If you ask Brittany Davis how she chose her career — she’s a General Partner at Backstage Capital, a venture fund investing exclusively in women, people of colour, and LGBTQ founders — she’ll point to the systemic barriers these entrepreneurs face in accessing capital.
However, her origin story is a lot more personal.
While doing her undergraduate business degree, Brittany completed an independent study project on Black Wall Streets: prosperous enclaves of Black Americans, served by and supporting Black-owned businesses. The one in Tulsa, Oklahoma was well known on account of its size (more than 35 square blocks, with hundreds of businesses) and its demise (The Black Wall Street Massacre, one of the worst race riots in the history of the United States, which had its 100th anniversary this year), but Brittany learned there were several Black Wall Streets operating in the early 20th century, including one in her home state of North Carolina.
“The takeaway from the project was that we do need to have a concerted effort on funding,” says Brittany. “There were a lot of Black business owners that had really thriving businesses, and they were able to get them up and running with that first infusion of capital. I wanted to be that person that could catalyze other businesses.”
At the time, she wasn’t thinking specifically of venture capital — she knew about it structurally, but didn’t know anyone that had a career in the field — but saw the need for a separately managed pool of equity or debt-based financing for Black-owned businesses. She brought her pitch to Bank of America, where she ended up working for five years in a traditional finance role.
Then, after earning an MBA from Harvard, Brittany launched her own startup building AI software for fashion ecommerce. Runway Technologies ultimately failed, but it sparked an interest in supporting other people’s visions — she kept meeting fellow founders of color that were struggling to get funded and felt compelled to help.
“There were a lot of Black business owners that had really thriving businesses, and they were able to get them up and running with that first infusion of capital. I wanted to be that person that could catalyze other businesses.”
“That’s when I was actually looking for roles in venture based on this diversity thesis. I was interviewing with a lot of mainstream funds. Just coming out of Harvard Business School, I had a company, I worked in finance, I also spent some time in tech. These are all of the things that I’m explaining that I can do. I have that background, but what’s going to make me unique is that I’m bringing a lens of let’s invest in more women and people of color,” explains Brittany. “I interviewed quite a bit without finding a real landing. Most VCs I did not hear back from after I explained, ‘This is what I’m trying to focus on at your fund.’”
It was a long road. Brittany interviewed for about five months, eventually finding her way in by focusing less on big, traditional funds and moving to more early stage investments. Arlan Hamilton, the founder of Backstage Capital, had a similar story. “The reason she started the fund was that she could not find a job in venture, even as an apprentice” says Brittany. In fact, she sent over 100 emails applying to apprenticeship roles, and got no’s from all of them. “Her road was actually trying to find a job.”
Brittany first met Arlan in 2016, when they were both on the judging panel for a Black founder’s pitch competition. At the time, Brittany was working at a fund called Village Capital. Though her role didn’t have an explicit diversity lens, their model allowed for a personal focus on finding and investing in more women and people of color.
Arlan, on the other hand, was just getting started with Backstage Capital, which she had launched in September of 2015. “I’d heard about this woman putting together funds for underrepresented founders,” says Brittany, “but this was Arlan before she started doing public speaking. She was very reserved and quiet.”
At the end of the competition, Arlan ended up investing in the top five founders. It was a lightbulb moment for Brittany.
“I thought I had to do it within funds, and then to see how her approach was, ‘Let me actually get some funds and do it myself,’ I was like, ‘Okay, that fast forwards my plan of having to work for years and years and see if I can change the industry from the inside,’” explains Brittany. “I remember thinking, one way or another I’m going to find a way to work with this woman, because this is exactly what I’m doing.”
That opportunity came in early 2018. Arlan was looking to build out the investment team, and she brought Brittany on as Head of Deal Flow. In a typical venture firm, a lot of that role would be finding new companies to invest in. At Backstage, the deals were coming to them. In addition to having built a strong brand and presence in the ecosystem, Backstage had launched open applications for investment through a form on their site. It was a groundbreaking idea within venture, explains Brittany, because the model had always been that you had to network your way in.
Over a thousand founders applied. Brittany oversaw that inbound deal flow — not only managing the investing that Arlan wasn’t doing herself, but also figuring out how to build a framework that captured the way Arlan thinks about investing, so that Backstage could scale beyond its original founder.
“I was really passionate about figuring out how to take those unique things that I loved — a lot of the investing that Arlan was doing was a lot of the same companies that I would have invested in — and create a basic framework that other people could learn and adopt, but with the freedom to bring in their own perspective.”
“She explained some of her first investments, and how she thought about deals,” says Brittany. “I was really passionate about figuring out how to take those unique things that I loved — a lot of the investing that Arlan was doing was a lot of the same companies that I would have invested in — and create a basic framework that other people could learn and adopt, but with the freedom to bring in their own perspective.”
Using the criteria she identified, Brittany and her team went from seeing about 450 companies to investing in five. Her next big project, the Backstage Accelerator, added another 24 companies to the portfolio. Launched in the spring of 2019, the 12-week development program worked with founders in four cities — Los Angeles, Philadelphia, Detroit, and London — to help build their community and network and prepare them for future investment.
“The core of our thesis is investing early with underrepresented founders, so that we can catalyze their progress in getting additional capital,” explains Brittany, adding that they’ve been the first investor for over half their portfolio. “A lot of times we’re catching them before they have something to really evaluate in a quantitative sense; a lot of it is thinking about future potential.”
That means their investing framework must be less metrics-driven (x number of users, or x dollars of revenue, for example). The evaluation used by early-stage funds often includes criteria like who is on the team, what’s the potential market size, and what makes the product unique. Many investors also use pattern matching, which means looking for similarities with founders that have already been successful, such as the schools they went to or the companies they worked at.
