Partners at minority-focused investment firm Harlem Capital were told “there aren’t enough black and latino companies raising significant capital.”
A search turned up 105 U.S.-based startups with black and Latino founders that have raised $1 million or more – $2.7 billion in total – for software, e-commerce, media and entertainment, healthcare and other industries. More than half of the 117 founders were women (yet their startups attracted only 32% of the capital). Thirteen have been acquired or gone public.
- Racial-lens investors. Ten of the 140 investors, including Harlem Capital, Backstage Capital and Kapor Capital, backed nearly one-third of the firms. Six of the 10 investment firms are led by diverse general partners. Still, less than 3% of all VC funds employ black and Latino professionals.
- Pattern-breaking. Like most venture-backed firms, two-thirds of the companies Harlem Capital turned up are in New York and San Francisco. Melissa Bradley’s Project 500 is planning a $100 million ‘opportunity fund’ to back entrepreneurs of color in low-income communities in 10 cities and regions.
- Racial-lens funds. In July, New Voices Fund, the female entrepreneurs of color-focused fund formed during Unilever’s acquisition of Sundial Brands, invested its first $30 million in eight companies. In June, Backstage Capital backed its 100th diverse founder following the announcement of a second $36 million fund for women entrepreneurs of color. Last year, Babel Ventures and LEAP Partners made their first investments from funds targeting Latino-owned businesses.
- The impact alpha. The Harlem Capital data show a growing capital market for black and Latino run businesses. “We’re going to see a company with a diverse set of founders solving a problem that hasn’t been solved before because of their particular lens,” Kapor Capital’s Brian Dixon told ImpactAlpha in an earlier interview. “That is the opportunity that, as investors, you’re always looking for.”