Plexo Capital, a “hybrid” venture capital firm investing in diverse VC funds and early-stage startups, today announced the close of its $42.5 million inaugural fund.
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The GV (formerly known as Google Ventures) spinout lists a number of high-profile tech companies as its investors including (obviously) Google parent company Alphabet, Intel Capital, and Cisco Investments as well as the Royal Bank of Canada, Kapor Capital, the Hampton University Endowment, and the Ford Foundation.
Lo Toney, founding managing partner of San Francisco-based Plexo Capital, actually incubated the firm in 2017 while at GV as part of that firm’s strategy “to foster diversity in venture capital.” GV then spun out Plexo in March of 2018.
In a telephone interview, Toney told me that the 60 percent to 65 percent of the capital will be invested as an LP into venture capital funds (typically smaller than $100 million) that emphasize investments in companies that are led by either a woman or person of color. The remainder will be injected directly into companies that it sources from those funds’ portfolios.
Sourcing from those funds is efficient because those firms have already scouted thousands of companies and picked the “best ones,” said Toney, who is also a former GV partner.
“They’re narrowing it down and providing us with a curation of the best they’ve seen,” he said.
A Team Approach
Plexo also works with other VC firms (some of which are its own investors) to invest together in the startups. One example of this is Los Angeles-based Blavity, a media company created by and for black millennials, which got money from both Plexo and GV.
Part of the idea is that by investing in VC funds led or founded by women or people of color, Plexo Capital can have a greater impact on diversity in the startup world, as those GPs “tend to have more diverse portfolios,” the firm says. Plexo describes itself as full stack, meaning that it invests in emerging VC funds and in early-stage companies in addition to partnering on deals with its own investors. However, the firm notes that it is also open to investing “in any funds or companies that will provide a great return,” whether or not led by women or people of color.
So far, Plexo has put money into 19 venture funds and directly into 14 companies, including PlayVS, an L.A.-based company building an infrastructure for esports in high schools. It’s a global fund, having backed funds and companies in Puerto Rico (ATO Ventures and iSono), Mexico City (Investo and Grin) and Lagos, Nigeria (Ingressive Capital). Looking ahead, Plexo expects to invest into a total of 21 funds and about two dozen startups with the $42.5 million it raised.
On the fund side, Plexo typically invests $500,000 to $5 million. On the startup side, it “likes to land at a total investment” of $500,000 to $2 million, according to Toney.
“Plexo was built around the hypothesis that women and people of color have a non-direct path into VC,” Toney told me. “As a result, they are able to provide a different lens with which to be able to evaluate deals and a different lens with which to evaluate founders as well.”
This is particularly important at the seed stage, he added, as it leads to a more differentiated deal flow and allows Plexo “to pursue deals that require an intimate understanding of certain problems or market opportunities in the absence of an abundance of data,” he added.
Plexo is one of a growing number of funds focused on backing diverse founders. Harlem Capital earlier this week announced the closure of its $40 million debut fund, as covered by our own Natasha Mascarehnas.
The need is certainly there. Earlier this year, we reported on how most venture-backed startups were “still overwhelmingly white, male, Ivy League-educated and based in Silicon Valley,” according to a study conducted jointly by RateMyInvestor and DiversityVC.
LPs Weigh In
GV CEO and Managing Partner David Krane said one of his firm’s goals is “to increase access to differentiated deal flow.” He worked with Toney to build the strategy into an independent fund that is now Plexo.
Roy Swan, director of mission investments at the Ford Foundation believes that “talent is equitably distributed, but opportunity is not.”
“Ensuring equitable access to capital is essential for building an inclusive and vibrant economy,” he said in a written statement.
Rob Salvagno, head of corporate Development at Cisco Investments, agrees, noting that improving and increasing diversity among startups in general and among its own investment portfolio is “a priority.”
Trina Van Pelt, vice president & senior managing director of Intel Capital and chair of Intel Capital’s diversity and inclusion investing initiative, said her firm believes that “investing in diverse teams drives innovation.”
“Our investment in Plexo is designed to enable earlier access to capital for innovative startups led by women and underrepresented minorities,” she said.
Illustration: Li-Anne Dias
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