The VC Disrupter — My Interview in Queer POC Print Magazine “The Tenth”
Interviewed by Khary Septh, Summer 2016. Published by The Tenth magazine, Dec 2016. Full article available at The Tenth’s online store and in select boutique book stores around the country. Shortened and edited for clarity.
Arlan is the founder and managing partner of Backstage Capital, “a seed investment fund that backs high-potential, underrepresented startup founders.” It counts tech veteran Susan Kimberlin, who made a name for herself at Salesforce and PayPal, as well as Valley rockstars Marc Andreessen and Slack CEO Stewart Butterfield as investors. With those types of names behind you — in any way large or small — the Internet is sure to take notice, and much has been written in the press about Arlan’s rather phenomenal story.
An Inc. August 2016 headline reads, “How This Woman Went From Homelessness to Running a Multimillion-Dollar Venture Fund,”; another one on Forbes calls her efforts “pioneering” and praises her for diversifying the playing field. For Arlan, all has a purpose. “The attention, the press, is really just serving a purpose, and that’s enabling a group portfolio of 50 or so companies — eventually, to have a chance.”
Arlan is generous with the time she’s taken out of her hectic day to teach a quick class to Tenth readers on the world of venture capital. It is immediately clear that she possesses the best possible attribute for an interview of any depth: openhearted intelligence. She brims with a quiet charisma; she doesn’t hesitate to cut an otherwise serious moment with a joke; today she’s dressed like a slacker — jeans and a tee; full disclosure: so am I. She’s family.
Immediately, we’re off to the races to find out how a girl was enjoying a career as a production coordinator and road manager for acts like CeeLo Green, Kirk Franklin, and Amanda Palmer, with no tech background, winds up conjuring circumstances to get her to the Valley.
During this down period, when most of us would have been plotting our next lease, or our first lavish meal with girlfriends once that bounce-back check clears, Arlan, “sitting on the floor in a room that didn’t have a bed without so much as a penny,” had her sights set on something else: her first investment in an artificial intelligence B2B startup out of Miami named Kairos which does facial and voice recognition, and its founder Brian Brackeen, or in her words, “teacher’s pet.”
“I saw a video that Brain did in the summer of 2013. He hadn’t raised any outside funding, or he hadn’t raised much, and I said, ‘Man, that guy is going to do something. As soon as I get funds I’m going to invest in him.’ He was technically the second investment I ever made, but he was actually the first on my list. The important part is what they do and how amazing their founder is and his ability to build a team… That’s huge. It takes a leader, it takes vision, it takes the understanding of what works, on top of being a technical genius.”
That was four years ago, and while solving the problem of how to get to Silicon Valley (once she did arrive in San Francisco for Y Combinator’s Female Founders Conference in 2015 she says, “It wasn’t, ‘Oh, my god, this is Disneyland.’ It was like, ‘This feels right. I feel confident here. I feel like I belong.,’”), Arlan feverishly took up an information hunt, not just to learn, but to imagine herself as part of that community, because once you’ve been bitten by an insect drone and watched a few seasons of Shark Tank, there’s nowhere to hide. And there’s an unprecedented amount of information to be gained on the web — I do spend enough time getting stoned on on my couch to know. It’s downright shocking how some of the most amazing video interviews with tech entrepreneurs get so little views on YouTube. Guess everyone is too busy gulping ignorance by the gigabyte on Facebook.
“I watched hundreds of hours of video, listened to podcasts, read books, read blogs… I just did that any time I had any time off. It was like going to school — homeschooling,” says Arlan as she recalls of her tech learning curve. “The more I learned about it, the more I realized that I felt a kinship with people who wanted to start something on their own, and, not necessarily work for themselves, but start something for themselves and create teams.”
Thank THE ORACLE I found Arlan, because what a horrible waste — all these Black dreams and technological innovations on ice due to “reliability issues.” There’s a lot to admire about a girl who recognizes the scent of a winner, not it’s color, and has made her life’s work trying to create more opportunities for them. She points me to a freshly painted purple wall where a grid of small framed photographs of her first 8 founders hang, and lest I assume the merits of the group are based on color and gender only or even first, she shares, “It wasn’t like I woke up one day and said, ‘Oh, let me go and do something for charity.’ There’s not one product up there that requires you to be a certain type of person to use it, but if you look at the founders themselves, they don’t fit the pattern that perhaps a white VC who has only seen Stanford and MIT grads walk into their office fit, so those guys look to them like, ‘Oh, their pedigree is off… They’re not polished enough…How are they going to run a team…blah, blah, blah.’”
