Advice for Miami: Start connecting communities with smart urban planning now or risk becoming another San Francisco
By Nancy Dahlberg
Q&A with Henri Pierre-Jacques
Henri Pierre-Jacques, a Haitian-American who grew up in Detroit, earned degrees from Northwestern and Harvard Business School and then moved to New York for stints at Goldman Sachs, Bank of America, and Merrill Lynch before co-founding in 2015 Harlem Capital, a venture capital firm with the mission of changing the face of entrepreneurship. What started as an angel syndicate is now a firm with two funds, including a $134 million Fund 2 launched last year. Harlem Capital typically makes $1 million to $2 million investments in early-stage companies.
“Our mission is to help build a global multi-asset of diversity-focused funds over the next 20 years, so by 2040,” the managing partner said. Consider that diverse asset managers now manage about 1% of dollars and only about 2% of diverse founders are being backed, when 70% of the global population is people of color and women. “We fundamentally bet we can increase that 1% or 2% to closer to that 70%.”
Although his firm is still firmly planted in New York, Pierre-Jacques and his wife have put down roots in Miami. Now as a Brickell resident for a little more than a year, he is part of the wave of prominent tech and venture leaders that moved to the Magic City in the last two years. Opportunity Miami reached out to this thought leader for his observations about Miami and what the region needs to become a truly diverse and inclusive tech hub. And in light of the market plunge and recessionary environment we are facing now, we also asked him for his views on that. Here are excerpts of the conversation, edited for brevity.
Opportunity Miami: Before we get started, given the state of the economy, I want to ask you what’s your take?
Obviously, I think we’re in a recession. Everybody’s waiting for Q2 numbers that come out and make it official but people feel it. It will definitely be worse than 2020, which was like a three to six-month recession. I think this will be elongated for a number of reasons — inflation, war, supply chain, etc.
But at the same time, there’s a lot of cash on balance sheets for a lot of funds and companies. And so even though people are hurting, these companies and funds are well-positioned. I think the level of emotional response has not been the same (as 2008) … I don’t know what that disconnect is, and maybe that will change.
Similar to all investors, we’re talking to all of our companies, analyzing the runway, like how much time do you have and how do we extend it? Nobody knows how long it’s going to last and we’re all being more conservative than everybody has been the last 10 years.
OM: What are you advising your portfolio companies?
To the ones that have less than 12 months of runway, cut burn. That usually means you have to fire people or you have to slow growth and extend your runway to hopefully 18 to 24. Some people are going to have to raise, some are going to have to sell because they’re not going to be able to raise. Suddenly there’s going to be a lot more small exits happening. I’ve already seen this in the market. There’s just more companies that are going to be forced to sell. Ultimately, cash is king.
Opportunity Miami: What is Harlem Capital doing differently in light of this economic climate?
I would say the biggest difference would be we’re doing more deal diligence. We have more time, rounds are taking longer to close, we don’t have to give offers in 24 to 48 hours, which is great for us as investors.
Recessions impact minorities more in every facet of life. When you think about Covid and the number of businesses that closed, minority businesses closed at a much higher proportion. Managers of color, founders of color are going to have harder times during downturns. All you can do is control what is in front of you, so we’re just going to keep trying to find new businesses, help our businesses, and go from there.
OM: Since the murder of George Floyd, we’ve seen a bunch of efforts launched to support and propel Black founders. What is your view on what is working and what is not?
There’s definitely way more funds that are focused on diverse founders and so I think the number of funds and GPs [general partners] of color has increased exponentially. We did our diverse founders report in February and we definitely saw a massive increase in dollars going to Black and Latino founders last year; it was like 3x over 2020. We don’t know whether that was George Floyd-related or 2021 VC [venture capital] related because VC was up 3x last year. But I think everybody can agree that George Floyd was a massive inflection point and a focus for a lot of funds that didn’t have diverse founders. We’ve seen change in this moment.
But time will tell if it’s a movement. I’m cautiously optimistic, but the U.S. broadly doesn’t focus on one issue more than a year, right? You had a push for more women-focused funding probably six years ago and all these funds emerged, and last year funding [for women] went down actually, it’s like 1.9%.
I think the closest comparison would be the women founders, and that’s just pretty much remained flat for the last 10–20 years. There’s been these little blips but we haven’t seen sustained growth over long periods of time. I think the same probably will be true because the system is just broken.
