At the end of last year, venture capitalist Adeyemi Ajao returned to his native Spain to look after his 92-year-old father. Elder Ajao asked his son about recent investments from his venture capital firm, Base10 Partners. “I said, ‘Oh, I’m doing fintech deals in Africa,'” Ajao recalls. “And he says, ‘So I left Nigeria for Europe, you left Europe for the United States. Now you’re going all the way to put money in Nigeria? You’re crazy.'”
Ajao thinks otherwise and is betting on fintech in Africa as one of six to eight emerging “megatrends” in which he plans to invest capital from Base10’s third seed fund. On Tuesday, the company announced the closing of this fund, a $460 million vehicle that brings its total assets under management to more than $1 billion. It is the first time that a black-led venture capital firm has crossed the ten-figure threshold. “It’s crazy that in a world where venture capital raises $150 billion a quarter, we’re number one. There should be several now,” says Ajao.
Founded in 2018, Base10 Partners is led by managing partners Ajao and TJ Nahigian. The San Francisco-based company uses a data-driven approach to investing in automation technology in industries such as food and retail. “There are way too many businesses out there,” Ajao says. “By our calculations, there are 110 new deals a day for our VCs to review, so we need to find a way to focus and filter that.” To do this, the company built an automated software tool to track startups in real time with a set of predictive data points; the 64 investments made by Base10 represent 0.4% of the more than 15,000 companies it tracks.
Most of these investments go into sectors that the company has identified through its software as an emerging megatrend, which Ajao defines as “trends that develop rapidly in terms of hiring and fundraising, but who still have a majority of early-stage versus later-stage opportunities.” In the first two funds, for example, the company invested heavily in food technology. Base10 led the round of restaurant marketing startup PopMenu (currently valued at $525 million) and incubated the cloud-based kitchen company All Day Kitchens ($375 million). Now, according to the company’s research, the sector is saturated with mostly late-stage opportunities. With the new fund, the company has the eyes on other spaces such as African fintech – Ajao entrepreneurs know, he says, to have up to 95% of their capital in fintech applications rather than bank accounts – as well as on the environment, the social and governance, software and logistics.
Base10’s new seed fund follows a $137 million fund I in 2018 and a $250 million fund II in 2020. In the past, the company has invested in approximately 30 companies per fund with large lead checks of up to $15 million, which would give him 15% to 20% equity in a startup. The larger size of the new fund will mean investing in a few more trends and trades, says Ajao, but if something changes significantly in its cadence, “it’s even more ownership.”
Some 60% of its investments have gone to companies with minority founders, but Base10 is not inherently a minority-focused company. Yet he has made significant efforts to strengthen the pipeline for black people to access technology and entrepreneurship. The company donates 1% of its profits to causes supporting diversity. Last year, as part of the launch of its first $250 million growth stage fund (it has since grown to $300 million), the company said it would channel 50% of interest earned to endowments and scholarships in HBCUs. This could have a marked impact on these institutions, which are cash-strapped. In 2020, the cumulative size of all historically black college and university endowments totaled just 11% of Harvard University’s endowment, according to an analysis by black tech news website The Plug. “They have $5 million max to deploy in venture capital,” Ajao says.
Ajao says HBCU staffing officials tell him that no other company has yet launched a similar initiative (companies like Notion have also named the pledge as an additional reason to choose Base10 as a funder). He is well aware that the action signal on inclusiveness in venture capital has not always resulted in concrete changes. Yet he is encouraged by the steady rise of black investors and black-led funds. Enough has emerged that a group of around 20 fund managers now meet regularly. “I think it won’t take long to see the second black-led fund top $1 billion,” he says, calling out 645 Ventures, Harlem Capital, Kindred Ventures, Plexo Capital and Precursor Ventures as rising stars.
At a dinner last month with these other black investors after hitting $1 billion in AUM, Ajao said the opportunity was bittersweet because of the work that remained to be done. For one, sponsors are increasingly asking him to connect them with other fund managers from underrepresented backgrounds, he says. “I didn’t hear these questions four years ago.” Still, it’s just one step for an industry that has called for many more in the wake of the murder of George Floyd two years ago. “We shouldn’t let people forget that all these things have been said and all these promises have been made,” says Ajao. “We have to keep going because otherwise no one will.”