On her wall are her “headliners.” Along with Kairos, there’s TresseNoire, an on-demand, at-home beauty booking app designed for women of color. There’s Ceek VR, a leading developer of virtual reality experiences for education, entertainment, and brands. BANDWAGON according to their website, “uses qualitative data to assign seat characteristics so that fans not only know where their seats are but also, what the in-stadium environment will be like,” and startup CareAcademy teaches evidence-based online classes to help caregivers provide excellent care at home in an $84 billion industry. There’s also a company called DIBS which has some sort of crazy algorithm that addresses inventory management and problems that result from the one-price-fits-all approach traditionally taken in the health & wellness space, and of course there is more. “I don’t say this often, but my true goal is to invest in 100 startups with underrepresented founders in the next 2 or 3 years,” says Arlan.
“I actually see Backstage as an enabler — straight up!” says Arlan when talk of her business’s core purpose is brought up. “In some cases I’m the first dollar in, and sometimes I’m the very last dollar in because they’ve been killing it and they just want me at the table. Every once in awhile, it’ll hit me like ‘Marc Andreessen is an investor on my fund.’ A year ago, I wouldn’t have been able to even wave that way, you know? So the investors that we have are really exciting, but we’ve only just begun. I don’t think anyone’s prepared for what we have in store,” she says, suggesting the world best get ready for her Black, queer tech takeover.
We are. The raise she’s under right now is dwarfed by far better-known funds like Andreessen Horowitz or Benchmark Capital (which have raised $5.8 billion and $1.5 billion respectively), but the impact of Backstage’s operations on our community are huge. Capital changes everything. “There’s a lot that we can do once we reach certain milestones in fundraising… it’s still lean, and it’s still small, but hopefully our impact will cause a ripple effect,” offers Arlan.
Yes, a ripple effect in the tsunami of venture capital. Even the world’s largest corporations are taking a page from the tech-industry playbook and incubating their own new ventures from scratch, and almost 50% of the top 30 companies are actively engaged in venture investing as well.
Once the big girls are involved, it’s a wrap. They can provide the cash, office space, resources, mentorship, and even vendor access to accelerate a start-ups’ growth. The question is: given the global frenzy of venture capital, shouldn’t we too be in this game? Sure, Arlan’s forays into the startup world may not compete with venture operations such as Google Ventures and the legion of veterans along Silicon Valley’s Sand Hill Road, but she’s challenging our cultural norms of investing, at scale — and getting in the game so that we can too.
Acceleration, incubation, capitalization, all terms that were soon to keep me up at night with dreams of “making the world better,” but our world, and instead of counting sheep or popping a xannie, I’d be counting unicorns — Black ones, and the sweetly sung promises of the Valley, thanks to this encounter with Arlan. Fuck it, I’m already here.
Nearly four years ago, the woman sitting across from me considered herself a failure. For years, Arlan ran an independent music magazine called INTERLUDE which she says, “died out just as the world was crumbling financially in 2008.” She’d luckily managed to bounce back with a career in music, but in August 2014, Hamilton wrote an email to all her colleagues and told them she was putting her career on pause.
“Once I found Silicon Valley, I realized that I hadn’t been a failure when I couldn’t get the magazine to work. I’d actually been an entrepreneur — I’d done something. It was really therapeutic to find the startup world,” she says. “But that’s when I really started seeing the disparities in the funding, and it didn’t make any sense to me; this is the land of opportunity, but only for some. That’s when I switched over to, ‘If I’m going to do this, I’m going to raise a fund where I have the greatest opportunity for success.’ There are companies that are amazing; their founders are undervalued and they’re scrappy — but no one’s paying attention to them.”
It’s amazing what Arlan’s level of determination has done; obsessed with phone calls and emails, always working on raising a fund, always using military-grade tactics to wrestle coins out of potential investors, she has left behind what she had been and is on a journey to what she is becoming. “Every week, people come to me and say, “I want to get into venture, how do I do it?” I’m happy to talk to them and I tell them the good, the bad, and the ugly, because why not?”
