By Nabil Gutierrez (BC ’21, Venture Fellow 2020–2021)
Venture capitalists have recently been reckoning with a serious lack of diversity. Not only is the venture capital industry homogeneous, but the startups they fund also fail to reflect the U.S.’s diverse population. In 2018, 9% of venture capital (VC) funding was allocated to women-founded startups. Black and Latinx founders raised 2% and 1% of VC dollars, respectively. Of VC investors, 8% were women, 2% were Latinx, and less than 1% were black. During a past internship, I saw these statistics in action as I attended meetings with VC and private equity (PE) investors. Most were white men. None of them looked like me, a Latinx woman. No one brought up a priority of investing in diverse founders.
Before COVID-19 cancelled in-person networking opportunities, I attended the Seize every Opportunity (SEO) Alternative Investments Conference in early March. There, I sat on a panel regarding the growing importance of diversity in VC and PE where I had the opportunity to learn from Henri Pierre-Jacques, co-founder of a firm called Harlem Capital. Harlem Capital’s mission is to address the diversity gap in VC through investing in 1,000 minority and women founded startups over a period of 20 years. It is Harlem-based and was founded in 2015 by Henri Pierre-Jacques and Jarrid Tingle. In 2017, John Henry joined the team as a venture partner. In 2019, they all made Forbes’ 30 under 30 list for their impact in social entrepreneurship.
In late 2019, the firm announced the closing of its first fund, Harlem Capital Partners’ “Venture Fund I, Limited Partner (LP)”, which raised $40.3 million. The fund has 55 LPs: Vanderbilt University, Dorm Room Fund, and TPG Capital (The Texas Pacific Group) just to name a few. Additionally, 50% of the individual LPs are people of color or women, highlighting Harlem Capital’s goal to not only diversify VC dollars, but also to diversify VC investors themselves. The raise of Fund I inspired some of the United States’ leading private investment firms to further support Harlem Capital’s goal of diversifying VC beyond merely the financials. For instance, TPG, a Fund I LP, created its own company initiative, “Harlem Council,” in order to offer investing expertise and other resources to Harlem Capital. The renowned PE firm KKR & Co. (Kohlberg Kravis Roberts & Co.) announced a partnership with Harlem Capital designed to help KKR identify applicants from Harlem Capital’s internships who could be further matched with roles at KKR. The closing of Fund I not only signals the success of Harlem Capital’s ability to rally support around its unique investment strategy, but it brought on a wider effect resulting in TPG and KKR’s company initiatives in supporting diverse investors.
Harlem Capital Partners Venture Fund I aims to invest in approximately 30 U.S.-based minority and women-founded post-revenue companies. The fund intends to lead or be a part of $500,000 to $1 million sized seed or Series A rounds. Its investment criteria includes high quality management, a post product market fit, a disruptive business model which solves an important problem, and a $1 billion+ market size. The fund targets a 5–10% ownership stake and seeks realization within 4–7 years. The firm is industry-agnostic, but strays away from the cannabis, biotechnology, hardware, crypto, and capital-intensive industries.
Of course, it will be years until Harlem Capital’s investments are realized. However, research has found that diverse companies produce higher returns than their non-diverse counterparts. In addition, I truly believe that Harlem Capital’s portfolio companies are genuinely making the world a better place. Harlem Capital is paving the way for real, lasting change to be made in VC.
Thus far, the fund has invested in 23 companies including:
Cashdrop
Headquarters: Chicago
Industry: Enterprise software
Description: Helps small businesses create and manage an online storefront all from a smartphone app in less than 15 minutes
Round type: Seed
Round size: $2.7 million
Other investors: Founder Collective, Long Journey Ventures, M25
Curu
Headquarters: Denver
Industry: Fintech
Description: Enables lenders to boost loan applicant eligibility through credit score and debt to income ratio improvement
Round type: Seed
Round size: $3 million
Other investors: Vestigo Ventures
Dexai Robotics
Headquarters Quarters: Boston
Industry: Enterprise software
Description: Automates commercial kitchen tasks through artificial intelligence and robotics
Round type: Seed
Round size: $5.5 million
Other investors: Hyperplane Venture Capital, Rho Capital, Contour Venture Partners, NextView Ventures
If you’d like to learn more about Harlem Capital you can visit their website or follow @HarlemCapital on Twitter for more updates.