There's a growing understanding that venture capital's race problem needs to be fixed — like yesterday. Let's review the numbers, sis. According to Forbes, of the $60 billion venture capital funds invested in 2018, only 2.19% of that money went to female entrepreneurs. Even more appalling, of that 2.19%, the percentage capital distributed to Black, female entrepreneurs was 0.2%. What these (usually white) Venture Capitalist Firms will claim is that they don't know how to begin closing the massive funding gap. But is it truly ignorance, or just a refusal to act accordingly?
Don't let these venture investors fool you, sis, it is 100% possible for the funding gap to be closed in our favor. Just ask venture capitalist and Founder/CEO of Backstage Capital, Arlan Hamilton. Under-represented Black, female entrepreneurs are in dire need of VC dollars, and Hamilton aims to fulfill those needs. Since launching Backstage Capital, Hamilton and her team have already "invested more than $4 million dollars in 100 companies led by under-represented founders" — and that investment number continues to climb!
I had the pleasure to speak with Arlan on how VC Firms can allocate funding to Black entrepreneurs, what Black, female founders can learn from Backstage Capital, and why it's important to cut out negativity to achieve success.
Check out our exclusive interview with Arlan Hamilton below.
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21Ninety: How did the concept for Backstage Capital come to be? What inspired you to build a venture capital firm from the ground up?
Arlan Hamilton: I started Backstage Capital a few years ago after noticing the disparities between the amount of money that was going to white male founders and everyone else. There was less than 90% of funding going to women, people of color, LGBT founders and others. I thought that that was a shame and a missed opportunity.
21N: Despite being the fastest-growing group of entrepreneurs, according to Forbes, 0.2% of Black women entrepreneurs receive Venture Capital funding. Moreover, according to your website, “less than 10% of all venture capitalist deals go to women, people of color, and LGBT founders.” Why are venture investors so reluctant to supply wealth to our business community? How can other willing VC Firms lend their hands to changing these percentages?
AH: I believe a few factors contribute to this. Some of it is blatant laziness on behalf of investors. Some of it is complacency. They are doing well already and why rock the boat? I think that a lot of times, people who are writing checks simply don't have access to a broad group of people, and so they feel like it's an overwhelming task to try to figure out how to reach people that they, for so long, have not had access to. They look at that and see that it's such a hurdle and it becomes too much for them to tackle. I also think in some cases, there is ignorance, and so a lot of people, they don't know what they don't know. But the challenge and the worry there is when it becomes willful ignorance.
Today, in 2019, I think it's almost impossible to say that you have unconscious bias. Either your bias is conscious or it’s not. It's not all bad intentions. It's not all bad people. It's not us against them or vice versa, but there is a lot that can be done still today.
VC Firms can start by allocating a specific amount of capital under management that they say will go towards founders who are under-represented and underestimated. This can be as small as 2% or 5%. If enough large funds and firms do this, it will drastically change the landscape and the future of entrepreneurship. It will be incredibly impactful, and it only takes a small amount of commitment from each person. The trick is getting more than just a handful to participate, and to really change the hearts and minds of investors rather than trying to yell at them or shame them.
If they're already willing VC firms, then they can do what some of their peers have done and start programs that are apprenticeship programs and angel educational programs like First Round Capital has done in the past. They can reach out to other funds like Backstage Capital and ask for help. We are very willing to be helpful and come in and do some of the work for them and teach them how to do the rest.
Photo: Backstage Capital
21N: What can Black, female entrepreneurs and career-savvy women learn from Backstage Capital mentors?
AH: Our mentor base is nearly at 100, with another 200 on a waiting list. These are heavily-vetted experts in their fields that come from diverse backgrounds and have diverse profiles. They are specifically in place to support the Backstage portfolio, the companies that we have invested in. In the future, we believe we will be able to create access to our mentor base for founders and career-savvy women and entrepreneurs who are not in our portfolio. But this is a little bit of a ways out.
21N: Backstage Capital also offers a 3-month Accelerator program to help Black founders reach their next financial milestone. What are some benefits Black women can expect to gain from enrolling?
AH: We are launching the Backstage Accelerator across four cities: Los Angeles, Detroit, Philadelphia, and London this Spring. They are for founders who are of color, for women and LGBT founders. There is a curriculum. There will be mentors that come in. There is extensive programming that has been created and curated, and an impressive list of co-investors, mentors, experts, entrepreneurs, and the like, who will come in and work one-on-one with the founders. All of the companies for this pilot cohort have been chosen. We received 1900 applications last winter, and we culled that down to 24 companies. We expect to continue the programming after the first cohort.
21N: Three years ago, as Fast Company reported, you arrived in Silicon Valley with no college degree, no network, and no money. Yet today, you are the inspiring, living and breathing proof of what hard work and determination can do for one’s dreams. What has been the most rewarding aspect since launching Backstage Capital?
