SHE'S
ON A
MISSION
arlan hamilton wantS to
create 1,000 black millionaires
WRITTEN BY: JEFFREY MCKINNEY
COVER IMAGE BY: RAYON RICHARDS
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Entrepreneur Arlan Hamilton is characterized as a bold and relentless disruptor. That description is fitting for the venture capitalist who serves as the founder and managing partner of Backstage Capital—a trailblazer in the $346 billion U.S. VC sector controlled by white males and widely known for excluding investment from Black women entrepreneurs like herself.
Black women business owners collected just 0.34% of U.S. venture capital in 2021, according to Crunchbase, and reportedly, 10% of diversity checks by number of deals go to women of color. Plus, they gain less than 1% of venture funding, a lingering obstacle. For her part, Hamilton asserts: “We invest in the very best founders who identify as women, people of color, or LGBTQ+. I personally identify as all three.”
After starting her investment fund in 2015, Hamilton built a business that invested $20 million in 200 companies in this underserved segment. Those portfolio firms have a combined market value of more than $1 billion in multiple industries, with health, fintech, and sustainability as the top three.
GROWING 10 TIMES LARGER AND INVESTING IN MORE COMPANIES
Now, Hamilton has ambitious plans for taking her Los Angeles-based firm focused on investing in early-stage companies to a higher level. She wants Backstage to reach $200 million in assets under management over the next five years, 10 times greater than its current size.
How does she hope to achieve this feat? Hamilton continues to work with limited partners (LPs) who are institutional investors, boost her firm’s marketing, and invest at least $1 million more of her own money into the drive.
Generally, VC firms provide money from several investors to help fund companies with high-growth potential. The VCs often take equity, or an ownership share, in exchange for the investment.
Along with institutional LPs, Backstage Capital’s funding comes from angel investors and wealthy people, including Canadian billionaire businessman Stewart Butterfield, NFL player Bobby Wagner, and Dallas Mavericks owner Mark Cuban. Hamilton says the billionaire entrepreneur invested $1 million in 2019 and another $5 million in 2020.When asked why he made these investments, Hamilton says Cuban told her, “You are in rooms I’ll never be in.” Cuban’s investment in Backstage was uncharacteristic for him since she says he rarely uses other funds as conduits to back startups, preferring to invest directly in companies.
Dallas Mavericks owner Mark Cuban invested $1 million in Hamilton’s fund in 2019 and another $5 million in 2020. Asked why the billionaire entrepreneur made these investments, he told her,
“You are in rooms I’ll never be in.”
Conquering Hurdles and Investing Her Own Money
Dallas Mavericks owner Mark Cuban invested $1 million in Hamilton’s fund in 2019 and another $5 million in 2020. Asked why the billionaire entrepreneur made these investments, he told her,
“You are in rooms I’ll never be in.”
1% of venture funding, a lingering obstacle. For her part, Hamilton asserts: “We invest in the very best founders who identify as women, people of color, or LGBTQ+. I personally identify as all three.”
After starting her investment fund in 2015, Hamilton built a business that invested $20 million in 200 companies in this underserved segment. Those portfolio firms have a combined market value of more than
$1 billion in multiple industries, with health, fintech, and sustainability as the top three.
Without a college degree or background in technology, she discussed her big ideas in meetings with investors from Silicon Valley but did not score any deals. Still, she got a big break from two early backers: a loan from seed accelerator president Sam Altman and $25,000 in backing from tech veteran Susan Kimberlin, whom she met while taking a two-week business course at Stanford University.
Hamilton was motivated to continue and bolster Backstage after witnessing the lack of capital BIPOC, women, and LGBTQ+ founders received compared to their white male counterparts. “I knew that if we could simply get more funding deployed to those groups and do so loudly in public, we would inspire other people to do it.”
As a youngster growing up in Dallas, she was driven to gain recognition by making an impact. She initially focused on the entertainment industry, working on live music tours for artists such as Toni Braxton and CeeLo Green. When Hamilton shifted to the VC sector, she says her former role became the manifestation of her message being heard. With input from her mother, Earline Sims, Backstage Capital was born. She recalls her mother saying, “You help the artists “backstage; why don’t you do that with the founders? It was a brilliant thing that I immediately said yes to.”
