Catalytic Capital | October 28, 2020

LISC bets on Fearless Fund with $750,000 investment in first-time fund managers

Amy Cortese
ImpactAlpha Editor

Amy Cortese

ImpactAlpha, Oct. 27 – One of the best ways to get more capital to entrepreneurs of color is to have more venture funds led by people who look like them and share a similar experience. But first-time fund managers have a hard time attracting investors.

That conundrum is behind an effort by the Local Initiatives Support Corporation, or LISC, that aims to break down barriers by providing early support fund managers of color.

On Monday the community development financial institution announced a $750,000 investment in the Fearless Fund, led by Arian Simone, Keisha Knight Pulliam, and Ayana Parsons. The trio launched the fund in February to invest in high-growth ventures run by women of color. They have raised money from individuals to date, but LISC is the first institutional investor.

“They had all the ingredients – experience, good access to pipeline – they just didn’t have experience running a fund,” LISC’s George Ashton told ImpactAlpha. LISC’s investment, he added, is “a show of faith that can help attract more capital to the fund.”

Fearless Fund has now raised its target from a modest $5 million to $20 million.

LISC put up $500,000 of its investable assets. Another $250,000 came via a grant to LISC from Fifth Third Bank’s foundation. LISC expects to make another first-time fund investment in December and is mulling a fund of funds that would invest in first-time minority fund managers to spread the risk.

Maurice Jones, Local Initiatives Support Corp.

LISC is also supporting Black-led lenders. In June, it launched the Black Economic Development Initiative to make bridge loans, participation loans and bank deposits in Black-owned institutions.

The fund was seeded with $25 million from Netflix as part of its pledge to redirect 2% of its cash holdings to Black-owned financial institutions. LISC expects a first close of more than $100 million in November.

Such strategies by corporations to help close the racial wealth gap can ensure a strong future customer base for their products, says Ashton.

Costco commits $25 million to LISC’s Black Economic Development Fund