Meet the woman who is exclusively investing in startups with underrepresented founders

The only black, queer woman to have built a VC firm from the ground up, Arlan Hamilton believes VCs need to be thick skinned, remain passionate and keep going.

The homepage of Backstage Capital reveals the premise the three-year-old venture capital firm is centred on. “Less than 10 percent of all venture capital deals go to women, People of Colour, and LGBT founders. Other VCs see this as a pipeline problem. We see it as the biggest opportunity in investment.”

The message is clear and direct, much like 38-year-old Arlan Hamilton, who built Backstage Capital from scratch to bring this much-needed revolution in the VC circuit.

But it wasn’t easy going. Three years ago, just before starting Backstage, Arlan’s reality was very different. Hailing from Pearland, Texas, she was sleeping on the floor of the San Francisco Airport, with no money or network to back her.

Arlan had a successful career in the music industry, where she went from a production assistant to touring with stars like Janine and Jason Derulo. When she saw stars like Ashton Kutcher and Ellen DeGeneres investing in Silicon Valley, she began looking at the venture capital circuit. She quit her job and immediately moved home to Texas to learn all she could about investing and went on to do a two-week pilot course at Stanford University.

Today, having invested more than $4 million in 100 companies founded by underrepresented founders, and backed by the likes of Marc Andreessen and Chris Sacca, Arlan is showing Silicon Valley that it takes grit, passion, and dedication to be in the game.

So, how did she learn the ropes of venture investing? At a fireside chat at European technology and startup conference Slush 2018, Arlan answered,

“To be honest, I just looked up on everything I could find about the subject. I watched videos after videos on YouTube. It was foreign and intimidating at first, but I soon realised that these are just people with ideas.”

However, it wasn’t easy raising funds, and Arlan says one of her biggest learnings was to develop a thick skin. “You need to learn to take rejection. As a VC you will have to hear ‘no’ a thousand times. But you have to remain passionate and never let them tell you what you can’t do!”

She narrated that in her first three years at Backstage she got zero “yes-es” from people who can write cheques. “In such times, you have to keep going and surround yourself with people who trust your judgement.”

Not long after, Arlan managed to rope in the serial entrepreneur and billionaire Marc Andreessen, who has made a personal investment in Backstage. The story behind it is quite interesting.

“I had written something comparing the film industry and the VC circuit, claiming that we were still in the 80s in venture investing. Marc (Andreessen) retweeted it and followed me back. Within a few minutes, I asked him whether he would invest (in Backstage). And he replied, saying ‘give me some time’. And he came back. So, when you get that shot, you just take it.”

However, Arlan believes that one needs be gracious even at a no! “The way I would have reacted to a no defines me,” she said.

Spotting bullshit

Arlan, who’s passionate about her firm, looks for the same passion in investors backing her and said she has a nose for spotting bullshit.

 “I have to live with myself and I just have to live with me, so I can’t do it. I can usually judge in five minutes if someone is bullshitting or whether they really believe the cause. Usually that judgement is 95 percent correct, but I do give way for the diligence process. The moral stance always is where you take money from,” she said.

Slowly but steadily, Arlan is showing that she’s a true champion of diversity in Silicon Valley. Last May, Backstage announced that it had launched a $36 million fund only for black female founders. Backstage’s unconventional approach is visible everywhere. Unlike other VC firms, Backstage calls its portfolio founders “Headliners”.

When was asked who are her favourite Headliners were, Arlan said, “We have invested in more than 100 companies and there are absolutely no favourites.”

So, what is the legacy Arlan Hamilton would like to leave behind? “I’d always imagine having dinner with my angel companies, whose founders have become angel investors themselves, have given successful exits to the ecosystem, and have created wealth for themselves and their people.”

We leave you with a few nuggets of advice from Arlan:

• Like me, take naps anytime.
• Enjoy your wins.
• Remember you will not be killing every single day.
• The grass is greener where there is manure.