Rachel Springate — Muse Capital

Great connecting with Rachel Springate about her path into VC, raising consumer-focused Muse Fund II, her partnership with Assia, and diversity in venture.

 

 

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Today I have Rachel Springate partner and one of the founding partners at Muse Capital. Muse is a seed fund investing in the consumer space. Currently investing out of Fund II. Congratulations. With companies like Motherly, Maven, Beekeepers, Clarity Money and many more.

We were gonna have Assia with us, but we cut her. We gave her the boots. She had Internet problems, unfortunately. Anyways, Rachel, thank you so much for joining me.

Thank you for having me. 

Well, let’s let’s talk about Muse and what you’re building and who you are. Maybe you could start there with. Give me a little bit more about your background and how you came to Muse. So I’m originally from the UK.

If you couldn’t tell from my accent, my my dad’s a Brit and my mom’s actually from the Philippines, but I grew up and went to school in the UK. And I started my career in brand research of all things. And so that was how I got to build relationships with marketing directors of Fortune 500. You know, everybody from an Apple to a Coca-Cola to an IBM. And then from that job, I was headhunted into a completely different world, which was the world of luxury lifestyle management.

And I joined a group called Quintessentially. And if you don’t know what Quintessentially is, it’s a very high end concierge service for high net worth individuals.

So if you think of a Richard Branson in his hometown of London, he would know everyone and everything lifestyle related. But if he went to Tokyo or to Rio, there were basically people on the ground who who knew the city’s inside out and they would help those networks navigate whatever they needed.

And actually, that role was fascinating because it’s how I built my influence.

The network, it’s how I built my relationships with athletes and sports teams, obviously just solidified my brand network. And after four years of doing that, I came back and realised that corporate accounts for 80 percent of the revenue of the company. And I just thought to myself, I don’t think I’m going to go any further here and there’s got to be something better I can do with this network and then make a lot of money for these guys. And so in 2012, I left and was doing some consultancy work in Asia, and I met a guy who changed my life.

A guy who we all know in the L.A. ecosystem called Troy Carter. And this is 2012 when he was Lady Gaga’s manager. And she was probably the biggest pop star in the world at the time. And I remember meeting him and sitting with him and say, you know what’s exciting to you? And he said, technology and early stage investing. And I said, you know, I was expecting you to talk about new artists.

And he said, no. He said, I’ve been spending a lot of time in Silicon Valley. I’ve just written an angel tech into this great company. You should know about called Uber. And I was like, wow, like what is even more importantly, what I letting you know why you’re investing. And he said, oh, you know, I let I use my network to help these companies grow. Right. So it’s a really important part of our future.

There’s very few people like us that have the network and the relationships that we do. So you should spend more time there. And, you know, he’s the one I open my eyes school to all of it and a really close with his team. And I think we’ve we’ve done like four deals together now at this point.

And so and so you started doing helping out these early stage companies and how did you end up connecting with Assia and forming Muse Capital Fund one, I guess. Well, one of my clients is actually in the music text banks, actually in the deejay space at the time because I was a big rock stars. Calvin, Calvin, Dead Mouse. Yes, I all these guys. But most importantly, it was helping them get their technology integrated into Spotify and Apple.

And when I was doing the deal with Spotify, the person that I was connected to was Assia and I’ll never forget it.

She did that meeting and she looked at me and she was like, this is great. You know, I am super interested in technology, but who are you? And, you know, for those that don’t know Assia and maybe I can give a little background on her about how we met. But Assia is really extraordinary, non-linear background also. So she’s originally Italian, came to the States when she was nine and went to Barnard College here and then went back to Europe and actually ended up running TV radio and a for a big music company in the U.K. called Ministry of Sound. And all the things that she’d done in her career. She she actually ended up putting one of the first ever music channels onto YouTube, which is how she met Chad Hurley, which was Ministry of Sound and through that was just networked, obviously, into the digital space and was becoming this leader in a time when no one really knew how to navigate that.

And through that, she ended up meeting Daniel Ek Spotify when he was very early in the development. They’ve just proven out that this was working in Sweden. And he asked you said, look, I need help expanding this internationally. 

So she actually came to help open the L.A. office, which is crazy. Think about Spotify didn’t have a presence five years ago. But, you know, alongside doing that. So she was working with Daniel, but also had met the Aneli family and the Aneli family, a very prestigious Italian family.