AH: The most rewarding aspect has been what you've mentioned here, which is being able to inspire people. It has come as a very welcome surprise that I have been able to inspire and help people with their aspirations, and to act as a representation for people who have felt unheard or unseen for far too long. The most rewarding part of this entire journey, though it has been a difficult one, has been in seeing Black women start companies because they read about or heard about Backstage Capital months ago. I will never get tired of hearing about those stories. I also think it's great that people join companies. They don't have to start a company to be successful. You can join a company and do well there. I love that people are meeting each other because of Backstage. They feel emboldened, and they feel inspired, and they feel like they have permission to excel.
Photo: Girlboss Rally
21N: Who are some Black entrepreneurs that inspire you?
AH: I'm inspired by all of our founders that are in our portfolio. 38 of them are Black women out 100. I'm inspired by people like Dawn Dickson, Sheena Allen, Stephanie Lampkin, and Jessica Matthews who are all in our portfolio and blow me away every single day. I'm also inspired by people like Jewel Burks, who is in Atlanta at Amazon. I'm inspired by Tristan Walker from Walker & Company and Bevel. I'm inspired by Marlon Nichols, Monique Woodard, Morgan Debaun and so many people that I get to stand beside in this journey to cracking open access to capital today for under-represented founders, and generational wealth in the future.
21N: Beginning March 4th, you will lead a 5-Day Newsletter Take Over, on our 21Ninety Daily Newsletter, to provide our subscribers with impactful and beneficial entrepreneurial tips. One tip, in particular, subscribers can expect to gain involves learning to cut out any negativity people bestow upon you — how do you tune out people’s negative opinion about you?
AH: When you set out to do something audacious and something groundbreaking and impactful, you are signing up for a lot of things. One of those things, unfortunately, is negative opinions and feedback from people. Most of them are strangers, to boot. What I try to do is think about who the source is when I listen to that because most people who have negative things to say about what I do or who I am haven't even done a tenth of what I've tried to do in my life and in the past few years. And so, if you're sitting on the sidelines and sticking your foot out, what exactly is your intention? Why did you get there? How did you get there?
I try to think about that. I try to tune out that noise. I do a lot of blocking on Twitter and on Instagram where I spend most of my time on social. I used to be very concerned about blocking people because I didn't want to offend anyone or hurt anyone's feelings, or get any sort of negative reputation for blocking. Today, I've grown. I've become wiser, and I block with abandon. I block for self-care, and I block without permission, approval or apology.
Photo: Sarah Deragon
21N: In your growing pursuit to fund Black, female entrepreneurs, what can we expect to see from you in 2019? How will you and Backstage Captial continue to expand?
AH: I think 2019 will be a pivotal year for both Backstage and the ecosystem at large. I've predicted for several years that 2019 and 2020 will be a Black entrepreneur renaissance and heyday, if you will, and I think that in many ways, that may come and go. So I always caution that we definitely hold out the buckets for the rain of capital that I see coming to us, but that we also take care to be strategic and smart in how we spend that money and how we hold that money for the lean times.
Because of that, I believe that Backstage will continue to make a great impact in the ecosystem, but we will do so as strategically as we can with as much focus and determination and conviction as possible. We will try to continue to only work on things that move the needle and have an impact, and try not to get distracted. I cannot predict how much money we will have under management or how many investments we'll make, but I do know that we'll do everything possible to do so with dignity and with respect for founders and their journey, as well.
We will continue to amplify our portfolio because we call them our headliners for a reason. They are the most important part of what we do. And we will also try to have fun and enjoy the process rather than being bogged down by the stress of it all the time. I try to lead by example, and I will continue to do that.
Photo: Bloomberg
21N: Do you have final words of advice or encouragement for Black, female entrepreneurs struggling to gain funding from VC Investors for their business?
AH: I believe that entrepreneurs who have not raised funding from VCs yet, or from outside investors, are some of the luckiest and most enviable people in business. I'm jealous of you. The reason is because you still have all or most of your equity intact. You still have all of your ownership. You can still make the rules without other people commenting or interfering. What you consider to be a challenge today, and someone's saying no to you today, could be the best 'no' you've ever heard because the more equity and ownership of your company that you keep the longest, the better. Maintain that equity and control until your value rises and you can decide whether to take on VC money at a higher valuation, or not take any at all.
Not all VC is created equally. So I would say, take a step back, assess why you think you need to look for venture capital funding. Is it really for you? Or could you create another way of generating capital that would have you retain more control? Can you do that by generating revenue sooner? Can you do that by manifesting partnerships, collaborations, mergers, or even scaling back? I say keep as much control of your company as you possibly can, and those who are in the thick of it and facing one rejection after the next, remember that one person's no is just one step closer to a yes.
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