Getting access to capital is a roadblock that stops numerous Black business owners. The conventional financial investment houses and venture funds are not icons of variety and inclusion. So it is incredible to see entrepreneurs Jewel Burks, Justin Dawkins and Barry Givens raise $50 million with major investors consisting of PayPal and Apple amongst others.
Burks thinks part of the reason that investors may be more deliberate about backing companies such as hers is the outcome of the racial oppression that was highlighted in the wake of the murders of George Floyd, Breonna Taylor and numerous other Black individuals at the hands of police.
We really wanted to build a fund that was appropriate for the opportunity that we see [in Black founders],” Burks said. “And honestly I would say, it’s a small fund out there relative to the number of Black-led companies out there that are looking and seeking funding.”
In 2015, the trio saw opportunity in that hole and unleashed Collab Capital, a company designed to invest specificallyy in Black founders. It debuted with $2 million in capital and a huge end target: $50 million. Today, the firm revealed that it has met that goal, with backers such as Apple, Goldman Sachs, Google, The Andrew W. Mellon Structure, Mailchimp and PayPal, making it one of the biggest funds closed from an entirely Black-led company solely dedicated to Black creators.
With the new fund, Collab Capital plans to purchase 50 companies over a three-to-five-year duration with check sizes in between $500,000 and $750,000. The firm has actually likewise booked approximately $2 million per investment for follow-on bets. It is targeting ownership in between 10% to 15% in each deal. To date, Collab Capital has backed 6 companies in the health care, edtech and future of work areas, consisting of Music Tech Functions and Hairbrella.
Burks noted that when Collab Capital was first raising its fund, potential investors told them to have a “wider perspective” on what kinds of entrepreneurs to back. Some thought they should create a fund around underrepresented founders or multicultural founders. With general VC volatility in the early months of the pandemic, Collab Capital saw some of its LPs pull back or delay commitments.
She said, “We were very adamant that the most important thing we wanted to solve was the funding space for Black founders, so we were not willing to broaden the spectrum there because we saw that there were many firms out there for diverse founders, and even in a few of those, Black founders were still marginalized.”
Black-led venture capital firms are on the move and it will be interesting to see how this momentum builds. This year Harlem Capital closed a $134 million seed fund; Cleo Capital, set a $20 million target for Fund II; and MaC VC, landed $103 million for its inaugural fund.
The role of the pandemic and video meetings using Zoom also played a role for Collab Capital.
“If you’d asked me a year ago [if] I think we’d be successful in raising $50 million over Zoom meetings, I would have said absolutely not,” she said. “But you can build meaningful relationships with people and not even have to be in person. That’s a big surprise — and, oh, the realization that you don’t have to travel so much.”