They own like Fiat and Ferrari. And you Juventus football club. And she’d been again advising them and their family office on media and tech investments. And actually through that. One of the any family became the chairman of Juventes football club. If you don’t know what you meant to say. It’s one of the biggest sports teams in the world. It’s a publicly listed company on the Italian Stock Exchange. And she actually ended up becoming the first female and youngest board member of Juventes football club.

And she’s still on the board today. So nine years later and has certainly seen a lot in the last nine years. And they signed Rinaldo in the last two years, the biggest soccer player in the world. And so when it comes to kind of sports, media, entertainment, Assia’s networks, this is so vast. And then as well as that, she ended up joining the board. Of Northtown Ventures. And no sign if you don’t know.

It was one of the first institutional money into Spotify. I need to ask some about Muse, what you invest in to tell me some about. You know, right now you’re investing out of Fund II. What sort of you know, are they all seed companies? They’re on the consumer space. What are you looking for when you’re investing?

Our idea at Muse is to be one of the most helpful investors on the cap table and actually bring something very different to be invested, because along with our check comes this 30 year combined network of access to these decision makers.

And so with Muse, what we look at, we we are a broad consumer fund. So we say products, platforms, marketplaces. So long as it touches the consumer at some point. We like to take a look. And, you know, fund one was more of a proof of concept fund where we were just proving out the model and seeing if this would work. And it actually went really well. 

And it’s really interesting because. Pre Covid, you know, we weren’t we were already very interested in sectors that are just being accelerated by by this.

So we were already investing in areas like telehealth and women’s health and online education. We we don’t do. We don’t typically do CPG unless, you know, if the founder is trying to change the entire category.

How you can kind of assess that potential to go from sort of an initial like products into more of a developing the brand and developing up a platform, say. Yes, so it’s interesting. I think a really good example of that in our portfolio is a company called Motherly. So if you look at Motherly, it started out as a platform for millennial mothers.

And they built this. They bootstrapped it. And, you know, it was resonating with the audience. So much so that they had, you know, incredible engagement.

Right. And now they reach 30 million millennial mothers a month.

And so Motherly is a great example of a existing platform that can now expand into a marketplace. Right. So they’ve already built that trust with the audience and they kind of know what they like, what they don’t like. 

And I think I think it was Connie Chan over Andreasen who talks about super apps.

Right. And how they. People are less likely to download new apps and focus on those that already out there and already have engaged audiences and build on top. And that’s why I think. Motherly being a platform to marketplace, then doing so much more with that existing audiences. They are the kind of company that we would focus on.

Got it. And, you know, I know there’s never a rule of thumb exactly. But when you’re investing into these companies, you’re you’re leading or participating in a seed round. What sort of traction do they often have that will make you think it’s like the right time for for you to invest?

Yeah, I think we’re unique in that we typically will not do your kind of pre product, pre pre revenue, to be honest, because if you look at all content. Our value add, it’s to supercharge a company. Right. So typically we want to see the product, a company in market with some traction. Because if we’re then going to take that into major brands, major corporations, they are going to want to see it working before they going to consider a partnership.

So when you’re doing that business development, are there lessons that other people can learn, like other ways of doing business development? You know, if I don’t know all the top to your talent other than working with Muse.

Yes. So I think it’s really important, you know, to get because business development sounds so vague. Right. And it can and it can cover many, many aspects. And, you know, it’s very easy for people to think because we’re based in L.A.. All this is it. I mean, obviously, we get me in front of celebrities influence, and that’s actually not what you know. That’s just one tiny part of what we can do.

And, of course, it’s important. But, you know, we’re just as likely to look to do a partnership view with a Fortune 500.

And actually, a good piece of advice here is talking about elephant hunting. Right. And you always want to try and go for that big deal. But to be a really good business development person, you have to have a balance.

So you need to have both the low hanging fruit. Right. So those smaller deals that are going to bring you revenue, bring you distribution when you customers, but then also have, you know, the elephant, the one that is going to be the deal that will define your company. And so I feel that entrepreneurs often overlooked that. 

And it’s so, you know, looking at examples of successful case studies, I guess that already out there. And then, you know, quoting that and then pitching it to the company as well.

