Our Summer in VC at Backstage Capital

By Roneal Demerson and Noel Viramontes, Venture Interns for Backstage Capital through a partnership with HBCUvc and PledgeLA

During the summer, Backstage Capital worked with HBCUvc and PledgeLA to hire two interns eager to learn more about venture capital and how Backstage invests in underestimated founders. We loved working with and learning from Noel Viramontes and Roneal Demerson. Continue reading to learn about who they are and what they learned during their summer venture internship. :)

Reflections from Noel Viramontes

MBA student, USC Marshall

I began my MBA program knowing that I wanted to use a business education to support communities that have been historically marginalized, but I wasn’t quite sure how to apply this aspiration. As a Latina, wanting to make an impact within my community, I was looking for an opportunity to work with a growing company that truly understood the value of supporting diverse and underrepresented communities, and then I learned about diversity-focused VCs! Coincidentally, through my connection with Latina Venture Students and VC Familia I found out about the HBCUvc and PledgeLA internship program that led me to this summer opportunity with Backstage Capital. It was everything I was hoping to be exposed to within the VC ecosystem.

I was immediately drawn to the authenticity and purpose-driven work of Arlan Hamilton and the Backstage team. Although my background in undergraduate college admission might seem unorthodox for VC, I found it to be a valuable perspective during my internship with Backstage given their open application process. Backstage’s mission is to support founders who have been historically excluded from traditional VC networks and an open application process allows them to apply for funding without the need for a warm introduction. Backstage clearly outlines criteria for applicants as startups with at least one founder who identifies as woman, person of color, or LGBTQ+. As I read founder’s applications and learned about Backstage’s portfolio companies the wheels began to turn in my mind for reflection and analysis given my college admission experience.

An open application process for an early stage VC firm provides substantial value to founders and the firm. Traditionally, venture capital has only been accessible to those who know someone who knows someone, founders outside of those networks have been systematically shut out from venture investment as an option. Backstage’s website highlights the abysmal percentage of venture funding for these underrepresented founders front and center stating that less than 10% of venture capital deals go to women, people of color, and LGBTQ+ founders. Since sourcing deals is resource intensive and relies on networking that is limited by someone’s network, an open application is a great way to ensure that diverse founders make their way into the firm’s deal flow pipeline. Highlighted below are a few tangible benefits of an open application process through my experience with Backstage.

Value to Founders:

• Access to Capital — There is no shortage of talent within the pool of underrepresented founders and many of their startups could benefit from venture capital to develop their ideas and scale. Many of these founders don’t have access to the wealth traditionally obtained through a friends and family investment round. We’re seeing founders who come from a variety of educational and socioeconomic backgrounds, and without access to wealthy investor networks, their options are limited to what they can individually bootstrap or obtain through personal credit and bank loans. Institutional capital will give them a better chance of success and when one founder succeeds, they will empower their community.
• Showcase Strengths — Pitching is a skill obtained through practice and coaching, two things facilitated through a network. If a founder does get the opportunity to meet and pitch an investor, there can be a myriad of challenges diverse founders face during a pitch like the unconscious bias of investors, risk of investors at traditional firms not understanding the market, or not having the insights/connections to help craft a tailored, competitive pitch. The application, especially if accompanied by criteria or advice, allows founders to put their best foot forward as part of a first step in a potential investor relationship.
• Build a Network — Applying via an application gets the startup in the system and plugged into the VC’s ecosystem. VCs can choose if and how to stay connected with applicants. One best practice is to share resources with founders who have applied, even if they are not selected to move forward in the investment process. This supports an investment thesis that focuses on underrepresented founders by adding value so founders can continue to build their startups and potentially apply again in the future.