“When you hear the term pattern matching, it’s always usually looking for that Mark Zuckerberg type,” says Brittany. “That’s just going to get you more of the same. Arlan used to say she pattern matched for grit.”
So, Brittany added grit into their scorecard, which enabled recognition for what the founders had accomplished with the limited resources they’d had. She even added that gut feeling — the spark or connection with a founder — because it was something Arlan often described when talking about her investments.
“We’re really talking about some of this stuff because for a lot of our founders, the journey can be a long one, especially not getting adequate resources,” says Brittany. “We look for where they can push past those things, and the founders that have done the best in our portfolio essentially have demonstrated a lot of that grit. I was trying to build that into how we think about investing so that we’re not just using the same standard metrics. We’re using something very specific to Backstage, and so it’s authentic to us.”
“Yes, we really are just getting started. There’s a lot of work we can do to help diversify who’s investing and who gets investment.”
Creating a scalable version of Arlan’s investing process was foundational for Backstage — but it was just the beginning. Brittany wants to build a firm, not just a single fund, and ultimately enable more people to get involved in venture.
“I think that’s core to the end outcome of getting more resources to the founders,” she says. “That’s something that I’m always thinking about and was passionate about to begin with in my career. I have seen that journey through Backstage, and yes, we really are just getting started. There’s a lot of work we can do to help diversify who’s investing and who gets investment.”
The work they’ve already done to provide access, resources, and education for people who are interested in investing has been varied, from sharing lessons through Arlan’s book, It’s About Damn Time, to offering an introductory course on Investing as a Catalyst, to helping with a Harvard Business School case study that, in Brittany’s own words, sends a message to the world about who business leaders are and who they can be. In October they launched a pilot Apprenticeship Program, bringing on 20 would-be investors for a three-month stint working with the investment team on deal flow review, as well as being taught the Backstage philosophy on investing, how to build a fund from scratch, and more.
Their biggest effort, however, came earlier this year, in the form of a crowdfund. Recognizing the need for operational capital — Backstage now supports 180 companies — as well as the potential of an engaged community that understood the importance of their work, they saw an opportunity to not only bring in resources, but also to further their mission of exposing a broader group to venture capital investing.
Typically, a fund raises capital from accredited investors, which limits the pool to about 2% of the wealthiest individuals. In 2016, the Securities and Exchange Commission (SEC) brought in a rule called Reg CF, or Regulation Crowdfunding, that opened the door to non-accredited investors. In their first crowdfunding round, Backstage reached the max of $1 million in about eight hours — the fastest equity raise ever on Republic, the investing platform they worked with. In March, the SEC changed the rules of Reg CF to allow for up to $5 million annually, so they opened it up again. A total of 6,755 investors — Brittany included — purchased the equity available, the majority of whom had never invested in venture or private companies before.
“That was the best way to share a piece of what we’re doing with the people who really want to help build the organization that we have,” says Brittany. “Then they in turn get a lot of exposure to venture. Long-term, hopefully, they’re getting a return on this too, and I believe that they will, but I do think the huge benefit is the exposure to venture.”
And that is the long game — a more inclusive population investing will result in more inclusive investment, whatever the source. On that front, things are looking up: Since Backstage launched a little over six years ago, several other funds with a diversity-focused mission have entered the space (over 70 in the US, by Harlem Capital’s count), and they often come with a collaborative attitude — which all serves to reduce the time of getting resources to founders.
In the broader venture capital ecosystem, Brittany says the biggest change over the last few years has been a growing awareness of and conversation around the issues that underrepresented founders face. “One thing that’s helping is data points. I’m seeing a lot more of the numbers being shared,” she says. “I couldn’t actually point to the lack of venture capital in dollars for different demographic groups when I was starting.”
“I still think we have a ways to go with creating that real fear that you’re missing out if you’re doing what you did 5, 10 years ago — which is just looking around you, most likely at people in similar networks, similar schools, similar demographics as you.”
There’s also more data on the opportunity cost, whether that’s studies highlighting the benefits of diverse leadership teams, or estimations of the amount of money being left on the table (according to Morgan Stanley, the inequity in funding for multicultural and women business owners is costing the US about $4.4 trillion in GDP annually).
“It hasn’t fully moved the needle on the outcomes. Black founders still get less than 2% of venture capital; women founders are the same,” Brittany points out. “I still think we have a ways to go with creating that real fear that you’re missing out if you’re doing what you did 5, 10 years ago — which is just looking around you, most likely at people in similar networks, similar schools, similar demographics as you.”
Brittany believes the missing piece for more traditional VCs is representation at the success level, which would essentially create the opportunity for a new pattern match. “But I want people to understand what it takes to get to the Mark Zuckerberg point. If you’re not getting resources early on, it’s really hard to get there.”
Simply put, these underrepresented, underestimated, and underfunded founders have a longer road to returns compared to those who haven’t faced the same barriers.
“The timeline might not be the same, but I think the outcomes could actually exceed some of the businesses that are getting more funding,” says Brittany. “It’s just that there is a bit of time for them to get the capital and get to work. There’s a starting runway that you need that these companies didn’t have.”
That leaves a chicken and egg situation; the founders need proven success to get mainstream funding, and they need funding to achieve big success. So, what happens in the meantime?
“You have people like Arlan who are saying, ‘I can do this, and whether you believe it or not, I’m going to take the steps and prove a thesis.’ She’s doing the things that a lot of people told her she couldn’t do,” says Brittany. “Being successful with what we have, I think we’ve proven a lot.”