Maggie Sellers Is Simplifying Startups and Investing on TikTok

0:00Hey, business besties. Welcome back to the Female Founder World Podcast. I'm Jasmine, the host of the show and the creator of the Female Founder World universe. Today, I'm chatting with Maggie Sellers. She's the creator of Hot Smart Rich. She is a VC and startup expert, and we're chatting in real life in LA. Maggie, welcome to the show. You are now entering Female Founder World with your host, Jasmine Garnsworthy. Thank you so much for having me. For people who don't know you or your background, they're not following you on TikTok yet, how do you introduce yourself to people? That's actually a really funny question that people always start with.

0:33I used to hate this question because I'm such a generalist. And so I was never like the founder of X. And so for me now, I always describe myself high level. I'm a creative multi-hyphenate entrepreneur. I've been that way since I was little. I've always been starting businesses. It just so happens now, it really kind of straddles the line between early stage startups, creative, so content, media, and then obviously investing. But I really like to not put such a big label as like, I'm just the founder of Hot Smart Rich because I do so much more than that. But I think going in with creative multi-haven entrepreneur always just encapsulates everything I'm doing.

1:09Okay. Love that. So you had what, like a 10 year career in startups before you started Hot Smart Rich, which we're going to get into in a little bit. Talk me through how you made that transition from like corporate startup girl to investor and what you're doing now? Yeah. So I always worked at super high growth startups and I'm very happy that I started my career at Salesforce, which was kind of like the best case scenario from a corporate structure perspective. I always say this, I felt like Mark Benioff knew who I was, even though he didn't, but that's how well the company was run, at least when I was there.

1:43And then I made a transition over to my first earlier stage startup. But when I was there, we actually went public and I reported to our CEO. So that's where I always say I kind of got addicted to this idea of liquidity events, because when you go public with your first startup, you're like, oh, my gosh, this is what this is like. This is amazing. So I kind of knew the path of where I was going. I kept going earlier and earlier and earlier. And so the next startup that I joined, you know, we raised one hundred and twenty million dollars. I was very attuned to when there was a board meeting coming up when I could feel like, you know, we had a big marketing budget, which I know we'll get into later.

2:15at one point I was managing$18 million underneath our CMO. Then there would be times where, you know, we're pulling back on spend because budgets are tightening. And I knew that was when we were kind of going into, we're going into a fundraise. We also happen to have a lot of really cool celebrity investors. So some, you know, celebrities, some really cool funds. That's where I just got really curious. And then when I made the jump over, I was living in LA and I saw this pattern of like, wow, celebrities is six, seven years ago. Celebrities are the future, like having an audience built in distribution.

2:46I need to understand the dynamics of a celebrity, even just team and how they're building. I ended up meeting a celebrity talent manager who at the time managed Post Malone, the Black Eyed Peas, and a lot of brands that were coming inbound as the head of brand strategy. I was fielding a lot of opportunities for equity investments instead of traditional brand sponsorship deals. So it was really up to me to figure out like, how am I even going to evaluate this? And it was just this really natural progression of being super curious, understanding what it was peripherally. And then when it was, you know, Richard, Sir Richard Branson, I just listened to his podcast the other day.

3:27He's like, always say yes, and then figure out what to do. And that's truly what I was doing. I was like getting these opportunities and being like, I have no clue what I'm doing, but I'm going to call people that were in my network that could help me diligence something, figure out, was this a good opportunity? What am I looking for? And I think that's really what's led me even to Hot Smart Rich is trying to bestow some of that for the people that don't have the network, don't have the connections that I was lucky enough to have. Really just kind of figuring it out on my own dime in my own time and hopefully be able to empower somebody with knowledge that I didn't have when I was first looking at it.

4:02Okay. People who don't know what Hot Smart Rich is, what is it? So it's actually a media. It's happened so organically. I was obviously just posting on TikTok. And I think a lot of people, I always say this to influencers and to startups, like you have to have a why. And I think for me, the why is really being able to empower women to bring their authentic selves into work. So when I was, you know, thinking about building a personal brand, that really wasn't my driving force. I really wanted to create a mission and a movement that had a bigger purpose beyond myself that could live on without my face one day.

