Arlan Hamilton speaking at Bloomberg in NYC, 2018. Courtesy of Bloomberg

 

Everyone Wins on Arlan Hamilton’s Level Playing Field

Diversity-focused investor funds startups for Silicon Valley outsiders

Arlan Hamilton could tell you the story of how she started up Backstage Capital four years ago and gave up a promising career in the music business to pursue her dream of founding a venture capital fund for people who, like her — a black, queer woman without a college degree — were outsiders in Silicon Valley. She could tell you how she went through her savings trying to get Backstage off the ground, and how she was homeless for several months while she tried to land that first investor. But she has told that story many times by now. Instead, she wants to talk about what happened next.

“My ideal world is where we’re all working together and equal, not a world where one group has more power.”

When Backstage started in 2015, Hamilton’s plan was to invest in 100 high-quality startups — all run by women, LGBTQ+ people, and people of color — by 2020. She reached that goal in May 2018. By then, Backstage had more than 20 employees and had invested more than $4 million in those 100 companies — whose products range from food and clothing to apps and software — with the majority of those investments being between $25,000 and $100,000. Backstage had also established a second $36 million fund, set up a mentoring program, and built a network to offer a support to entrepreneurs who had interesting projects but didn’t receive funding.

“We invest in less than three percent of what we see,” Hamilton explains. “All of it matters, not just the people we’re backing. When I see that Delane Parnell of PlayVS (a league for high school Esports) raised $30 million, I remember we missed him. That haunts me. But I don’t say that’s a loss. That’s a win for Backstage. All boats rise.”

Arlan Hamilton and Headliners at SXSW 2018. Courtesy of Backstage Capital

Arlan Hamilton and Headliners at SXSW 2018. Courtesy of Backstage Capital

 

It’s important to Hamilton to maintain good relationships, even with founders she chooses not to invest in. She knows that entrepreneurs — particularly those who are not straight white males — have formed a community and share information through back channels. She wants to be seen as authentic, the sort of person who does more than puff herself up on Twitter or write self-aggrandizing articles. That authenticity, she believes, is why people keep reaching out to her and to Backstage: “People feel like they’re being treated with a certain level of respect.”

Ever since Backstage launched, Hamilton had been asked to start an accelerator to offer new businesses more support beyond the initial capital. For a long time, she demurred. But then she started working with other accelerators to help them reach a more diverse pool of founders (more than 90 percent of venture funding recipients are straight white men), and found that they weren’t moving as quickly as she would have liked. “They haven’t made it as much of a priority as they should,” she says. “It’s an HR move — something they think they need to do and be better at — but they don’t necessarily know why.” So she decided to give it a shot herself.

Backstage began taking applications for its own accelerator program late last year with Microsoft and Mailchimp as its launch partners. There would be four three-month sessions in four cities, staggered throughout 2019.

“We wanted to be different,” says Hamilton. “We wanted to see what we could really accomplish.” Instead of building toward Demo Day, Backstage’s accelerator would help each company reach a specific milestone — a first pilot B2B customer, the first 1,000 signups, the first half a million dollars.

Arlan Hamilton. Photo by Sarah Deragon/Portraits To The People

Arlan Hamilton. Photo by Sarah Deragon/Portraits To The People

 

Hamilton expected 800 applications for the 24 spots, consistent with Backstage’s history of funding three percent of applicants. Within the first five weeks, Backstage had received 1,900. Hamilton and her partners decided to shut down the process because they couldn’t accept any more. Then they had the difficult task of narrowing down those 1,900 to 24.

“The quality was so, so high,” Hamilton says. “There’s a certain group of people that, on another day, would have gotten in. Next year, they may still get in. We made sure that everyone in the top 100 understood how valuable they were.”

As soon as Hamilton finishes her presentation at SXSW, she’ll be flying to Detroit for the launch of the first session of the Backstage accelerator.

But she’s still not done. Over the next few years, she wants Backstage to become independent of outside investors. She thinks it will be able to manage half a billion dollars.

She has also launched Backstage Studio, a media company. “Think about why certain white men are so confident,” she says. “Growing up, from the age of three, they’re seeing Batman, Superman — all these superheroes who are white men. I want to embrace representation through media.” Over the next two years, Backstage will be producing videos and podcasts about its founders and Hamilton herself, to show young people that women, LGBTQ+, and people of color can be successful entrepreneurs themselves.

“I’m often called racist online,” Hamilton says. “But I’m an idealist. My ideal world is where we’re all working together and equal — not a world where one group has more power. With a more level playing field, everybody wins.”

Arlan Hamilton will be a Featured Speaker in the Entrepreneurship & Startups Track on Monday, March 11.

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