20VC Arlan Hamilton We Have Come For Cake, Not The Crumbs, Arlan's Plan To Return $1Bn in 10 Years, Why Arlan Plans To Giveaway or Invest 90% of Her Wealth & What The LP Class Can Do To Ensure More UnderRepresented Managers Get Funded

In this episode of 20vc, host Harry Stebbings is joined by Arlen Hamilton, the trailblazing founder and managing partner of Backstage Capital, a seed investment fund that focuses on underrepresented founders. Hamilton shares her unconventional journey into venture capital, from her beginnings with no financial background to establishing a fund that has invested in over 100 companies, a feat achieved with limited resources but abundant determination. She also discusses her strategic approach to amplifying her mission and her intention to generate significant wealth over the next decade, aiming to return at least a billion dollars to investors. Hamilton emphasizes the importance of equal capital distribution and calls for LPs to invest in diverse managers, reflecting the demographics of those who contribute to their funds. Throughout the conversation, Hamilton's passion for nurturing talent and her commitment to catalyzing change in the venture ecosystem shines through, as she envisions a future where her work at Backstage Capital continues to disrupt and inspire.

• Arlen Hamilton is the founder and managing partner at Backstage Capital.
• Backstage Capital invests exclusively in startups led by underrepresented founders.
• The fund has expanded to include the Backstage Accelerator, operating across four cities.
• Mark Cuban invested $6 million in Backstage Capital to support underestimated founders.
• Arlen Hamilton is also an author and has a platform, backstagecrowd.com, for investors.
• The platform has over 2000 investors and completed its 6th deal, raising $1 million within three months of launch.
• Acknowledgments to Mark Cuban, Christy Pitts, and Chacho Valdez for content suggestions for the episode.

"Joining me on 20 vc today, we have, you guessed it, Arlen Hamilton, founder and managing partner at Backstage Capital, the seed fund that's paved the way, investing exclusively in startups that are led by underrepresented founders."

The quote introduces Arlen Hamilton and the mission of Backstage Capital, highlighting its unique focus on underrepresented founders in the startup ecosystem.

• Arlen Hamilton had no financial or investing background and grew up in Dallas, Texas.
• She started various companies, including a music magazine and a blog.
• Arlen worked her way up in the music industry but faced housing and food insecurity.
• Her interest in Silicon Valley grew from observing celebrities investing in startups.
• Initially, Arlen wanted to start a tech company, Juliet and Juliet, a dating site for women.
• Upon learning about the lack of diversity in venture capital funding, her focus shifted to raising capital to invest in overlooked founders.
• Arlen's goal was to become the go-to investor for black founders and other underrepresented entrepreneurs.

"Around 30 is when I started seeing more and more about this place called Silicon Valley. This magical land called Silicon Valley. And it was mostly through, like, seeing stickers of Airbnb on Ashton Kutcher's laptop or hearing Justin Bieber talk about investing, or Ellen DeGeneres hearing through the grapevine in West Hollywood that she had been investing in startups."

Arlen's curiosity about Silicon Valley was piqued by observing celebrities' involvement in tech investments, which led her to explore the startup and venture capital world.

"I came across the statistic that 90% of venture capital and investment money into startups was going to white men. Now, I don't know if you know this, Harry, but I am not a white man. I am a black woman. I'm in the LGBTQ community. I am a gay woman. And I didn't see myself in those statistics."

This quote highlights the lack of diversity in venture capital funding and Arlen's realization that her identity did not align with the predominant demographic receiving investments. It was a pivotal moment that steered her towards her mission with Backstage Capital.

• Arlen Hamilton looks for a rare combination of passion and groundedness in founders.
• She values founders with diverse backgrounds, not necessarily prestigious on paper.
• Experience and proximity to the industry are key indicators of potential success.
• How founders treat people, including in stressful environments, is also crucial.
• Arlen practices "pattern matching for grit," applying her lived experience to identify founders who have the potential to succeed.

"I do what I call pattern matching for grit. I do the same thing that other investors do with the data that they are used to and the profiles that they're used to, and I just supply that to my lived experience."

Arlen Hamilton explains her unique approach to identifying promising founders by using her own experiences and insights to detect the qualities of grit and resilience that other investors might overlook.

"If you can find someone, which I often do, who has both at the same time, and then on top of that, they have something in their background, maybe they worked for their family, at their family company, washing dishes, but they watched their parents for ten or 20 years build something from nothing, something like that."

This quote illustrates the type of entrepreneurial background and experience that Arlen values, emphasizing real-world learning and the observation of business growth as formative experiences for potential founders.