She speaks candidly about approaching VC firms early on in the game while on a job hunt: “I was blissfully unaware of a lot of things I’d be running into. I reached out to a lot of funds thinking they were going to want me because I’m a Black gay woman — it helps them, but not so much.”
How hard was it to keep faith, I ask? Arlan takes justifiable pride in having circumvented the path that no doubt would have shaped her to its own requirements. “I’m happy to be doing it this way,” she says. “I do have LPs to answer to in some ways, but an LP is a limited partner for a reason — they’re limited. So when they sign a contract, there are things they can tell me, and things they can’t tell me to do. Ultimately, I have founders to answer to, and I have LP’s to answer to, but everyone who signed up, understands my philosophy to begin with. It’s been very freeing and I can’t imagine working in another fund now.”
Most of the information Arlan has learned and her journey is documented on Medium — the platform that begins where Wordpress and Tumblr left off, and home to the world’s tech and startup-related bloggers these days. In her posts, Arlan demonstrates a guru’s grasp of the rules. She knows that if you’re going to help anyone, if you’re to be of any use, you have to go there. That’s a risky undertaking, so you’d better play it brilliantly.
In one of her more popular posts, “Dear White Venture Capitalists: If you’re reading this, it’s (almost!) too late” she initially wrote it back in 2015 as an exercise at 500 Startups’ two-week seminar for new investors in Palo Alto, but it would soon come to define her:
DEAR WHITE VENTURE CAPITALISTS: DO NOT PITY BLACK FOUNDERS! Do the same thing you do with White and Asian founders and invest in them because you want to make money. Do not think of this as a social mission. Take the words “help,” “support,” “charity,” and “social impact” out of your thinking on this. (Social impact certainly is of interest to me, but that is not what this post is about)
It’s about financial returns…
Your goal is to make money as a VC or accelerator who is investing other people’s money because you have a fiduciary duty to do everything in your power to bring your LPs returns. Therefore, if you haven’t hired a team of people who are of color, female, and/or LGBT to actively turn over every stone, to scope out every nook and cranny, to pop out of every bush, to find every qualified underrepresented founder in this country, you’re going to miss out on a LOT OF MONEY when the rest of the investment world gets it.
The case for investing in diverse founders and diverse markets is more about doing everything you possibly can to not miss unicorns and decacorns and polyamorous butterflies (I just coined that, thank you) in underserved, untapped places. Plain and simple. It’s not about “helping” founders, it’s about fueling an untapped ecosystem so that you may be lucky enough to reap the rewards in years to come. You should be calling underrepresented founders and BEGGING them to allow you to invest in their company at the slightest sign of traction. Because of the blind spot investors have for this group of people right now, there’s an enormous opportunity to invest at undervalued prices. It won’t always be this way. Adjust your thinking NOW. Adapt NOW.
The post worked the Internet into a frenzy. We ask if it has been hard to judge the industry’s response? Was going in worth it? Arlan responds, “I’m really so laser-focused on completing the raise of my funds, and getting into the deals that I have crafted, that is really difficult for me to see what other people see when they say, ‘Oh, you’ve done so well. You’ve done so many cool things.’ Even if I’m stressed and frustrated about something, the fact that I can look at that group of people there (she points to the wall of founders) and say, ‘I remember a few months ago when they couldn’t make X, Y, and Z happen because they didn’t have the funding’ but because of all this stress, they they were able to.”
When asked about her position in the space as one of the “only ones” in the Valley, she responds: “I feel like I’m definitely supported. I don’t feel like I’m walking against the wind here and no one wants this to happen.” When we ask about inspirations, she doesn’t forget the names of the women — Kesha Cash of Impact America (a fund based in New Orleans that focuses on “impact investing”) and Monique Woodward who is the first Black venture partner at 500 Startups — who have “been doing it, doing a magnificent job of it, and often with very little fanfare,” as Arlan puts it.
