1,000 [inaudible 00:43:59 it's a fantasy.
I think that one answer is you going to be better at the fantasy? The other is, who's not in that fantasy world? So it might be corporate venture, these are all companies, but there's hundreds of them that are in businesses and they just want a little slice of something that's more agile than they are. And there's a ton of investment that gets done.
These people, they understand PNLs. They understand margin, profitability all the reality. They live it every day. Going into this corporate venture meeting, this is their vacation. So you can also speak to people who are not in the St. Lucia news house who have money. There's a ton of them. Family offices have it. There's just a ton of really rich people that like to invest in things [crosstalk 00:45:01 for a reason.
Melinda Wittstock: I've noticed a lot of female entrepreneurs really having to chart a slightly different course from the VC model and go for … Yeah, family office money is a big trend, Corporate VC, just different strategies.
JC Herz: Well also even regional. So people who are not in the Silicon Valley. ‘ Cause believe it or not, there actually is a startup world outside of Sand Hill Road.
Melinda Wittstock: What? Can this be true?
JC Herz: I know, it's crazy right? And this is how crazy it is. And it's frankly one of the reasons why I haven't gone out for venture money for one of my current startups; part of it is I don't need it because I actually sell a product to people who are willing to pay me money.
Melinda Wittstock: Well that's a nice position to be in.
JC Herz: But VCs are in California, would rather make an investment in a company that's in Tel Aviv, than a company that's east of California in the United States. They'll go international before they will fund something in Tennessee, upstate New York, Texas.
That's why all of these local accelerators are starting. Is because, it's like the old New York [inaudible 00:46:20 map, so New York, California and then there's nothing in between. There's Silicon Valley, Boston and New York. And then there's the whole rest of the world. They'll get more excited about something in Estonia than something that's in Florida.
Melinda Wittstock: That's just astonishing. Just a little bit about the VC world. Do you agree that a lot of women who say, “More women would get access to capital if there were more women on the investment committees of the VC.”
JC Herz: Sure, yeah.
Melinda Wittstock: And what about, the pension money that funds the VC's, could they make a bit of a change, by just requiring the capital to be used more equitably?
JC Herz: I don't know. I think that gets very dangerous. It's hard to say. This is one of the areas where you have a lot of potential for unintended consequences. I do think that if the VCs themselves were more evenly composed, that would move the needle in a good way. I think the minute you start to have limited partners, imposing mandates, what's going to happen is, the top tier VC's who generate the bulk of the alpha will say, “That's fine. Take your money somewhere else.” Because they can.
So you're going to have all these middle and bottom of the barrel VC's with mandates from their limited partners who have less access to steel flow anyway. And then what's going to happen? I don't know that I have any particular faith in quotas of any sort. I do think that if the people who are sitting on the investment side of the table are more evenly composed that they'll bring more perspective, that's a good thing. I think there should be more women in venture capital, as venture capitalists.
I don't necessarily think that people who are one removed from the marketplace as startups, which, let's face it, are disproportionately male, in tech, are going to have a necessarily 100% good effect with mandates, because then you create the affirmative action problem of, “Oh, well they just got funding because it's women and it's a mandate and it's a quota.” And then what happens when those startups fail, which they will because the odds are that they will. So what are the stories that are going to get told about that? You could end up worse than before.
Melinda Wittstock: That's a really, very good point. It's a complex problem. So the solutions are complex as well. I think as attitudes change, as women, I think, get more confident and start to really get out of their own way, understand a little bit better about the circumstances and then, but the men really have to change too.
What I find astonishing is the amount of value and opportunity left on the table. One of my most ridiculous experience was being told by an investor once that he would love to invest but he was worried that his wife would disapprove. I'm like, I just couldn't even believe this. I was, what? What did it have to do with your wife? What because I'm a woman? Like, what? There's this craziness that still exists. It requires just a big attitude shift. I'd like to think that we're on that trajectory, or at least talking about the right things.
JC Herz: Also, Springboard has a lot of women, venture capitalists involved and some VC's that are just dedicated to making investments in female founded startups.
Melinda Wittstock: Yeah, that's happening more now, which is great.