The innovative financier and her
mother, Earline Sims, serve as each other’s entrepreneurial inspiration. Sims helped Hamilton fine-tune her VC approach and develop the Backstage Capital brand. On the other hand, Hamilton was the catalyst for her mother’s audacious eyewear collection.
And it has been a tough climb, personally investing “seven figures” into the firm. Last year, Hamilton described the challenges of raising funds from institutional and corporate investors on her podcast. So, in 2022, she cut her staff by 75% from 12 to three and decided to make follow-on investments instead of new ones, according to Protocol. It also reported Backstage had raised roughly $5 million in a crowdfunding campaign, allocating the funds to the management company—instead of the investment funds—and reducing accumulated debt.)
Still, Hamilton has remained resilient and persistent. “I’ve taken on loans and paid for payroll more times than I can count. I’m also an investor in Backstage, so I am so happy about that. I’ts a joy. I plan on investing a lot more as my wealth grows.”
Investing In Scalable Startups with Niche Offerings
Hamilton’s firm is known industrywide for investing in overlooked, underrepresented, and underestimated founders. Hamilton says Backstage typically has invested in startups ranging from $50,000 to $500,000, depending on several variables.
One approach Backstage uses to secure clients is an application form on its website. Hamilton says 38 investing apprentices review those applications and surface the highest qualified based on the firm’s internal metrics and scoring system.
She maintains the method is unlike most venture capitalists and investors, where a founder must be connected to gain access. Backstage reviews thousands of applications and invests in 30 or so each year.
“We’re looking for some evidence that you have traction,” she says, citing revenues and marketplace solutions as a factor. “We don’t need all the things that a lot of investors need, but we do need you to be actively doing something.”
Like any early-stage venture firm, Hamilton says Backstage looks for its underlying portfolio companies to have exits through mergers and acquisitions, going public, or other liquidity events.
Including a broad mix of entrepreneurs, genders, and racial groups, its portfolio companies cover an array of sectors and disciplines. For instance, they include Hello Alice, a tech firm that helps advance startups; Dollaride, a Nigerian-founded firm offering accessible transportation to underserved communities; and CapWay, a fintech venture providing banking services and financial education products.
CapWay CEO Sheena Allen told BLACK ENTERPRISE via email that Backstage Capital invested $25,000 in the early stages of CapWay. “Arlan witnessed me bootstrap my first tech startup, Sheena Allen Apps, to generate millions of app downloads and, therefore, who I was as a founder and executor.”
Hamilton’s Backstage Capital has financed scores of diverse innovators, ranging from Nigerian founders of a transportation company for underserved communities to an entrepreneur who created an early-stage fintech venture focused on financial education. Here, at SXSW, Hamilton poses with the founders of those world-changing portfolio companies.
Conquering Hurdles and Investing Her Own Money
Hamilton and her mother support each other as entrepreneurs. In fact, Hamilton inspired Sims to launch the Earline Sims Eyewear Collection, an initiative with Vontelle Eyewear. Many people learned about Sims and her struggles from Hamilton’s first book, It’s About Damn Time. Hamilton proudly reports her 74-year-old mother now has six designs on the Vontelle website. “They are selling really well because they’re really cool.”
Embarking on a fresh endeavor, Hamilton seeks to create 1,000 Black millionaires through entrepreneurship. To kick off this campaign, she has written her second book, Your First Million, scheduled to debut on Jan. 2, 2024. She writes about how entrepreneurship can serve as a wealth-building tool despite an individual’s past or current financial status. The book details how to produce multiple income streams and raise funds for a venture while maintaining majority ownership. In April, Hamilton plans to launch her first large-scale event, “Your First Million Live 2024,” in Los Angeles to introduce an expected 2,000 to 4,000 individuals to her wealth formula. Check out more details here.