• Harry Stebbings discusses the importance of finding founders who are "hungry, not thirsty" and the rarity of such individuals.
• Arlen Hamilton emphasizes the public perception of her versus the reality of her strategic intentions.
• Hamilton's strategy involves catalyzing the success of black and brown founders to generate generational wealth.

"So when I pattern match, I'm looking across the table to see myself, are you hungry, not thirsty, as I call it."

This quote highlights Hamilton's approach to identifying founders with a strong drive and ambition, differentiating between mere eagerness ("thirsty") and a deeper, more authentic hunger for success.

• Hamilton notes that her public image may lead to misconceptions about her goals and actions.
• She points out that most of her press is inbound and that she often declines opportunities or redirects them to others.
• She plays "five dimensional chess," focusing on catalyzing others and thinking in terms of decades rather than quarters.

"A lot of people may misconstrue what my intentions are, like, what my goals are, and why I'm doing the things that I'm doing."

This quote addresses the misunderstanding that can arise from Hamilton's public presence and the complexity of her long-term strategic goals.

• Hamilton's strategy for her company, Backstage Capital, is built on three pillars: vision, execution, and amplification.
• She explains the importance of each pillar and how they contribute to their overall impact and success.
• The vision involves forecasting the future and determining the place of Backstage Capital within it.
• Execution is critical to transforming ideas into reality, evidenced by their investment in 100 companies.
• Amplification ensures that their work has a broad impact, affecting not just thousands but potentially millions.

"The first pillar was vision. The second was execution, and the third was amplification."

This quote succinctly outlines the foundational elements of Backstage Capital's strategy, emphasizing the importance of a clear vision, effective execution, and widespread amplification.

• Hamilton describes her decision-making process as an art, based on personal boundaries and impact assessment.
• She turned 40 in 2020, which helped her establish clearer boundaries.
• Her choices are driven by the potential impact on the mission, rather than personal gain.
• She uses a "weight system" to prioritize opportunities and admits it's a continuous learning process.

"But I say, is this going to make me look really good, but not have really any other outcomes for anybody else?"

This quote reveals Hamilton's altruistic approach to decision-making, prioritizing actions that benefit others over those that serve only to enhance her image.

• Hamilton shares her perspective on money, seeing it as a tool rather than something to revere or be controlled by.
• Her past experiences with poverty have shaped her understanding of money.
• She aims to use wealth as a means to contribute back to the ecosystem and plans to invest 90% of her wealth over her lifetime.

"My relationship with money is that I don't have any reverence for it. It doesn't control me, it doesn't impress me. It is simply a tool."

This quote indicates Hamilton's pragmatic view of money, emphasizing its utility in achieving broader goals rather than its intrinsic value.

• Hamilton reflects on her achievements and expresses pride in her journey without arrogance.
• She encourages others to adopt some of her confidence through her book "It's About Damn Time."

"I am proud of myself for many things."

This quote captures Hamilton's ability to recognize and celebrate her accomplishments, which serves as an inspiration for others to do the same.

• Arlen Hamilton reflects on her journey from hardship to success, considering the impact she has had on her family and others.
• She emphasizes the importance of acknowledging and taking pride in one's achievements, especially for women and people of color who may be socially conditioned to downplay their success.
• Arlen acknowledges the finite nature of life and the significance of striving to be good people with the best intentions.
• Celebrating small wins is seen as a necessary counterbalance to the negativity and stress that can come with striving for success.

"How did I get here? How did I go from sleeping on the floor of the airport to being able to just provide so much for so many different people?"

This quote reflects Arlen's moment of introspection and pride in her accomplishments, considering how far she's come in her life and career.

"We're here for what, 8100 years, if we're lucky. We have this finite amount of time. Hopefully we are good people."

Arlen muses on the brevity of life and the importance of being good people and making a positive impact during our time.

"What is the issue then with saying to yourself or maybe celebrating those small wins?"

Arlen challenges the notion that taking pride in one's achievements is boastful, advocating for the recognition of personal successes.

• Arlen admits that negative comments from others, particularly from within her own community, can be hurtful.
• She describes a process of acknowledging her feelings as human responses while also focusing on her accomplishments to counteract the negativity.
• Arlen emphasizes the importance of weighing the credibility of critics and not giving undue weight to uninformed opinions.
• She advocates for resilience and self-validation, especially when faced with online trolls or detractors.

"Yes, they do hurt. Certain types hurt more than others."

Arlen confirms that negative comments can be hurtful, indicating that some criticisms are more impactful than others.

"Let me think about all the things that I've done... and then let me weigh that against this one person's opinion of me who most likely does not know me."

Arlen describes her coping mechanism of reflecting on her achievements to put criticism into perspective.

