In mid-October, eleven college students will be flying to California for an opportunity that would be the envy of any Ivy League MBA candidate—they’ll meet the venture capital firm partners who will personally mentor them throughout the school year.
The students—all but one are undergraduates—come from campuses in Prairie View, Texas; Tallahassee, Florida; and Nashville, Tennessee. They all attend historically black universities, and their invitation into the Silicon Valley investment world is part of a new initiative to change the statistics about African-Americans in the tech industry.
Only about one percent of investment professionals at VC firms are black, according to studies that spurred San Francisco entrepreneur Hadiyah Mujhid to launch the Venture Capital Fellowship that brings the first group of students to California this fall. The low representation of African-Americans in venture financing has downstream consequences throughout the tech ecosystem, Mujhid says. Funders tend to back startup founders from their own networks, she says. Then, those less diverse founding teams hire less diverse workforces.
“All these things are inter-related,” Mujhid says. Concerned about declining household wealth among black families compared with the white population, she says, “Tech entrepreneurship is an opportunity to address this widening gap.”
Mujhid found her own way to Silicon Valley as a computer science graduate from the University of Maryland Eastern Shore, which is among the 101 historically black colleges and universities (HBCUs) founded in the United States in the 19th and 20th centuries to educate black Americans who were then largely excluded from other higher learning institutions. These affordable schools have graduated the majority of America’s African American teachers, doctors, judges, engineers, and other professionals, according to the non-profit Thurgood Marshall College Fund.
After college, Mujhid earned an MBA from Drexel University’s LeBow College of Business; worked as a senior software engineer for Lockheed Martin for ten years; co-founded a San Francisco startup, Playpen Labs, and a consulting firm; and served as a software engineering instructor at Hackbright Academy.
Along the way, she co-founded Black Founders, an organization that began informally in 2012 as a league of new entrepreneurs helping each other out, Mujhid says. But an understanding grew that the group could be more effective if it created ongoing, official programs, she says.
Mujhid reached into her network of contacts last spring to found the nonprofit organization HBCU.vc to draw black students and other minority members into tech entrepreneurship and investing. She held meet-ups to publicize the program. [Students from a San Francisco meet-up pictured above.] The fledgling organization has evolved quickly since then—in large part due to the help of investment professionals at California venture capital firms.
Venture capital firms come on board
A key supporter was Marlon Nichols, a founding partner at Culver City, CA-based Cross Culture Ventures. With Nichols’ help, Mujhid created the first of what may become a series of online courses about venture financing and other entrepreneurship topics. They also widened the base of VC firms that will mentor Venture Capital Fellowship students this year to include Oakland, CA-based Kapor Capital; two San Francisco firms, 500 Startups and Indie.vc, as well as Cross Culture Ventures.
On Oct. 17 and 18, Nichols will host two of the fellowship students at Cross Culture as they meet the investment team, participate in a portion of the weekly partnership meeting, attend training sessions, and visit portfolio companies. He’ll then continue to mentor them after they return to campus.
“This is a unique way to create a pipeline of young investors,” Nichols says of the HBCU.vc program.
The fellows will get some hands-on practice once they return to school. As one of their projects, they’ll serve as community startup builders by organizing an educational event for entrepreneurs on campus.
Through their VC mentors, the students will learn how to meet promising entrepreneurs and scout for startups that might be relevant to their mentors’ investment interests, Nichols says. They’ll learn what happens in Series A and Series B financing rounds, and how to build an investment memo, model out a deal structure, read a cap table, and envision an exit scenario for investors, he says. This is not the kind of knowledge that most young people from black and Latino backgrounds would pick up through their social contacts alone, he says.
“Their odds of knowing a venture firm professional are very slim,” Nichols says. Even if they make such contacts later through their university professors or alumni, they still have to compete for VC jobs with family members of the partners, or other candidates with closer relationships to them, he says.
Nichols left a job as investment director at Intel Capital to co-found Cross Culture with prominent music talent manager Troy Carter, whom he met through an introduction by Freada Kapor Klein of Kapor Capital. Nichols says he wanted to lead a more diverse investment team that would tap into popular culture, and back startups that serve the needs of African-Americans and other groups that might be off the radar for the predominantly white investment professionals at standard VC firms. Cross Culture made its first investment in Oakland CA-based Mayvenn, a black-owned company that sells hair extensions through hair stylists who receive commissions on orders they take from their customers. “They become advocates and salespeople for Mayvenn,” Nichols says. The startup is tapping into a $9 billion market for hair extensions and weaves, he says.
Nichols says his challenge now is to persuade well-heeled limited partners that Cross Culture’s investment lens can pay off for them.
“It takes courage to invest in something new,” Nichols says. “But I would argue, that’s actually how you’re going to create outsized returns.”
HBCU.vc becomes a fledgling edtech unit
Nichols began helping Mujhid with HBCU.vc by recording several videos on investment topics as a way to attract student interest and possible financial support for the fellowship program. The video project expanded into a course, Venture Capital 101, which is now part of the instructional component of the HBCU.vc Venture Capital Fellowship. Mujhid recruited two additional black instructors: Monique Woodard, a venture partner at 500 Startups, and Charles Hudson, a general partner at Precursor Ventures, to record video lectures and develop assignments for the course.
Mujhid had at least 165 applicants to choose from in June, when five women and six men were chosen for the first fellowship class. The winners had all taken the option to apply as teams. Their group applications came from … Next Page »