OM: What needs to be done to fix this?
More diverse GPs. Ultimately you need new funds to change the system. I don’t think the existing funds are going to be the ones that change the system. Really it’s more diverse LPs [limited partnership] to back diverse GPs. Whether or not they have a mandate like us, they’re going to back diverse teams due to their networks. Diverse teams have proven to outperform the market in hedge funds and public equities and I think the same will be true in the private markets.
For dollar returns it makes sense, but I think for [non-diverse] teams that have been around for 20 or 30 years and you have $3, $4, $10 billion under management and you do $100 million, $200 million into diverse founders, but on a $10 billion denominator, that’s kind of irrelevant. You’ve built your network over 20–30 years — that doesn’t just change overnight because all of a sudden you are getting pressure from LPs.
OM: Your team is obviously super diverse. Are you seeing that increasing at other firms?
At more established firms at the junior level, yes, because of what happened two years ago. They’re hiring analysts or associates. But in terms of real equity ownership, that takes years if you’re basically going to have to bring people in and hopefully promote them. It’s why you see in our diversity report that the majority of Black and Latino VC partners are partners of their own funds.
OM: What can Miami do to build a truly inclusive tech ecosystem?
First, you’ve got to find a way to connect the new Miami to the old Miami. I live in Brickell where the nickname is Miami Manhattan. It’s like you’ve got separate worlds happening where basically Midtown, Downtown, Brickell, Wynwood are essentially expats and no locals can live there because it’s way too expensive. And most of us [expats] don’t have jobs here. We’re getting paid from our New York or our Valley jobs. So the first thing is how do you connect these worlds? There’s poor public transportation — what makes New York New York is anybody — a homeless person, a billionaire — will be in Washington Square Park, will be in Central Park or any of the endless parks, or on the subway sitting next to each other. That’s not Miami.
There are no parks, every open space becomes a building. …I think Miami has poor urban planning, and that’s why SF became SF [San Francisco] — there was no affordable housing, and affordable housing is critical. And if you don’t plan appropriately, then you’re going to end up being San Francisco. You’ve got to build a city that enables the new people to meet the old people or you’re basically going to be like Dubai or Singapore where you have these communities where the expats live and have no integration.
In Miami, it’s endless poor urban planning, like it’s purely built for people who don’t live here, and that was fine because in the last 10–20 years people weren’t actually living here, right? To give Miami the benefit of the doubt, you had no idea that you would have this influx of people in the last two years. They were building because it was a real estate inflation hedge for people who live in other countries. It wasn’t built for people who actually walk over the Brickell Bridge. But now that you’ve seen it, you’ve got to adjust that, and I think it’s clear they haven’t started that process.
OM: And the risk of inaction is the divides will get bigger?
Bigger. I’m going to New York for all of June and I’m just so excited. I love Miami but I love New York too. They’re very different cities, but just like sitting in Central Park and watching the piano player, watching people give free hugs, it’s things like that. I think when it comes to empathy, you understand who these people are, which is why New York is so special and just creates these moments that tie people together.
You can’t underestimate how important it is to create space and environments where people can see and meet people randomly. That is the part to me that is missing the most in Miami — urban planning. The rest is there. The restaurants aren’t New York yet but they’re getting better, the energy, the weather, the people are here, but now it’s like how do you create environments to engage with people and interact and create networks? You can have the crypto bros — crypto is not going to save Miami. Miami is going to be saved because of the community building, the infrastructure building.
OM: One year in, any final thoughts about Miami you can share?
Miami is a great city. The weather is obviously very incredible. I love the water culture and going on boat parties with your friends. It’s also a very event-driven city: it’s Bitcoin Week, Miami Tech Week, Formula One Week, Art Basel, Ultra Week, but in between how do you create a steady flow? That’s something Miami can also work on.
For Miami founders, there are not a lot of early-stage VC funds here. There’s a lot of capital but probably more late-stage Series B plus, growth equity, hedge funds. Most funds are based [elsewhere], some have one person like me here — our team is not here. The market has changed; Miami has definitely changed. I’ve done two deals here [Ugami and Mueshi] already — we had never done a Miami investment here. But it’s still really hard for founders. People can feel disconnected from the hype. You hear that Miami is booming. Yes, Miami is better off. It’s booming from where it was but it’s growth on a small base. Everything has to be relative, in perspective.
Founders interested in pitching Harlem Capital can learn more and reach out here.