"I say, there's a lot of opinion about me. I am happy to hear that opinion from the person who has accomplished as much as I have or is doing the work that we're doing at backstage capital."

Arlen sets a standard for whose opinions she values, focusing on those who have similar achievements or understand the work she does.

• Arlen does not set short-term milestones, acknowledging the unpredictability of life.
• She has a long-term goal of amassing wealth and returning at least a billion dollars in capital over the next decade.
• Arlen is proud of the impact that Backstage Capital has had on the venture capital industry and is excited about the future potential of the firm and its founders.
• She emphasizes the importance of continued support for underrepresented founders and the need for equitable distribution of venture capital.

"I have a goal for myself, to return at least a billion dollars in capital in the different ways that I do."

Arlen sets a clear financial goal for the next decade, demonstrating her ambition and commitment to her work.

"The fact is that the work that we do at backstage has changed the game in venture capital and will continue to do so."

Arlen expresses confidence in the lasting impact of Backstage Capital on the venture capital industry.

• Arlen criticizes the venture capital community for treating investments in black and Latinx founders as charity or an afterthought.
• She calls for a change in sentiment and for capital to be distributed in a way that reflects the demographics of the United States.
• Arlen is actively investing in emerging managers and encourages limited partners (LPs) to commit real dollars to support diversity in venture capital.
• She envisions a more equal playing field in the industry, facilitated by movements like angel investing and the zebra movement.

"We're still somehow black founders, Latinx founders, et cetera, are still put into this bucket of, like, us versus them other HR, charity, et cetera."

Arlen points out the problematic way in which minority founders are viewed in the venture capital industry.

"It's about capital being distributed equally and fairly based on demographics."

Arlen advocates for a more equitable distribution of venture capital that aligns with the demographics of the population.

"Don't come to me with crumbs when we came for the cake."

Arlen uses a metaphor to demand substantial investment in underrepresented founders, rather than token gestures.

• Arlen Hamilton emphasizes the importance of being seen for who she is, beyond her venture, Backstage Capital.
• She conveys the sentiment that her identity is not solely tied to her professional endeavors.

"It's more like I don't have to have backstage in order for you to see me, I get to have backstage."

The quote reflects Arlen's perspective on her personal identity as distinct and independent from her venture, suggesting that her existence and worth are not conditional on her professional success.

• Arlen describes Backstage Capital's growth from a solo endeavor to a team of over 40 people across two countries.
• She discusses the challenges faced, including severe pay cuts and resource constraints.
• Arlen reflects on her leadership style, recognizing her strengths, weaknesses, and the need to balance her savior complex with practical business decisions.
• She highlights the importance of resilience and having a clear vision.

"It has been one learning experience after the other... we've always been resource strapped... I've learned that I can't do everything. I can't be everything for everyone."

This quote summarizes the continuous learning process Arlen experienced while building Backstage Capital and the realization that as a leader, she must make decisions based on more than just compassion.

• Arlen discusses the difficulty of managing layoffs, which occurred in waves rather than as a singular event.
• She explains the strategic downsizing and the emotional impact of letting go of team members who were like friends and family.
• Arlen shares the shift in perspective, viewing Backstage Capital as a stepping stone or 'university' for team members' careers.
• She emphasizes the value of open communication with the team to understand their thoughts and feelings.

"Every few months, something else would hit us... it was, every single person had come to backstage as friends and family... I started thinking of backstage as less of a company... and more like a university where hopefully we are the stepping stone for you."

The quote reveals the emotional challenges of downsizing and Arlen's evolution in viewing her company as a developmental platform for her team, akin to a university.

• Arlen expresses her current favorite book, "What I Know For Sure" by Oprah, for its evolving relevance to her life.
• She identifies managing expectations with limited resources as the hardest part of her role.
• Arlen addresses a misconception about her, stating she is not fame-hungry but strategic and private.
• She observes that founders often skip steps due to inadequate research and development.
• Arlen suggests that limited partners (LPs) should have mandates to invest in underrepresented groups.
• She admires Oprah's decades-long successful career and impact.
• Arlen envisions growth in Backstage's assets under management, partnerships, and support for founders over the next five years.

"Right now, it's still 'What I Know For Sure' by Oprah... The hardest is managing my expectation and my vision with the lack of resources... Biggest misconception is that I am fame hungry... I think founders skip steps... I think that LPs should have mandates... I think Oprah's successful... Next five years, I think we're building our assets under management."

These quotes capture Arlen's responses during the quickfire round, providing insights into her influences, challenges, misconceptions about her, advice for founders, views on the venture ecosystem, her definition of success, and her future plans for Backstage Capital.