JC Herz: I think that those people, that is their sense of mission. They can get support, 'cause they believe in it and they have made money. And then they're going to be looking for their own cream of the crop as well. I think that that can generate a positive feedback cycle of its own because assumedly, the women who have those companies who then exit, those are the next limited partners. Where are they going to take their money? Well, hopefully, they're going got take it back to where they got their start. You can have a positive feedback cycle.
There's a book called the evolution of cooperation, which I love and it's actually quite a think book, it's about gain sharing but don't let that scare you. It's about this competition prisoners’ dilemma and it was a computerized competition. The guy said, “Okay, bring your algorithms. And we'll all compete to play prisoners dilemma. And the algorithm was tit for tat, which is the simplest, which is don't be the first to defect. If someone defects, defect immediately thereafter. And if they stop defecting, don't defect after that. It was about cooperating, if people are willing to cooperate with you.
The next year, he announced the competition again and everyone knew that tit for tat had won last year. But it still won. So he wrote this whole book about why is that such a successful strategy? And if you do this computer modeling, what you find is that you only need a few cooperators in a society of non-cooperators benefiting so disproportionately from their cooperation with each other, that they'll flip the system over time. That is fascinating. [crosstalk 00:52:45
Melinda Wittstock: Because people will read that, it's called the Evolution of?
JC Herz: The Evolution of Cooperation, by Axelrod. It's a big inspiration.
Melinda Wittstock: [crosstalk 00:52:52 that's awesome 'cause I was-
JC Herz: Yeah, and it's skinny too. It's only like half an inch thick, which is a big plus if you don't have a lot of time.
Melinda Wittstock: That's cool. So that could also apply to bro culture. You must manage a lot of engineers who a lot of them are most likely male. How does that go?
JC Herz: Actually, I'm very proud that we have in our home office female in there in the mix. That's all for the good. We tend to hire more advanced professional engineers because we're doing stuff with speed and scale so it's less of those because the [inaudible 00:53:36 are going to have to have six or seven years of engineering experience in order for us to consider hiring them.
But, I think that it's definitely an issue. Let's just take away the bro thing. When you have young people. When you have a ton of young people on your staff. This is their first job, maybe second job out of college. They are coming to it with all different kinds of ideas, what they're entitled to. How brilliant they are, particularly if they're being hired out of the places that tell everyone they're brilliant. So you have to socialize, you have to train these puppies.
And I think that that is the responsibility that's kind of aggregated by a lot of the companies that employ tons of these people just because they're trying get them to work for talent. But they're not training the puppies. And puppies that aren't trained, they're going to do all sorts of things in your house. That's just the fact. The boy dogs are going to do more than the girl dogs to mess up your house. And that's just how it is.
Melinda Wittstock: I love that you brought the conversation back to dogs.
JC Herz: I think that there's character … So here's the problem, is there's character formation that happens in your early 20s. And your parents aren't there. And the culture of the companies aren't enough to give people touchstones for, this is the right way to behave and this is not acceptable. Because they're so hungry for the talent that, that enculturation and that maturation and that character formation it just took the cake of the bagel away. And then you concentrate that in places like Silicon Valley and you get something that's really hard to turn away from.
It is happening, but I think it's really also about leadership, not just on the corporate CEO level, but it's really on the management level, on the middle manager, on the team leader, on whoever's ordering the pizza for that two pieces of project has a leadership role. On some it's kind of local and that local leader has to step up and make sure that it's a respectful culture. And that includes listening to people you don't agree with. Which is, it's a generational issue. It's not just a gender issue. And having respectful differences. And all of that.
That's something that the junior manager, the middle manager, that they don't necessarily understand that, that's their role or they feel like it's a difficult thing to do or they don't have the top cover or backup to do it. I think that we need to examine leadership. Not just something that comes from the top, although, obviously it does. But it's something that happens in the middle. That's the hard problem.
Melinda Wittstock: This is so true. So we have to wrap up really quickly. One of the things I love to … There's two questions that are just a must question. And the first is really, when you were growing up, did you have any super-sheros in your life? A woman that you really looked up to and thought, “Wow. I want to be like her.” Whether in business or in sports or any area?