4:35So Hot Smart Rich came in because I started realizing like I had grinded, like you said, for 10 years in the startup world, really taking away all of the feminine and authentic selves about myself and really focused on being masculine and grinding it out and, you know, being able to manage this budget and do this. And I was like, wait, I'm so torn. Like I am 20. Oh, at the time, I was like in these startup roles, 25, 26, seeing success, but I wasn't enjoying my personal feminine life. And so HotSmart Rich was really a problem I faced my whole life, which was I want to empower women to more than just learn the education and the knowledge.

5:12It's like be free to be who they are. And so now it's really an investment holding company is what we call it. It's really like a media platform where, yes, we focused on short form content. We have a weekly newsletter. We're going to be evolving that into long form content. I don't know if I'll ever do live events, but I just want to create a safe space for women to feel educated, be themselves and just grow as a community. Something that I heard you talk about on another podcast was like this pushback that you get about the name, I think, Hot Smart Rich and like even just I think generally just the vibe and what you're doing, which just resonated so much with me because, you know, female founder world, we use the word business bestie for everything.

5:56Like our vibe is very feminine. And, um, we get this pushback of like, well, why do you have to make it like that? And I, what I say back to that is like, well, why is anything that's wrapped in any kind of feminine packaging considered less valuable, less important, or less serious? Like why can't we speak to people the way that they want to be spoken to without while you're not. And like, then you don't take the content itself seriously. Um, and so I like to put that back on people. I would love to know like what your response is to people who say that to you. I think I've learned so much more from failure than I have from success in my career.

6:34And one of the biggest failures that we had at one of the startups that I worked at was we were trying to be for everybody. And when you do that, you lose your entire cult community base. And so I think for me, it's like, I don't need to be for everybody. And I've been dragged on VC Twitter and, and yeah, there's Reddit threads about me and it's, it's, it's hard, but it also is like, you're doing the right thing. And I think for me, my answer is it doesn't have to be for you. Like if you don't relate, keep scrolling, you're good. And honestly, I think I'm a little bit of a psychopath. I think every founder has to be in a way.

7:10I kind of like it in this weird way because I know what we made all of the mistakes doing when I was at a startup was we were for everybody. And so if I feel like I'm not pushing boundaries, being contrarian, those are two qualities that I look for when I'm even investing in a founder is like, do you think differently? Do you think critically? Are you afraid to go against the grain? And, you know, a story that I feel so vindicated by is I two years ago during B-Reels, Series B, when it was everything, so much VC hype, every single tech bro, finance bro was like, this is the next thing. I looked at it from the feminine consumer lens of like us controlling 85 % of consumer spend.

7:50And I'm like, this is a feature, not a company. And I just personally don't think that the valuation warrants where all this money is going. Again, learning from failure, having been at a startup that raised$120 million in four years and burnt$120 million dollars in four years and not a great success story. And I remember I posted the video. I got so much hate from that archetype of that finance bro, tech bro. Like you don't know what you're talking about. You didn't come from an A16. You don't know what you're talking about is just the go-to response when they don't like. You probably have a lot more experience than them.

8:24For sure. And different experience too. And I think that's something that's really worked for me in this way where it's like, I don't think I didn't go to a tier B or tier A school. Like I'm from Canada. I didn't have the background that a lot of these, you know, investment bankers, VC bros have. And it was so rewarding last week to build a returns illustration analysis to be like, actually, if you invested in the series B only, you lost money on your investment. You made 80 cents for every dollar that you put in. And the seed investors, they had a great investment, 48X return. Incredible. But nobody talks about that.

9:02The headline is, you know, they sell for $530 million or 500 million euros. And so for me, it's like, I didn't have to be for everybody back then. And I'm glad I wasn't. And now two years later, there's this delayed gratification to be able to be like, if you think differently, it doesn't matter if you're right or wrong. Just don't be afraid to like, do something different. I love that. I think that's actually what you do so well is like, you just make this whole world feel more doable and more digestible for I think a lot of people who normally would just have just been told and this is something that again like we hear at Female Founder what a lot of people who just kind of like think oh it's not for me because Business Insider and Forbes like don't sound like I don't feel like they're targeting me and I don't see my point of view like reflected and so you don't think that it's what it's valuable and so I think what you do is like break this down so well and like bring a lot of people who haven't been included in the conversation along with you I'd love to just keep talking about some of these myths or misconceptions that you think maybe early stage founders or the entrepreneurial community have about fundraising and VC?

