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Behind The Scenes Of Black Founders Matters’ First Fund

Illustration of Black Founder launching a startup rocket

Portland-based Black Founders Matter, a new VC firm focused on investing in Black founder-led companies, closed $3 million for its first fund. The firm is among a growing group of micro VCs investing specifically in diverse founders. Black Founders Matter, which was founded by Himalaya Rao-Potlapally and Marceau Michel, looks at Black-led companies as a vertical of its own.

Some quick stats about the fund: It has raised $3 million in committed capital for a planned $10 million seed-stage fund. It’s made about 10 investments so far, investing alongside individuals like Serena Williams and Issa Rae. A usual check size is around $100,000, and about half the fund is reserved for follow-on investments. The firm has invested in companies in sectors including gaming, healthtech and consumer products.

The idea behind the fund is to invest in Black entrepreneurs and innovators who have used their different lived experiences to create a unique product and service offering, along with a company that operates in an innovative way.

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The firm looks for companies that are innovative not only in their products, but in the way it is run. This is a concept managing director Rao-Potlapally researched as a graduate student studying venture capital at Willamette University.

Part of the reason for starting the fund is to create a more fair and equitable process around how investment is conducted so people of color are the ones making decisions and writing checks, according to co-founder Michel. Venture capital has worked more or less the same way for decades, with VCs investing and benchmarking in the same way, Michel said.

“It’s not just about ensuring that Black people can get capital and have access to capital, because that’s what our fund is doing,” Michel said. “Still the majority of venture dollars, all venture dollars, pretty much, are controlled by white entities. So that means that a Black founder has to go to a white entity and is at their mercy, and creating Black Founders Matters is about changing the narrative.”

Of the 10 investments the firm has undertaken, five of the companies have been led by men and the other five have been led by women, according to the firm.

Rao-Potlapally pointed to the firm’s first investment as an example of its thesis: Black Founders Matter backed the company A Kids Book About, which produces children’s books about various issues and has been cash-flow positive from Day One.

The first topic the startup tackled included talking to children about racism and race, something founder Jelani Memory has experience with, coming from a blended family.

“He (founder Jelani Memory) was able to utilize his unique lived experience to create a book and a narrative that is able to explain and start the conversation about racism to many different types of children,” Rao-Potlapally said.

More fund details

Black Founders Matter is an industry-agnostic fund and has developed a different set of metrics to evaluate different kinds of companies. Because the firm doesn’t focus on one specific sector, it introduces its portfolio companies to industry-specific leads for their next round.

“The challenge of post-investment (is) how do we support all different types of companies with different metrics? And that’s where our fund strategy is actually really important and where we spend a ton of time creating partnerships with Series A to Series C industry-specific leads,” Rao-Potlapally said.

The firm also acts as a “connector fund” to larger funds looking to diversify their portfolio, but don’t have the “genuine connections to the community” to do so, Michel said.

“One of the fortunate things of doing this and working on this fund is we’ve had no issue around deal flow,” Michel said. “We’ve had no issue around finding incredible deals and exclusive deals.”

Illustration: Dom Guzman

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