- Base10 Partners is the first black-led venture capital firm to surpass $1 billion in assets.
- Its growth reflects a growing interest from companies such as PayPal in supporting various fund managers.
- Pensions and endowments are also changing the way they invest to achieve a more diverse set of VCs.
While venture capitalists have raised record funds, an emerging class of funds led by investors from underrepresented backgrounds is gradually beginning to reap the benefits.
On Tuesday, Base10 Partners announced that it had raised $460 million in seed funding, bringing its total assets under management to $1.3 billion. Base10 is the first black-led company to cross $1 billion in assets, according to the company and data provided to Insider by Crunchbase.
Base10 has grown rapidly in its five years of existence. Last year, he launched the Advancement Initiative, a $300 million growth fund with a portion of its returns going to fund scholarships for historically black colleges and universities.
The increase in Base10 assets comes as more limited partners — investors in venture capital firms — have stepped up their efforts to support venture capital firms led by investors from underrepresented backgrounds. The move follows the 2020 murder of George Floyd, which prompted a global judgment on racial equality. These venture capitalists have proven primary source of capital for black and Latino founderswho have often struggled to find financing for their businesses.
But now LPs are starting to see the potential for returns among these often overlooked founders, Adeyemi Ajao, co-founder and managing partner of Base10, who is black, told Insider. He pointed to other black-led companies, such as Harlem Capital and 645 Ventures, that have successfully raised significant funds.
“I have no doubt that they will all exceed $1 billion in the next two years,” Ajao said.
Two factors have allowed venture capitalists led by underrepresented fund managers to raise more capital, investors told Insider. First, traditional LPs, such as pensions, endowments and foundations, are increasingly willing to write smaller checks to new businesses. Second, recent corporate funding initiatives directly for venture capitalists have helped increase the capital available to these investors.
Ajao shared his experience of raising Base10’s first fund. Naively, he said, he called and presented pensions and endowments without realizing that they were generally beyond the reach of new fund managers. Large financial institutions have generally sought to invest at least $100 million in each fund they back, and they aim to limit their investment to no more than 30% of the fund, several investors told Insider.
Many seed funds are not large enough to meet these criteria. Black-led businesses, in particular, tend to have modest assets. According to data from Crunchbase, only a dozen of them had total assets over $100 million, and even fewer had unique funds of that size. (Base10 bucked the trend from the start: its first fund was $137 million.)
But now some sponsors are changing their approach. When Miriam Rivera, co-founder and chief executive of Ulu Ventures, raised money for her company in 2016, one of her would-be LPs had never invested in a fund under $100 million, he said. she told Insider. But now, more and more LPs are realizing they need to support small businesses to gain access to new funds investing in founders who have often been overlooked.
“When you say you invest in funds of $300 million and above, that’s like saying, ‘We don’t invest in women and we don’t invest in people of color,'” said Rivera, who is latin. .
Ulu sponsors include now the University of Rochester, Los Angeles Fire and Police Pensions, and the MacArthur Foundation.
Several companies, including PayPal, Apple, Bank of America and Goldman Sachs, have also increased their investments in emerging fund managers from underrepresented backgrounds. PayPal, for example, has invested in Black and Latino-led businesses such as Harlem Capital, Slauson & Co., Collab Capital, MaC Venture Capital and SV Latam Capital through its economic opportunity fund.
Company diversity promises have come under scrutiny, with some research suggesting that many companies have no tracking of funding. But overall, the new generation of corporate LPs have shown consistency, several investors told Insider. Bank of America, for example, recently backed Overlooked Venturesand PayPal has appointed a new manager for its Economic Opportunity Fund.