10:11Because like you just said, like you just see that headline of that big exit. And so you just assume everyone got really rich and that's probably not what happened. No, not at all. I think venture capital is such a beautiful thing and where it started from was really to fuel innovation. And I think that's the first thing you have to ask yourself if you're a founder is like, are you truly innovating in a space where you need capital, where if this sells, this is not going to look like a small exit, like this is going to truly be defensible IP, something that needs the backing to grow quickly and grow fast and keep off competitors.

10:47And I think that venture capital has really been diluted down where there's so many different even types of venture capital, like the difference between a syndicate investor and a venture capitalist is so different. And an angel investor is so different. And so for anybody that is kind of trying to figure out even the landscape, it's like angel investors are typically investing their own money. There's less of like a returns analysis that they're doing to figure out, will this return my fund if this exits at these return scenarios? If you're investing other people's money, you're immediately categorized as a venture capitalist.

11:19But like I said, there's growth equity, there's private equity, there is early stage consumer VC, there's early stage biotech VC investors. Like there's just so much unknown in it. But I think the big difference, and this is something I talk about a lot with people is, and maybe this is actually super contrarian because in the past, if you wanted to raise money, you could never talk about an exit. You had to build a forever brand and you wanted to do this for the rest of your life. I would never invest in a consumer founder that doesn't have an exit plan or a strategy. Like I always think about this P and G don't quote me on the exact number, but I see, let's say if we see a thousand deals a year, if I look at a pitch deck, let's say 800 of them say they're going to sell to P and G one day.

12:09Do you know how many brands P and G owns? They own less than a hundred brands. So 800 people a year are saying they're going to sell to P &G, well, that's one of your potential acquirers. There aren't that many of them. So right now, a huge question in beauty is who's buying all of these beauty brands? Like, I think that is where you have to be very clear from the get go on like where you're going. And if you want to build a brand that you are going to run forever, I don't think you need venture capital money. And I know it's so hard to get venture capital money right now. But I think you really have to figure out like, what is it that you need money for?

12:47Because I will tell you whether it's Airbnb, whether it's my friend Byrony who started Pilates by Byrony, like the best, most successful beginning or the most successful companies come from humble beginnings and they come from things that don't scale. And I think, especially if you're talking, I would assume like female founder world is there's a lot of consumer tech, but there's also a lot of CPG. Like it can come from one product, one success, one hit, and then you can grow and develop from there. I don't know if you necessarily want to sign yourself up to being held accountable to the growth that venture capitalists are going to expect of you.

13:22I think that's such an interesting like switch in your brain to think about, okay, if you want to build a business and what are your chances actually of being acquired and selling this thing, then okay, well, what does the pace of growth look like? What does your life look like while you're building this company? Because I think a lot of people like, okay, I'm on this like five year all or nothing fast track. And it's like, well, maybe you've read about these tech founders doing that in certain spaces, but that's actually not the path that your product and your vision should deserve and entail.

13:53And maybe it's something really different and your approach should be really different. I don't think a lot of people are talking about that. Yeah. And I also don't think it's like, you know, there's this huge misconception in the market that if you're not right for venture capital, you don't deserve a place. That's also not true. Like I look at, and I am reading in the HSR book club right now, Tash Oakley's book on Monday swimwear, like Aussie founder. Yeah, exactly. Like love. And you know, it's empowering that they didn't take venture capital money. And I think especially like my, if I could just, and there's never good advice for every single founder that's listening to this because every business is so different.