JC Herz: I don't know, when I was growing up. I did have an amazing biology teacher in high school, Alex Kabey and she had done research. She had been a research scientist. She was so passionate about the subject. She was teaching, but she was teaching from the experience of having been a scientist, not just being a teacher. I thought that was kind of amazing.
A lot of it is just literature. If you read a Wrinkle in Time. We think about Meg. Or if you read Daryl Markham's biography, which I did when I was quite young, the last one was a knight, this one was a pilot in Africa in the early part of the 20th century. Literature was always really important to me. That was the role of imagination. I think it's more characters to me, who speak to me.
Even now, I watch Penny Dreadful, that was my guilty pleasure. If you watch Eva Green's character in that series and how strong she is, under how much pressure she is. The aplomb and just juggling under fatigue. It was so inspiring. It was so amazing. I think that that's, we tend to lose novels, we tend to lose fiction at night when we're so busy. But it's also an essential nutrient.
And so I think that it's important to just fight for time to read a novel, because there are some amazing women in business and there are amazing inspiring figures that we should all look up to. But you can't really get inside their heads in quite the same way. But we can get inside the heads of the characters that are in the novel. I just read another novel called ‘Where'd You Go Bernadette?’, which completely sums up the Seattle tech culture, which is fabulous. I think it's important, it feels like it's fun and vacation, but I actually think it' necessary to be able to open up your imagination like that.
Melinda Wittstock: Fantastic. A great segue into my last question, which is, if you had three pieces of advice to give to women at the early stages of their entrepreneurial career, whether they're young women in their 20's or whether they're women a little bit older coming to entrepreneurship a little bit later in life, in the spirit of reinvention. What would those three pieces of advice be?
JC Herz: I think the first would be don't apologize. Women apologize a lot. Sometimes you're in a situation where you should apologize, but women tend to apologize for things that they don't need to apologize for. So don't do it. The second would be, just pay attention to how you speak. And think of yourself as a performer and you got to drive out things like soft talk. You've got to land on a note. My joke is, all your talking points, in your head, silently, you just need to end with comma bitch. And you'll make the point.
Melinda Wittstock: I love it.
JC Herz: Just practice that in your head and just understand that these challenges are going to provide opportunity for you to grow and so it's the cross fit thing, embrace the suck. Just surmount it and you could do it. If it all falls apart, you will have lunch and try other things.
Melinda Wittstock: Exactly, and don't take it personally, when or if it falls apart.
JC Herz: Yeah, and who are your buddies in that situation? ‘Cause sometimes it's a scenario I like to call fly into the sun, from all the movies. We're going to fly it into the sun. You've got to be able to turn to the person to the left of you or to the right of you and this is the mission that we're on. We're not going to sit around blaming each other for what's about to happen. We're going to try to do the most good that we can in the time that we have. That also goes for if things go south, how do you protect your people? This is part of the experience in National Security and the military. How do you protect your people?
If your company's going to not make it, how soon can you know that? What can you do to make sure that your employees have jobs? If there's someone for them to land, you are dead, you are trying to do your best to protect them because people remember that. And also, you remember and you know that you did what you could. That's the best reason to network, it's not necessarily for your own personal gain or to be connected or socialized with mucky mucks, it's so that if you run into contingencies, you have options and not just options for yourself, but options for your team.
You've always got to know, there are people who would love to take your people on. Because it's like finding homes for your children if you're terminally ill. You've got to think about that. It's kind of grim, knowing that there are people out there that you could call and say, “You know what. This whole thing is going belly up. I want some good places for people on my team to land.” And they're like, “Oh, hell yeah. I haven't wanted to [inaudible 01:04:04 your people but they're amazing, so let's talk.” You have contingencies, and you want to succeed and you have to believe you're going to succeed. Sometimes you don't succeed. But are the people that are associated with you going to get burned? You don't want them to.
Melinda Wittstock: That is such important wisdom to share. JC, let me just say, you are a true super shero. I want to thank you so much for sharing all your wisdom with us today on Wings of Inspired Business-
JC Herz: It was fun.