Ariel Segal comes from a long line of industrial entrepreneurs. Her great-grandfather invented a stainless steel flexible gas connector that was placed in industrial kitchens all over the country, and when her father took over the small Pittsburgh business, he scaled it into something global.
Everything was “the factory” in their home growing up. She even remembers her dad taking her whole class on field trips there. He would introduce her to all of the different departments, explaining each of their roles. Ariel was always drawn to the marketing team: Their jet set life to conventions and trade shows, their mission to weave the products of the company into a story the market would buy.
By the time Ariel made it into the world of entrepreneurship, it was less about inventing things out of stainless steel and factories, and more about software and venture capital. She tried to break into the New York venture capital scene, but she was put off by the old boys' network feel of it and the lack of female representation there. So she went back to working with tech companies in operating roles, mostly around storytelling and marketing, her passion since those early days roaming around her dad’s factory, getting to know what everyone did.
When her father retired, he decided to start investing in startups and some small venture capital funds. It turned out, he was actively doing something about that old boys' network problem: He was investing almost exclusively in underrepresented founders.
This wasn’t a case of a “Oh, I’ve got daughters too” guilt you so often hear from male patriarchs. It was a selfish business decision.
“He was doing a lot of philanthropy work with Kiva, the microloan platform,” Ariel says. “And he found that when he loaned money to women entrepreneurs, they always paid him back. The men didn’t always. So he started to think, ‘Maybe there’s something here where it’s not only the right thing to do, but it’s also a financially savvy decision and strategy to invest in women too.’”
Once Ariel saw the impact he was making, she left her operating job and jumped on board at Segal Ventures, LP, to help him invest the family’s fortune. It’s a lean family investing operation of just Ariel, her father, and her cousin, but they are able to punch way above their size when it comes to investing in startups because of this hybrid LP/angel investing strategy.
Segal Ventures often invests in the first fund a manager is building, along with second and third funds. The funds they invest in are always under $100 million in size, often in the $10 million to $75 million range, and are deployed at the pre-seed to seed stage. They write checks at the $200,000-$500,000 check size. They’ve invested in about fifty funds so far.
They invest in smaller funds, with smaller check sizes, so that they can be closer to the fund managers and be more involved, Ariel says.
“We want to have a seat at the table,” she says. “I think we’re more active than a lot of other LPs, so this stage has really been a sweet spot for us.”
Often, the family will wind up co-investing directly in select startups, alongside the venture funds it invests in. In fact, this is a big part of why the family is such an active LP: It gives them much better deal flow than angel investing on their own.
“As an individual angel, you can only see so much,” Ariel says. “But as a VC, you are seeing a lot more, and you have a strategic framework for doing diligence. That was really what sparked my father’s interest in LP investing. He recognized the lack of his own bandwidth and the level of diligence required to invest across a wide range of sectors. This is such a good way to find deal flow. It’s like having a thought partner in answering: ‘Why this company over this other company?’
There’s another reason the family likes to invest in funds under $50 million: That’s where real early-stage funding is happening right now. Most name-brand venture capital funds have gotten so large, they are investing later, at much higher valuations, and they are almost acting more like growth capital, private equity, or even hedge funds. That doesn’t give Segal Ventures the diversification they are looking for into extremely early-stage companies, the way small funds do.
“By investing in venture, we’re really looking to support innovation and entrepreneurship,” she says. “These bigger funds aren’t necessarily achieving those goals. I really like to see focused funds where there is a solo GP or GP partners who are operators, with really, really deep expertise within a given vertical, who have a really thoughtful thesis. They have to provide that kind of value to their founders to win deals and earn a seat at the table.”