14:25Like you look at Naturium, they, I think they only had three or four years and they sold for like$300 million. Um, that also is a super rare case, but I think it's like if there's a blanket statement I can make, it's just like focus on the community first and foremost. That is the growth hack, I think, for consumer brands that will be the wildfire that you need to have something that's successful. When you try to manufacture too much and you're trying to manufacture, like, am I the right fit for venture capital? I keep getting turned down. It's like, you know, they say be delusional and self-fulfilling prophecies.

14:59Every single founder that I know is turned down by hundreds and hundreds and hundreds of funds. If you feel like you're the type of founder that's going to be affected by that and it's negatively going to impact what you can bring to the actual job every single day, then try everything in your power to not go the VC route because that's just the reality. And I say that as somebody that has raised money for a syndicate, that's raising money for a fund, like it's, I get no's all the time, all the time. I'm lucky I started my career at Salesforce where I made a hundred cold calls a day and I was hung up on and told to F off every single day.

15:32that's good practice, such good practice of like, it doesn't matter. That's a you problem, not a me problem. Um, but if you're new to getting rejected, my biggest piece of advice is go to a retail store. I do this all the time. I actually told my assistant to do this and ask for 15 % off, just ask for a discount. And when they look at you and say, why would we give you a discount? You say, I don't know. I would just want to, I just want a discount. Most times they will say, no, ma 'am, we're not going to give you a discount. You get a little rejected. You learn how to deal with that. And then maybe best case scenario, you get 15 % off and you pay less money that you can save for something else.

16:06Like it's little things like that in your daily life. That's just opening you up to how can I take one step today to get better at rejection? Because that's just naturally what you're going to face when you're raising VC. So hot smart rich ventures is a syndicate. Yeah. What is that? So a syndicate is essentially similar. Like I'm investing other people's money. The difference is that I'm also a venture partner and advisor for Vanterra Ventures. So we have committed capital in a fund at Vanterra. So when we look at a deal, we internally with an investment committee make a decision whether this is a good investment or not.

16:42And the capital has already been called by LPs, limited partners in the fund. When you're doing a syndicate investment, same exact process of doing diligence, well, deal sourcing, doing diligence. But then when you actually want to make an investment, it's a little bit of like the chicken before the egg. I think that's the saying. I'm really bad at those things. You may want to invest. You've done all this work. You want to get an allocation in the round, but you actually have to go out to your LPs. These are mostly high net worth individuals. These are mostly people that are an accredited investor.

17:14And then you have to pitch them on why it's a good investment or not. So the tricky part is that you may want$100 ,000 of an allocation in a round, but you don't have$100 ,000 that you can 100 % with certainty say, I want in. So on super fast moving deals, it's actually happened to me. I had $100 ,000 allocation. I couldn't move as quickly as the deal was moving. Good deals move fast. Bad deals most often take a long time or you just don't have the right connections, whatever. So the problem, it's a beautiful way to get into investing. The problem with it is that you don't have that committed capital.

17:51So you can get burned and you can also burn founders really easily. Because if you say, I'm going to take a hundred thousand, it's not up to you. You have to be a really good salesperson to go and get a hundred thousand dollars. If you can't, then you've told the founder, you're going to give them a hundred thousand. You don't have a hundred thousand dollars to give them. Interesting. Okay. I have a couple of questions from the community. And the first one breaks my heart, but speaks to, I think, what so many people are feeling right now. Why does it feel like it's impossible to get investors in the moment?

18:20You know what's something about me that I'll just admit? I am not the smartest person in the room. But overall, the macro environment is really concerning for a lot of investors. And the big people that are giving venture, this is something that you have to realize, like LPs, when I say LPs, limited partners, people usually don't know what that is. Those are like, especially if you're over a$30 million fund, you can start to get interest from like institutions, endowment funds, you know, not like the high net worth family offices that usually are the people you target for LPs if you're under$30 million.

18:53Those people are investing in their own portfolio of things. They haven't seen the returns that they've wanted to from venture capital. So there isn't as much capital that's being dumped into venture capital funds. So either they've blown through their fund and they are having trouble raising, which a lot of founders don't know. So a good question to ask VCs is, are you currently investing? What fund are you investing out of and how much of your fund have you deployed? How much do you actually save for follow-on? Those are really good questions to understand. Is this a fund that even has the capital?

