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The pair of Princeton University grads are focused on investing in startups they believe are addressing the rising millennial and Gen-Z markets.
“We see a millennial takeover happening across venture, especially in Austin,” Stroud told Crunchbase News.
TXV first opened an office in Dallas in January but soon realized it needed a physical presence in Austin as well. Stroud relocated to the Texas capital while Allen now maintains a home in both cities.
“We figured out really quickly that the tech scene in Austin is becoming one of the premier locations in country,” Stroud said. “We knew we needed a footprint in a city that was becoming the birthplace for so many great companies. We wanted to have feet on the ground rather than coming up from Dallas every week.”
TXV has a target of raising $50 million and currently has $10 million in soft commitments, according to Stroud. It plans to fund about 10 to 15 companies per year with investments ranging from $500,000 to $3 million, he said.
“We can be the lead or co-invest as well,” Stroud added.
As for industries, TXV will focus on financial services, consumer products, sports, and media & entertainment. NFL legend and former Northgate Capital Managing Director Brent Jones is an official mentor, per Stroud. TXV’s advisors include former MLB player turned investor Torii Hunter; NFL legend turned investor Steve Wisniewski; and Laura Fainzilberg, CEO of Alta Financial Solutions. (In case you’re wondering about all the athletic connections, Stroud’s father also played in the NFL and Stroud himself played football at Princeton.)
So far, TXV has made one investment, leading Austin-based streaming company Matter Music Inc.’s $500,000 seed round.
“They’ve since been approached by a major Silicon Valley venture firm that wants to lead a Series A in a few months,” Stroud said. “We beat out a lot of premier VC funds for that but ultimately, they saw the value in working with partners around their age.”
For the duo, the road to becoming venture capitalists hasn’t been long, but it has been illustrious.
Stroud was raised in the small town of Prosper, Texas, before playing football at Princeton where he received his A.B. in Religion. After graduating, he worked as a fixed income analyst on Wall Street. He then ended up joining Austin’s Vida Capital, a multibillion dollar alternative asset manager.
It was there that Stroud was recruited by current advisor Torii Hunter to lead the Clubhouse Investment Club, a conglomerate of celebrity investors that sought to co-invest with VCs. Ultimately, he decided he wanted to branch out on his own.
At TXV Partners, Stroud aims to put to use his deal sourcing ability as well as operational and fund growth to expand TXV.
Allen grew up in Boston, Mass., and after attending Princeton, he went on to consult at strategy firm Stax where he focused on a variety of product categories, from consumer goods to B2B software companies to light industry. Allen then moved on to consulting at Chartic.
Earlier this year, Stroud and Allen decided to team up to form TXV.
Stroud and Allen are aware of just how underrepresented minorities are in venture and tech in general. They view their being young and black in a predominately white industry as an asset.
“People are shocked at our age. Plus, you don’t really see two black kids from Princeton in VC,” Stroud told Crunchbase News. “That’s been a shock for some, too.”
But the challenge of being minorities is not one they are at all afraid of or worried about.
“We’ve got such a different approach in terms of risk mitigation, deal strategy, and equity retention,” he said. “I think that’s what sets us apart even more.”
(Only around one percent of venture capital-backed startups are led by African-Americans, according to a 2015 White House press release. There are no official figures on how many blacks are VCs; however, it’s likely safe to assume they’re underrepresented.)
He welcomes the addition of TXV to the Austin venture community.
“I think it’s pretty clear that there’s a severe lack of diversity in the VC industry—both in terms of gender and ethnicity,” he told Crunchbase News. “So anytime I hear about African-Americans starting a VC fund, my ears perk up and I’m interested in the people behind it and what their point of view is. I’m also excited that more people are fundraising and getting in front of different LPs so that more people are getting exposed to African-American VCs. That will be helpful to both founders and other VCs.”
Even more, though, Spearman is intrigued by the firm’s focus on millennials and the Gen-Z population.
“Black people in America are not only consumers of culture but also creators and instigators of culture and behaviors in a lot of ways,” he said. “Whenever you have African-Americans pursuing VC, it’s rooted almost fundamentally that there is a certain understanding of culture, consumer behavior and technology adoption we inherently have. I think their (TXV’s) millennials focus is even more interesting when you think about tech adoption…That unique point of view is going to be a differentiator for any VC.”
Overall, Spearman is encouraged by the increasing number of venture funds in the Austin area.
“There’s strength in numbers, and when founders have a few different firms to pitch to, that’s a great place to be,” he said. “It’s a lot different from a few years ago. Multiple, diverse funds here—whether they’re African-American or female-led—that’s just better for Texas.”
He believes that TXV’s focus on seed and early-stage VC capital will help meet demand for more such capital in Austin. James also thinks that TXV’s focus on fintech, blockchain, and consumer products are a good fit considering all are “rapidly emerging or high growth sectors” in the Austin startup ecosystem.
“Also, you have two members of this firm that are African American, which inherently broadens the Austin startup ecosystem perspectives and networks by having investors that are ‘non-traditional,’ thus adding more diversity to the ecosystem, especially at the investor level,” James wrote via email.
Austin has historically been criticized for its general lack of diversity (and probably rightfully so), but here’s to hoping that slowly changes with the presence of TXV Partners and others like it in the future.
Illustration: Li-Anne Dias