Did you see this? We can do this for you. I think that’s actually really powerful, too. Yeah.

That makes a lot of sense. Great. So in this one, too, I meant to ask sort of what is your target check size, that sort of thing.

Our average check is 250 to half a million into the seed round of a company. So, yeah.

And just for use, sort of more personally, like you’ve gotten into VC now, you’ve been doing this for a number of years.

Do you advise for people who want to maybe follow your path? Like, is there a path there to follow or are there different ways in?

For sure. And I think that, you know, Assia and I over the last three years have been just doing it right, heads down working, not really telling our story, but we actually think it’s really important because especially today. Right. I think that given the current environment and what’s happened with Covid and what’s happened with Black Lives Matter, I think now it’s more important than ever that we have diverse emerging managers. Right. And diverse, diverse managers who can write a check.

This been the hardest thing I’ve ever done in my entire career.

By the way, going out and raising that first fund without the right background necessarily or a different background, I should say, by the way, while pregnant and having a baby. Just when you thought it couldn’t be harder, you know, it was definitely really tough. And I think for Assia.

And I you know, we really came to kind of share our story and some of the mistakes that were made and how we can make that easier for other emerging managers to follow the path.

But we believe in diversity. I’ll give you an example of this. So when Assia and I went out to create news, we actually didn’t have a mandate that we had to invest in our only female or only like minority entrepreneurs. Yeah, when we when we look at our portfolio, just naturally, why?

Because we are we look at the world differently. Fifty percent of our portfolio is minority or diverse. And we were really proud of that.

Do you have any tips, things that you might have done differently other than realizing that it’s incredibly hard, I think one of to pass on advice would be, hey, guys, this is how it works.

These are the people you really shouldn’t be talking to yet. And here are the people that you should and why.

I assume that most endowment’s institutional investors are just looking to invest much larger sums of money into later stage funds.

Exactly. And, you know, it’s tricky cause, you know, there seems to be this movement that more investors do want to invest in female and minority emerging managers. But when you actually peel back the hood and you look under it and you’re like, you know, what does that actually mean? It’s like, oh, you know, you have to be raising at least one hundred million. And then you’re like, OK.

And then, yeah, in terms of the fund raising process, I mean, it took us 18 months. And I know that that’s kind of normal. But for us, it was like, wow, this is you know, this is not for the faint of heart.

Yeah. And we’re in such a moment of time right now. I mean, we are in the midst of Black Lives Matter right now.

And I think everyone’s getting more exposed and having harder conversations about white privilege, about our societal structures.

Now, are you maybe it’s a more personal question, but, you know, are are you guys getting involved?

How have you been experiencing this this moment in history? We are definitely getting involved.

And honestly, I’m all kudos to my Assia. You know, she’s very passionate about this.

Assia is a co-chair of L.A. All Raise. And, you know, taking those resources and sharing that with always and making sure that we’re doing that.

I mean, you know, hats off to Assia. She’s she’s niche. I don’t think she slept for the last four days.

Yeah, I was going to ask about sort of what is your maybe not this week, but, you know, normally, you know, how much. How are you able to lead your life with. I know you have. Is it a 10 month old baby?

I you I mean, my question, I think, you know, that’s the beauty of partnership, right? I feel that I honestly don’t know. You know, when I look at solo founders, I’m just like, you know, how do you do this? Because we we definitely couldn’t do it with our each other.

Right.

And yet it is I mean, it is a position of power. You’re you’re it. You are a capital allocator.

I remember saying to Assia the day that our CFO called us during this fundraiser and said, hey, guys, congratulations. You got to a point in the fund, right? Well, you know, you’re here to stay. And this is real. And, you know, so many emerging managers don’t even get to this point.

I literally was crying because. Wow. We’ve given everything to this. And honestly, it’s because. We truly believe the, you know, being diverse. As an emerging manager, having the ability and the power to write a check understanding is more important now than ever. And we’re really passionate about about about that and making sure that the world changes.

Fantastic. I think if we’re gonna have to wrap up.

But I really appreciate talking with you today. It’s been fun getting to know you better.

Now, you, too. And now I’m sorry Assia had technical difficulties, but hopefully I did. And then. All right.

Of course, we’ll get her next time.