Women of Color Get a Tiny Fraction of Venture Capital—But One Fund Is Spending $36 Million to Change That

SITE Women of Color Get a Tiny Fraction of Venture Capital, But One Fund Is Spending $36 Million to Change That
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It's bad enough that female founders only received 2.2 percent of the $85 billion invested by venture capitalists in 2017, thanks in no small part to prevalent gender-based biases. It's even worse that women of color, on average, earn less than 1 percent of the total funding each year, as Fortune reports. But Arlan Hamilton, the founder of an inclusivity-focused venture capital firm, just announced a $36 million initiative to help balance the scales. Some people call it a "diversity fund.” As Hamilton said on Twitter, it's more of an "IT'S ABOUT DAMN TIME fund."

Hamilton made the announcement on May 5 at the United State of Women 2018 Summit in Los Angeles. Then she shared the news with Twitter, writing, "The rumors are true. Today at #USOW2018, I announced that my venture capital firm @Backstage_Cap has launched a $36 million fund that will invest in Black women founders $1 million at a time."

It's a landmark achievement, especially for someone who was and pursuing an entirely different career just four years ago. That's when Hamilton decided to abandon her job as a live music production coordinate and become a venture capitalist. Her goal was to create a fund to invest in underrepresented entrepreneurs. After cold-emailing venture investors, she found a number of limited partners to back the fund. "[They] saw I wasn't just a VC tourist," she told Fortune in January. "I was serious."

Since 2015, when a partner cut Backstage Capital its first check, Hamilton and her colleagues have invested in dozens of startups helmed by women, people of color, and/or LGBTQ individuals. (On her fund's website, Hamilton says she identifies as all three.)

"We felt like a lot of these people and companies were being overlooked, undervalued, and underestimated," she said. "With a little bit of leveling the playing field, we believe that these people are equipped to handle an erratic market and the various ups and downs in the startup world."

In an email exchange with TechCrunch, Hamilton explained why an investment like this will perform like gangbusters. "I think the figures speak for themselves: less than 0.2 percent of all early-stage venture funding goes to Black women, while we make up approximately 8 percent of the U.S. population and are one of the fastest growing entrepreneur segments in the country," she wrote. "It is my firm belief that because Black women have had to make do with far less for centuries, equipping them with early-stage capital that is on par with their white male counterparts has the potential to lead to outsized returns."

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