Venture capital is a black box. Backstage Capital’s Christie Pitts wants to make it more transparent.
Christie Pitts, general partner at Backstage Capital, quickly realized how pale, male and stale the venture capital world is.
Pitts, who was first introduced to VC in 2015 while working at Verizon Ventures, was surprised to find that so little funding went to Black, Latinx and women founders. Given that women hold the majority of spending power in the U.S. and that people of color will soon make up the majority in the U.S., Pitts assumed those folks would receive a large share of the venture capital funding that goes to startups.
“And then I got into venture and I was like, ‘what?’,” Pitts said. “I saw that as this kind of tragedy. A capitalist tragedy. Beyond the impact lens, I saw it as a business failing.”
That reality check ultimately led Pitts to Backstage Capital, where she could make investment decisions of her own. Green Room recently caught up with Pitts to discuss what she looks for in startups, the black box of venture capital and Backstage Capital existing “despite all odds.”
Pitts’s comments have been edited for clarity and brevity.
Funding the right startups
Investing is not a rubric where you can just check off boxes.
I look for founders who are building from their own experiences. And then there’s this specific quality I’m looking for where the founder won’t give up on this particular company because they have to see it exist in the world. Like, that’s what’s driving them.
And I think you can see that a lot throughout the Backstage portfolio. It goes beyond the simple concept of “I saw a problem in an area that was ripe for disruption,” but rather, “I lived this problem, and I knew it was affecting others, so I wanted to solve it for them, too.”
How to pitch Pitts
When pitching me, founders should assume that I’m a blank slate. I rarely have an opportunity to research the company ahead of a meeting. If I’m taking the meeting, I’m curious about the problem or the solution the founder’s working on. So just treat our meeting like we’re having a conversation and I’m learning about your company.
Founders should also know I’m interested in big problems. Like, women’s health is huge. I think aging is huge. So I will pretty much talk to any company in these spaces. Two areas we don’t invest in are alcohol and cannabis companies, largely because Arlan is sober but also most of the team are not big drinkers.
With cannabis, I think there’s a justice issue there. There are a couple of cool Black women founders in this space and I think could see us making an investment in this area but if we do, I think we would do cannabis before an alcohol company. But it’s all hypothetical.
Making VC’s black box more transparent
The most exciting thing of all is these small funds and managers that are crowdfunding, and the fact that people have embraced 506(c), which is the rule that allows them to raise in public. I think that’s huge.
The JOBS Act passed in 2012. It’s been ten years and we’re now finally starting to see some of the changes manifest across the industry. And that’s super exciting to me.
My whole purpose is opening the door to people that haven’t had access before. Venture has been this black box for so long. People can’t see into it. They don’t know what’s going on, and slowly we’re chipping away at that. The face of venture is slowly changing and I think it’s going to continue to accelerate.
Competition for LP dollars
There are now a handful of firms out there focused on underestimated founders and I do think there’s an element of competition, but I think I’m not competitive with them because it doesn’t align with Backstage and who we are, that we would fight another firm for a check. Like, I’m happy if an LP chooses to support Mac, for example. I don’t have a zero sum mentality. Or, if it’s going to be competitive, I’m not playing that game.
I could tell an LP why Backstage is a good investment, but I’m not going to go head-to-head. We exist despite all odds, and I can step into that power. And if an LP is going to put us in that position, then, bye.
Proving the haters wrong
I think we still have work to do. We did the Reg CF last year and we now have like 7,000 people who invested in the overarching company. When those people have all received multiples on their investments, then I will light the match, set the car on fire and walk away. But right now, we still have work to do. The portfolio still needs to succeed. I think we have catalyzed so many folks in the ecosystem and I’m really proud of what we’ve accomplished so far, but I don’t feel that sense of being done.
