ImpactAlpha, March 26 – Venture capitalists love to invest in disruption. Arlan Hamitlon is disrupting venture capital. She created Backstage Capital in 2015 with a conviction that backing “underestimated” founders could unlock overlooked value. Initially dismissed by the VC world, she convinced investors like Slack’s Stewart Butterfield and Mark Andreesen to sign on to her fledgling fund.
The West Hollywood-based venture firm has built a portfolio of more than 175 startups, including tech ecosystem Bitwise, commercial fleet management firm Fleeting, climate-friendly food products company Planet FWD and fashion upstart Haute Hijab. Nearly all of Backstage’s “headliners” are run by women, people of color and/or LGBTQ founders (Hamilton identifies as all three).
Hamilton just broke another mold, becoming the first venture firm to raise money via “regulation crowdfunding,” which allows companies to reach out to customers, supporters and the public for capital. Her first campaign, on crowdfunding portal Republic, raised over $1 million in less than 10 hours. When regulators last week lifted the fundraising cap to $5 million, she re-opened the campaign. Within days, more than 7,000 small investors had maxed out the raise. “The narrative and what it signifies is tremendous,” Republic’s Kendrick Nguyen told ImpactAlpha. “It’s a major validation for the concept of inclusion and retail capital to be able to collaborate with Arlan Hamilton like this.”
In opening up her fund to ordinary investors, Hamilton also opened up on what it means to be an emerging fund manager. “We have never had enough assets under management at one time where any management fee would cover even one person,” Hamilton told Inc. magazine. The $5 million will give her and her five-person team a couple of years’ runway. In return, investors get a small stake in the firm, entitling them to a share of any management fees and profits it makes. They also get to tag along on Hamilton’s groundbreaking ride. “It’s a sigh of relief,” Hamilton said on a recent Backstage podcast. “I’m just revved up and ready to go and do all the things that we have been waiting to do but couldn’t do before.”