ImpactAlpha, Dec. 2 – New York-based venture firm Harlem Capital closed a $40 million fund to invest in U.S. companies led by women and founders of color. The venture firm is the latest to seek an edge by backing entrepreneurs often overlooked by traditional venture capital.
“Our thesis is that women and minority founders are undervalued,” Harlem’s Henri Pierre-Jacques told ImpactAlpha in an earlier interview. “There’s alpha to make.”
Early this year, private equity firm TPG made a non-controlling equity investment in Harlem Capital to provide institutional back-office credibility. In return, Harlem is helping TPG diversify its own portfolio and talent pipelines. Harlem has struck similar talent sourcing partnerships with KKR and Techstars.
Other limited partners include the State of Michigan Retirement Systems, Vanderbilt University and the Consumer Technology Association. The W.K. Kellogg Foundation invested $3.5 million as part of its strategy to reduce bias in the financial system, where less than 1.3% of assets are managed by firms owned by women or people of color.
“We were excited to see a new manager come out like this with a fresh perspective and some back-office girth that got us really comfortable,” Kellogg Foundation’s Cynthia Muller told ImpactAlpha.
For Muller, the investment also takes on bias in venture capital, where women and founders of color raise only a fraction of total invested capital. “If they are introducing underrepresented people of color to corporations to banking to investment, for us that’s the win,” says Muller.
Managing partners Jarrid Tingle and Pierre-Jacques founded the firm as an angel syndicate three years ago.
At first they were told, “There aren’t enough Black and Latino companies raising significant capital.” The team turned up more than 100 startups with Black and Latino founders that have raised $1 million or more – $2.7 billion in total – in software, e-commerce, media and entertainment, healthcare and other industries. “We don’t believe it’s a pipeline problem,” says Pierre-Jacques.
The raft of new funds moving to seize “inclusion alpha” include Impact America Fund, Backstage Capital, Babel Ventures, and Unilever and Sundial’s New Voices Fund.
Silicon Valley-based Portfolia recently launched Rising America Fund, led by African-American and Latina women partners, to focus on African-American, Latino, LGBTQ markets and entrepreneurs.
Copenhagen-based Unconventional Ventures raised a micro-fund to make small but early investments in startups led by female, LGBTQ, immigrant and founders of color.
Harlem Capital has made eight investments, including in Paladin to boost pro bono legal services; Jobble, a marketplace for the gig economy; and Aunt Flow, a B2B feminine hygiene products company.
“This closing is a huge accomplishment for us,” Pierre-Jacques said in a statement, “but also just the beginning of a long mission to change the face of entrepreneurship.”