HBCUvc’s New Million Dollar Fund wants to give overlooked investors a history – TechCrunch

HBCUvc, a non-profit organization organization that wants to diversify the world of adventure by taking root in historically black colleges and universities, which almost closed last year. Founder Hadiyah Mujhid met her team, an all-black and Latinx staff, and warned them that they only had two months left before she had to stop the three-year operation.

A week after this conversation, George Floyd, a 46-year-old black man, was wrongfully murdered by police in Minneapolis. His death sparked global Black Lives Matter protests and a national awareness of racism. In the tech realm, this has led to a rush of venture capitalists publicly committing to backing more black founders, trying to offset a history of inequality in dollar allocation.

The surge of support saw HBCUvc land its largest unsolicited one-day donation ever, $ 40,000. Over the next year, the association was able to double its budget and staff, and triple its impact by launching programs in Baltimore, Alabama and Chicago.

And now, HBCUvc has raised a first leg of capital that will invest non-dilutive capital in black, native and Latino start-up entrepreneurs. The $ 1 million fund was raised from a group of philanthropic investors, including the Mark Cuban Foundation, the John D. and Catherine T. MacArthur Foundation and Google for Startups.

“It is a very strange feeling to know that all of this, and the impetus for it all was due to an unjust murder,” Mujhid said, about a year later. “It’s cold, but [my advisors] say that sometimes it takes a tragedy to trigger a change in the way we think and do things. And so [I’m] recognizing this as an additional opportunity to evolve the industry.

HBCUvc staff.

Teaching capital

The investment vehicle, called Venture Capital Lab Fund, is different from a traditional venture capital fund. Because it offers non-dilutive financing, HBCUvc does not take capital from a startup in which it invests. The checks are also not donations, Mujhid said, because the funding goes to for-profit entrepreneurs and the nonprofit does not get a tax deduction for it.

Instead, Mujhid thinks the best way to describe the Venture Capital Lab Fund is “teaching capital”. Similar to how teaching hospitals give would-be physicians a way to practice and learn their craft before officially entering the field, the fund wants to do so for aspiring investors.

The fund will give HBCUvcs some 230 venture capitalists, all from under-represented backgrounds, check-writing experience. Fellows are encouraged to identify an entrepreneur, write an investment note and submit to the HBCUvc investment committee, a board of partners as well as members of the alumni community.

“This is an opportunity to give so many of our fellows who are following our program an opportunity to work to develop a roadmap at this time,” she said.

While the fund doesn’t have a specific number of checks it plans to issue, around half of the capital will go to founders linked to historically black colleges and universities.

“The entrepreneurs we see in our community are kind of anxious to accept funding and sometimes they make deals too early, and sometimes they take funding and give up their capital far too early,” Mujhid said. “This could be an opportunity to take some funds, without giving up equity.”

The checks are intended to replace the “tower of the angels” with an average size of $ 5,000 for founding students and $ 10,000 for non-founding students.

A wave of new investment vehicles for black and under-represented founders has developed in recent weeks. Google for Startups today announced the launch of a $ 5 million Black Founders fund that will provide $ 100,000 in non-dilutive funding to 50 black founders in its program and community. Last week, Screendoor was launched as a $ 50 million fund of funds to support under-represented emerging investors. And last month, Collab Capital closed its first $ 50 million fund that will be invested only in black founders.

“There are a lot of organizations right now that are launching funds [with] the main objective of supporting the founders, ”Mujhid said. “And that’s one of our goals, but we’re hoping to have a ripple effect on training and provide ramps for the next best-in-class investors… and in order to do that, they need to have a training vehicle. “

An unexpected challenge to this progress, she says, is returning to work in person as the pandemic subsides.

In person came out

“When we worked with partners before COVID, investors said that [they] need someone who is based in San Francisco, ”she said. “And we would say, good luck because most of our population isn’t really here.” In contrast, the upload opened up programming to the nonprofit, as it removed geographic barriers. He recently entered his largest class of interns to date: 45 interns working at 40 venture capital firms across America.

Now, as businesses reopen, she worries about recreating geographic barriers and their negative impact on opportunities for underrepresented people who want to gain experience in the industry. The nonprofit has started advocacy work on educating tech professionals on how racial barriers intertwine with geographic barriers. Part of HBCUvc’s push will be asking companies to rethink their policies as they open up, especially staying true to their commitment to diversity.

Despite this, remote working has come with its own equity issues. Funding for female founders fell to 2017 levels as many checkwriters looked to existing networks, largely male and white, while investing from a distance. According to Crunchbase data, U.S. companies have raised nearly $ 150 billion in venture capital, and of that amount, only 1%, or $ 1 billion, has gone to African-American or black startup founders.

And the commitments made by investors? While HBCUvc was able to “change the trajectory of its programming” thanks to a wave of support, Mujhid believes much of the initial buzz surrounding support for black founders was “unfortunately, a knee-jerk reaction.”

“I saw our name everywhere,” she said, describing the series of memos and tweets companies have started posting to show their commitment to diversity. Half of the mentions were from people HBCUvc had never spoken to before. “You are getting over this tragedy and negotiating our name in an unethical way,” she said. Some of the interest turned into partnerships, some didn’t.

As they crafted new programs on the basis of an increased budget, one concern of Mujhid then and now was what it looks like if people shift priorities or fall short of their commitments. But for now, she feels like they’re riding a lucky wave, one that has the potential to make black founders and investors a solid part of tech dollars and deals.

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