A venture capitalist’s job is to invest in risky projects, so as far as all startups are risky propositions, there’s a level of evaluation (come to find out minimal due diligence) that requires skill as well. They invest where their background and instincts convince them that the anticipated return will far exceed their evaluation of the risk. It’s not a science; it’s what the gay kids call a feelliinngg. In Arlan’s case, as a Black, gay female VC, she may have one thing that a room full of Silicon Valley white boys do not: empathy.
It’s a rare and valuable thing. It is obvious that women, do it better (isn’t it?). “Sexism is real,” says Hamilton, not surprisingly, and suggests that she can “just relate” to women of all races. It’s why on Shark Tank, Barbara Corcoran will make an emotional investment in a woman who reminds her of a scrapppier, fiercer, younger version of herself, even if the idea she’s bidding on isn’t the million dollar one. She sees potential; she sees herself — and that is enough. Seems fair enough, instinctual even, until you remember the reality: less than 2% of the people making the investment look like you if you’re not Billy from up the block.
Arlan shares a story: “My Tinsel founder gave birth to her child at home because she couldn’t make it to the hospital…pulled that baby out herself with her husband there, and then a couple of weeks later said, ‘Let me get back to work.’
As if to anticipate my needs, Arlan looks across the table and asks, “More coffee?” in a real moment of clarity. I’ll just say it: women make a more human, inclusive nation. Women lack the male ego which constantly nags: “don’t grow up, behave like a child, tire of every single shiny object, buy another, waste it, whine, break it, then blame. The more honest I was about the situation, the more help I got with introductions, interviews, advice, and support.
It’s not illegitimate to point out the lesbians are better at money than gay men either — argue with yourself if you’d like to on that one.
As our interview wraps, I ask Arlan about the next few growth phases of the company, because one thing is clear: this is just the beginning. “I’d love to, just in general, have little offices in 5 or 10 cities around the country, she says.” WeWork is good for that because they are in so many places so that our founders are in like Chicago and Portland and Detroit. I think that will really be interesting.”
“A lot of funds will stick to Silicon Valley because it’s where innovation starts in tech, so it makes sense. Someone compared it to wanting to be an actor and not wanting to live in Hollywood. It makes sense in one way, but there’s so much innovation and intelligence all over — the one thing they’re lacking is that access. Some VCs’ philosophy is: You have to be in Silicon Valley. That’s not mine.”
As a sense of maturity in the Valley sets in for Hamilton, it’s painfully evident she is confident that the numbers on a financial spreadsheet don’t provide all the information required to make a business decision.
Her LP Susan Kimberly published a heartfelt, flattering Medium post about Arlan’s ever-growing influence, aka as the “Arlan Network Effect”:
“She has an incredible pipeline of opportunities to work with amazing founders. These are founders, companies, and entire businesses that are often going unnoticed by the finance community… Arlan saw the potential gains for her fund that other investors may have missed because they didn’t cast a wide enough net. In addition to the compelling opportunity for gains, I wrote that first check because I wanted to do more than just talk about diversity, and I wanted to do it in a way that produced solid products, services, and businesses (that’s the 15 years in product development and operations in my background coming out). In every founder and business that Backstage Capital invests in, there is another example for the whole industry and aspiring entrepreneurs to look to. There’s another potential leader or mentor to join our ranks and grow the finance and entrepreneurship community.”
Shares Hamilton, “I’m hoping that that’s the case and we can build on that. It’s called Backstage Capital for a reason — I want to be in the back, helping, I don’t want to be in the spotlight. I can get the spotlights setup overhead, and then I can just sneak on back and leave them for the founders. That’s why we’re doing all this. This is why we’re doing the press, and why we’re making a ribbon line, and shouting to the rooftops [about] what we’re doing because there are some amazing companies that are just being overlooked simply because they don’t fit a pattern. So I’m doing my own pattern matching.”
At Backstage, Arlan is the kind of front woman who may be a little shy on stage, but gives and loses herself in the performance — and let’s be honest — that is where it counts.
Reprinted with permission.
About Backstage Capital: Founded by Arlan Hamilton, Backstage Capital is dedicated to helping to minimize funding disparities in tech by investing in high-potential founders who are of color, women, and/or LGBTQ. Backstage invests $25k-$100k in pre-Seed and Seed-stage startups that see the world through a unique lens. Follow us on twitter @Backstage_Cap!