Value to Investors:

• Identify Trends — Gathering a pool of applications facilitates efficient identification of trends given the volume of applications a VC could get. While the majority of founders who apply will not make it through the deal flow process, the pool offers insights into trends around industry, markets, technology, and allows for quick comparison of other similar early stage startups.
• Consistent Deal Flow — Because sourcing deals is resource intensive, a pool of applications that have undergone review means there are always potential deals just clicks away. With thoughtful application management and evaluation, the process of finding deals to fit specific needs is expedited. For example, applications can be sorted by scores on a rubric, industry, founder characteristics, and more ensuring that deals are easily sourced to align with a fund’s priorities.
• Understand Audience (Founders) — VCs that focus on diverse founders tend to understand the systemic barriers that have prohibited these founders from accessing venture capital in the past and thus, place a priority on adding value. A pool of applicants provides insights into what founders are thinking and what they need, be it more direction to submit stronger applications or even a new initiative/resource the VC has the ability to provide to help startups grow and flourish.

Reflections from Roneal Demerson

Senior, Cal State LA

As a first-generation college student from San Antonio, I learned early on that resources were scarce in communities like mine for those wanting to achieve more, and I decided to join the Air Force as a result. During my time in the Air Force, I realized it wasn’t just me that faced these types of issues, but that countless of black and brown communities across the country were dealing with these same issues. It was this realization that made me want to pursue higher education in finance with hopes of educating communities similar to mine. While at Cal State LA, I joined the Black Business Association where I learned about HBCUvc and their mission, and I knew I had to get involved. That connection led to the opportunity to work with Backstage Capital whose thesis matched my conviction in helping underrepresented communities. Over the course of this summer, I’ve had the chance to not only help serve underrepresented communities but also learn from an amazingly diverse group of minds at Backstage. This has been a motivating summer and amazing introduction into VC that has shown me I can truly be a part of the change that I intend to see.

As I learned about the disparities in funding within VC, I couldn’t help but wonder why that was the case. In such a diverse world, there’s the assumption that the percentage of investment in diverse founders would reflect the actual number of diverse entrepreneurs, however, as you dive deeper, you begin to see trends in the investment gap and how it disproportionately impacts underrepresented founders. From a lack of network, resources, or gender bias in pitches, we see funding typically headed to the same types of individuals throughout the VC space under the guise of pattern matching. This is where an application process in early stage investing becomes pivotal in bypassing some of these common obstacles many underrepresented founders face.

Although the application process can significantly increase an underrepresented founder’s chance of being noticed, that’s not enough to bring the change that’s needed to match the diversity of our world. This is where Arlan and Backstage Capital are so special. They understand that diverse perspectives are pivotal to investing in diverse founders and just because it’s not your problem, doesn’t make the problem any less valid. These founders are able to tap into underserved markets because they come from those markets. Additionally, these founders won’t have to overcome the obstacle of unfamiliar or biased investors with a diverse and culturally aware team, like at Backstage. Due to that diverse perspective, it allows the opportunity to validate problems which may have otherwise been ignored. It’s this action that is required if we expect to see a change moving forward. It proves beneficial to the investors for finding these diamond opportunities, and to the founders for having the chance to improve the livelihood of others.

Acknowledgements from Ron and Noel

We would like to thank HBCUvc, PledgeLA, and Backstage Capital for the opportunity to jump into the VC world with both feet and make truly invaluable connections. The training and support we received from HBCUvc and PledgeLA helped strengthen our skills so we could tackle the VC world and build our confidence by seeing and learning from others who share our backgrounds and passions. Thank you to the whole crew at Backstage Capital, especially Brittany (our manager), Christie, Chacho, and Arlan for guiding us, sharing your experiences, and entrusting us to be a part of the wonderful work you’re doing to support diverse entrepreneurs, equity in innovation, and the building of intergenerational wealth. We’ve seen first-hand the talent within these traditionally underestimated communities and how important it is to have diverse perspectives on the investing side.

Backstage Capital has had an open application process for founders since our fund’s beginning and we have enjoyed having Noel and Ron as part of our investment team this summer reviewing these companies. We plan to relaunch our application for founders to apply for funding this fall at BackstageCapital.com/apply.