How Backstage Capital is creating the next generation of venture capitalists
Venture capital is still mostly pale, male and stale. For Lauren Stewart, a former educator, she initially saw venture capital as a “locked door” that would only open for wealthy people, she told Backstage Capital’s Green Room.
But Stewart knew she was interested in venture capital and that she wanted to be able to invest in her students, she said. Up until last year, Stewart worked as a director of equity, diversity and inclusion at an all-boys school in Manhattan. Some of the students there were working one or two jobs to help support their families, Stewart said.
“And I thought that there had to be an easier way for them and other young people [to support themselves and their families],” she said. “But I couldn’t create something I didn’t know the half of.”
Stewart eventually came across Backstage Capital founder Arlan Hamilton’s Investing as a Catalyst course for aspiring investors. In it, Stewart learned about crafting a thesis, attracting LPs and more. Shortly after completing the course, Stewart applied for Backstage Capital’s pilot apprenticeship program and got in.
Since graduating from the apprenticeship program, Stewart has begun working on her own venture capital firm, called Prima Ventures. The idea is to invest in “the future of firsts” by investing in first-time founders, first-generation individuals and early stage startup ideas with an emphasis on underrepresented founders.
“And I’m hopeful that if I can find history makers early, we can celebrate them together,” she said.
The four-month program, which wrapped up in January, aimed to peel back the curtain on the inner workings of Backstage Capital. The goal: to make investing more accessible. The result: new VC firms built with inclusion in mind and a big bet on HBCUs.
Demystifying venture capital
Chacho Valadez, a principal at Backstage Capital, was Backstage Capital’s first apprentice back in 2017. There was no official program, but his experience was the impetus to formalize it, Valadez told Green Room.
“My apprenticeship served as the blueprint,” he said. “It was never intended to be just for me.”
The pilot program taught 21 apprentices how to evaluate potential deals, identify trends, build a fund from scratch and more. Apprentices also made deal recommendations to the Backstage Capital investment team.
“When it comes to early stage investing, a lot of it is just about getting the reps in and looking at company after company,” Valadez said. “Then you start to build this muscle of what you’re looking for as an investor. And we’re really trying to demystify things.”
The program is free and apprentices had the option to receive ownership in Backstage Capital or a $2.4K stipend for participating in the program.
Throughout the program, the apprentices had a number of conversations with Backstage Capital’s investment team about raising capital, evaluating deals, valuations and mental health.
For Amanda Heyman, now co-founder and general partner at Tundra Ventures, getting access to those conversations that typically happen behind closed doors was game-changing, she told Green Room.
“On a very practical level, just seeing inside the inner workings of a venture fund that shares the same values that we share was huge,” she said. “There can be a lot of imposter syndrome going into becoming a VC or even an angel investor. And there aren’t necessarily a lot of resources out there that are really willing to drill down and explain the nitty gritty and do that kind of information sharing.”
Heyman joined Backstage’s apprenticeship program knowing she wanted to start a fund, but “the program was a catalyst for us to form our venture fund much faster than we had planned,” she said.
While Heyman participated in Backstage’s apprenticeship program, her co-founder Danielle Steer was learning about warehousing strategy. Deal warehousing entails investing in a handful of companies before forming a fund to show traction to potential investors.
“What’s ‘fun’ for emerging managers is it’s this catch 22 that if you don’t have money, you can’t invest in anyone,” Heyman said. “And if you can’t invest in anyone, you can’t show traction.”
On an apprenticeship call, Hamilton offered those in the Backstage Capital community an opportunity to invest in her new company Runner, an operational talent platform.
“That’s when I connected the dots,” Heyman said. “I went back to my team and suggested we just form the firm now so we could get into the Runner deal and we could use that to create momentum and excitement with the LPs in our town.”
Since investing in Runner, Tundra has officially launched, backed three other startups and secured an anchor institutional LP. The firm aims to raise a $10 million fund and expects to have its first close later this year.
Betting on HBCUs
Garry Johnson vividly remembers the first time he could pitch his product without “feeling like [he] had to defend [himself] because [he] was pitching to white people who were going to ask, ‘isn’t this just reverse discrimination?’,” he told Green Room.
It was at an HBCU VC pitch competition back in 2018 where Hamilton was one of the judges. Johnson pitched his idea for an education platform focused on entrepreneurship for Black and brown people taught by Black and brown entrepreneurs. Johnson won the pitch competition.
“That moment alone just gave me all the energy I needed to have to keep going on this journey,” he said.
Fast forward to 2021, and Johnson took a leap of faith, he said. He applied to Howard University’s MBA program and got in. Around that same time, Johnson received his acceptance to Backstage Capital’s apprenticeship program.
“I was very much interested in investing and being an angel investor, period,” he said. But he was also interested in building product-based businesses.
Johnson’s company, Bison Venture Partners, combines all of his interests. BVP manages a portfolio of brands founded by MBA students at Howard University. Its business model centers around consulting, e-commerce, online courses and venture capital.
“I believe that HBCUs are incredibly untapped as it relates to a talent pool,” Johnson said. “And I strongly believe that through BVP we’re going to be contributing to this overall effort to show other students what’s possible and then to also create this pipeline where the talent that’s being developed at various HBCUs are equipped with the skills to start their own businesses, be investors, angel investors, but then also show the same students that they can be venture capitalists.”
Part of achieving those goals entails raising $50,000 through a regulatory crowdfunding campaign. Johnson said he was inspired by Backstage’s Reg CF campaign where the firm raised $4.7 million in one week.
“I just see Reg CF as a game-changer, especially for underestimated founders because it shifts that whole narrative of having to go to wealthy people to raise funds,” Johnson said.
At the time of publication, BVP has raised a little over $48,000 for its operating expenses. The next step will be to raise a fund but Johnson still has to finish up business school. After he graduates in 2024, Johnson’s goal is to operate BVP full time.
Reflecting on the program, Johnson said it was “a dream come true” to be able to learn from Hamilton, Valadez and the rest of the Backstage Capital crew.
“We already know that Arlan is a legend, but I think Backstage is going to be in the history books as one of those firms that truly accelerated the rate of equity in this space,” he said. “The whole firm is leading the charge and showing other people that it’s possible.”
The next apprentice
Valadez and the team are still sorting out the details of the next apprenticeship program, but will apply the learnings from the pilot to fine-tune the program.
Valadez said he could envision being more intentional around connecting apprentices with other firms that may be hiring. But what’s most important is to help people see themselves as capable of being an investor, he said.
“When I was looking at getting into venture, I didn’t see other Latino or Latina VCs,” Valadez said. “I really had to psych myself up and say ‘if any person can do this, I can do it too.’ But it does help when you’re represented on the other side of the table. That’s really important to me.”
FAQ
When is the next apprenticeship program?
Either this fall or Q1 2023. We’ll be sure to announce it in our newsletter, which you can sign up for here.
Who is eligible to apply?
The best candidates are those who are looking to get into venture either to start their own firms, are currently working to build their own firm or want to work at another firm.
How much does it cost?
It’s free!
Do I have to first take Arlan’s Investing as a Catalyst course?
We recommend that you do, because it’s a great course! But we will accept folks who do not take the course. (If you’re interested in taking the 4-week course, email ARLAN@BackstageCapital.com with “Venture Catalyst” as the subject.)
Will I receive a stipend or ownership in Backstage Capital?
To be determined.
