Want Stellar Returns?
Invest in People of Color in Enterprise Software.
New Day Ventures’ investment thesis is to invest in early stage Enterprise Software companies founded by People of Color located primarily in “overlooked” U.S. cities & regions. The response from the software and VC ecosystem to this thesis, to our potential portfolio companies, and to the overall philosophy of our investment approach has been overwhelmingly positive and refreshing.
Occasionally, I do come across those who challenge the premise of our investment thesis and I welcome and relish those discussions. So, I have included some of the questions and comments that have been posed to us along with my responses below:
Is this a charity?
This is not a charity. Our primary goal is to deliver stellar financial returns for our investors and our portfolio companies. Our secondary and complimentary goals are to help expand the People of Color enterprise software ecosystem via New Day Equity (i.e., “we drink our own champagne”) and to help generate 1 Million new jobs in the next 15 years.
Why would you limit your investment options?
This is an opportunity rather than a “limitation.” We have leveraged our unique domain expertise, background, and lived experience, to define an opportunity and a gap in the early stage investment market. Every successful VC firm has a focus and so do we (see below for examples of funds that have inspired us and their corresponding focuses). I look forward to the potential opportunity to co-fund with these funds in the near future- hint, hint 😊
o Kapor Capital believes that startups can leverage IT to solve real world problems and tangibly improve the lives of millions through innovations in the fields of education, finance, health, work, justice and more with an emphasis on underrepresented founders
o Backstage Capital invests in founders who identify as women, People of Color, or LGBTQ
o Revolution’s Rise of the Rest Fund invests in companies located outside of Silicon Valley, NYC, and Boston
o York Investments helps reshape how startups are built together with founders
o KCRise Fund invests in early stage companies in Kansas and the western half of Missouri
o Seneca VC backs the next generation of change makers
o Reinventure Capital invests in growth-stage capital in companies that have the potential for both excellent financial returns and sustainable, measurable impacts
o Harlem Capital focused on investing in minority and women founders in the United States
o Chloe Capital a seed-stage venture capital firm that invests in women
o Alumni Ventures Group co-invests alongside established VC investors leveraging the alumni networks of select U.S. universities
o Plexo Capital is a hybrid venture capital (VC) firm investing both in emerging VC funds and in early stage companies around the world, creating a one stop shop for investors and entrepreneurs.
o Indie.vc is designed to fund and support founders on a path to profitability
What about white male founders?
We welcome diverse founder teams with a Person of Color co-founder (ideally) or the meaningful presence of at least one Person of Color on the cap table (e.g., executive team, investor, advisory board member, etc.).
Diverse founder teams in enterprise software don’t exist.
They do exist and we have already identified and vetted 20+ companies to potentially invest in.
Even if you do find investable companies, the People of Color talent pool is too small to staff these companies for expansion.
This is a common misconception in the industry. There is a tremendous talent pool of People of Color in enterprise software and they are in very high demand-- mirroring the battle for talent across the industry. Author’s Note: This will be the topic of a future blog article.
What about women?
Yes, investing in Women of Color is of particular interest to New Day Ventures and we especially encourage Women of Color to contact us.
You’ll never be able to find good ideas outside of Silicon Valley, NYC, or Boston.
As I mentioned previously, we have already identified and vetted 20+ companies to invest in outside of those areas.
You want to invest in a Louisiana company? Isn’t that where Duck Dynasty is filmed?
Yes and Yes. Isn’t Silicon Valley where “Silicon Valley” is filmed? 😊
“Overlooked” U.S. cities and regions will never produce a successful software startup.
There are a plethora of examples of successful software startup exits in “overlooked” U.S. cities and regions including:
Partpic (Atlanta: Acquired by Amazon)
Dyn (Manchester, NH: Acquired by Oracle for $600M+)
Newmarket (Portsmouth, NH: Acquired by Amadeus)
MapInfo (Troy, NY: Acquired by Pitney Bowes for $408M)
Sendgrid (Boulder/Denver: NYSE “SEND”)…
Are there any People of Color with a successful exit in Enterprise Software?
Yes (see below for a few examples).
Sunny Ahn (Founding GP of New Day Ventures) has 3 successful exits so far:
ContextConnect (Cofounder): Assets acquired by Walmart
TakeaClass (Cofounder): Acquired by MindEdge Learning
PowerbyProxi (Invested/Incubated): Acquired by Apple for $92M
Clarence Wooten (New Day Ventures Advisory Board Member) has 2 successful exits so far:
ImageCafe (Founder): Acquired by Network Solutions/Verisign for $23M
Progressly (Cofounder/CEO: Acquired by Box
Jewel Burks Solomon (Head of Google for Startups in the U.S.) has 1 successful exit so far:
Partpic (Founder): Acquired by Amazon
Robert F. Smith (CEO & Chairman of the Board, Vista Equity Partners):
A leading private equity firm focused on investing in software and technology-enabled businesses with too many successful exits to list here. So, this warrants its own future blog post.
Is there any data to support that a VC fund with a focus on underrepresented founders can perform well?
Yes, the Kapor Capital Impact Fund has proven that investing in People of Color garners better VC returns (see below).
How did Kapor Capital produce such stellar results? Below is an elegant summary from the Kapor Capital website about their approach and philosophy:
“Kapor Capital believes in the power of transformative ideas and diverse teams. We are an Oakland-based fund that understands that startup companies have the ability to transform entire industries and to address urgent social needs as they do so. We believe that startups can leverage information technology to solve real world problems and tangibly improve the lives of millions through innovations in the fields of education, finance, health, work, justice and more.
Key to this philosophy is our deep commitment to diversity. Our entrepreneurs come from all walks of life. We believe that the lived experience of founding teams from under-represented backgrounds provide a competitive edge. Their experiences inform the questions they ask and the problems they identify that give rise to profitable, tech-driven solutions.”**
Jason Calacanis’ thought-provoking interview with Mitch Kapor on “Angel the Podcast” provides an in-depth, compelling explanation as to how Kapor Capital has outperformed the “traditional” VC industry.(See below for the podcast/YouTube links of this interview). I encourage you to listen to and/or view it.***
If the VC market is as data-driven as it claims, why is investment not flowing to those who produce the best results?
Why do YOU think that this is the case?
*https://impact.kaporcapital.com/ (May 2019)
** https://www.kaporcapital.com/who-we-are/
***Jason Calacanis’ podcast with Mitch Kapor: https://podcasts.apple.com/us/podcast/e24-mitch-kapor-partner-at-kapor-capital-shares-stellar/id1275677375?i=1000438019919. Jason’s Youtube video of this interview: https://www.youtube.com/watch?v=XVm73-MAgBQ