19:25And what's follow-on? Follow-on is when if you take a position, like I was saying around Be Real, that's a great example. You invest in the seed. Let's say maybe you put half a million dollars into it. Most good investors will secure something called pro rata rights, which means that you can just make sure you have your exact ownership amount in the next round of funding so that you don't get diluted. But some investors will take on bigger positions. So it's a really good question to understand how a VC is thinking about portfolio construction and there's no right way. Some funds, especially if they're super early stage, knowing how hard it is to be a venture capitalist, they will do like 30 initial checks in.

20:02And then anything that's a follow on, they'll do via a syndicate with their same LP network. This probably sounds really complicated. It's trying to break it down as easy as I can. We appreciate that. But is it making sense? It's making sense. I'm following. Okay. So I think it's just good to understand, is this fund even able to make an investment right now? Because there's a lot of funds that don't even have the capital and they're actually running syndicates to their LP base as a way to drum up more interest to see deal flow into even investing into their next fund. So you could think it's a you problem and it's actually a them problem.

20:38So that's really important to know. So those are definitely questions I would go back, save this episode and literally write down to ask funds. So that's one reason. I think another thing is there's just so much uncertainty in the market with really big macro trends like inflation, obviously the political environment that we're coming into in this year. There's a lot going on that is causing uncertainty for investors. And I think there's just been a proliferation of so many businesses are being started. So many funds are out there and it is a numbers game, like everything. A true sales funnel is like you might be getting rejected, but how many funds are you actually talking to?

21:20Because it is a matter of time before you get a yes. Like that is the reality. And so it's just kind of figuring out, like I said before, do you need to go the venture capital route? Because maybe it will take you 200, 300 calls to find that yes. You will find that yes, but it might take you a really long time. But you're right. Like VCs are not investing in consumer brands like they once were. There are some really strong VC funds that are. But like I said, at Vantara, we see a thousand deals a year. I think that they're, and don't quote me on this number, but it's like, they're saying yes to, and I'm not on the investment committee, but they're saying yes to eight deals a year, maybe not even.

22:00So think about the math, right? And consumer is just a hard space. Like we've seen, like I was saying before, when you track back the exit, like they've gotten completely demolished in the public market. So it's really trying to find those success stories of the acquisitions in the spaces that you're in. And then looking at that and making sure your valuation is reflective of what success would look like for almost this hybrid between a private equity and a venture capital fund. I want to kind of like switch tracks a little bit and talk about marketing because you obviously you're embedded in the space, you're advising different startups, but you've also yourself managed, like you said, 18 and$18 million marketing budget.

22:45What do you think a, first of all, like from that really high level, like how should brands be allocating their spend, um, at the big budget, at the small budget? And what are you seeing that's just like working driving traction now today? Yeah. So, um, at a super high level, I was very lucky to start up that I worked that we raised$120 million for, it was actually illegal to do paid digital ads. So I'm trained as a brand marketer through truly like community oriented approaches, which is I think why I've been able to like really advise so well, because I actually don't know anything about digital marketing.

23:21Like if you were to ask me, like, how do I target? I'd be like, I have no idea. I know there's really great tools out there, but I think it's really around, like I said, community driven initiatives and letting the community be your biggest spokespeople. So that's like identifying who is like the key hero customer that you have, figuring out where they are, where they spend time and how can you get in front of them. And I think it's also around identifying like, where are the problems that they are facing that you can be a painkiller for, not a vitamin pill for. So it's like if you're a water company, the summer is the best time to have most of your marketing budget be spent versus the winter, especially if you're on the East Coast because people aren't as like wanting to quench their thirst in the winter.

24:08They're doing that in the summer. So it's like you want to allocate most of your spend to field marketing, sampling, you know, even point of sale marketing when you're in the East Coast in the summer. Like think in general, allocating a budget is a really tricky thing because it's specific to the company and the category that you play in. Beauty as an example, it's like, I don't think POS marketing works as well as some other initiatives, but that's totally different for food and beverage. So I think it's just about understanding your customer. That's if like there's one big takeaway, it's like, who is the customer?