Arlan Hamilton is the Founder and Managing Partner of Backstage Capital, a VC firm that invests exclusively in founders who identify as women, people of color, and/or LGBTQ. So far, they’ve raised $12 million and invested in approximately 140 companies, including Mahmee, CareAcademy, Hidrate, LendStreet and more.
The firm is backed by some pretty impressive investors, including Slack CEO and cofounder Stewart Butterfield, Box CEO Aaron Levie, and Lowercase Capital Partner Crystal Sacca (who led early investments in Uber and Blue Bottle Coffee). In 2019, Backstage also garnered the attention of Shark Tank star and Dallas Mavericks owner Mark Cuban, who has invested millions in Hamilton’s firm.
As with many other success stories, Hamilton’s didn’t happen overnight. In fact, five years ago, she was living on the floor of the San Francisco airport with just her backpack and laptop in tow. But she has always been a go-getter.
Though it may have been incredibly tough, she didn’t let her living situation or lack of college degree prevent her from going after her dream: breaking into venture capital and elevating underrepresented founders. Hamilton didn’t originally plan on being a venture capitalist. In fact, she spent well over a decade working in the music industry. But, she knew she wanted to get more resources and funding into the hands of those traditionally underestimated entrepreneurs, and came to the conclusion that venture would be the best way to go.
Of course, she also realized that this would not be an easy route, as it’s a field dominated by white men. But she was committed to dedicating the time, effort, and determination it would take to pull it off.
Here, we explore some of Arlan’s top startup tips, plus advice on how to navigate the Covid-19 climate.
1. Bulk Up On Who And What You Know
Though restrictions are easing up bit by bit around the country, many aspects of life are still on pause, and the future of different industries is unknown. But according to Hamilton, there’s no better time than right now to put your head down and keep moving forward. Reach out to people, observe, take everything in and learn—become an asset through the knowledge you have.
When reaching out to people, make sure to do your research beforehand. Read anything and everything you can about them, including looking into their social media. Dig deep into the industry they’re in. Make sure that they’re someone you actually want to reach out to and identify exactly why you want to reach out so that you’re not wasting anyone’s time. And always, always, always send individual emails—don’t send a mass message to everyone you could possibly connect with at once.
2. Find Creative Ways To Raise Funds, Rather Than Relying Fully On VC
Venture is right for some companies, but there can be some major drawbacks to it. You give up ownership and power to investors (they could fire you!), you’ll have less to sell when you IPO, and there’s way too much pressure to grow.
Plus, some founders are given way too much money without enough guidance on how to use it. For example, Sophia Amoruso, Girlboss founder and a good friend of Hamilton’s, openly talks about the fact that investors handed her too much money for her first company, Nasty Gal. In fact, she calls it a “recipe for disaster.” Nasty Gal ended up filing for bankruptcy and selling for a mere 10% of its original valuation.
If VC isn’t 100% necessary, explore crowd equity funding, bootstrapping and accelerators and incubators—especially those that aren’t solely focused on catapulting you into the VC race.
You could even try bootstrapping for two to three years, then raise capital. It takes more time and isn’t comfortable or glamorous, but it means you can sell your equity for more money. Just make sure that, if you do decide to raise capital, you look for investors who prioritize nurturing you as a founder rather than throwing money at you and expecting immediate and skyrocketing growth.
3. Figure Out How To Need Less Money
With the uncertainty of the current climate, investors have tied up most of their money in their current portfolio companies. This is a good sign in an investor—as a founder, you want investors who will double down and help you ride out tough times. But, of course, this is a difficult situation for those who are actively trying to fundraise. That’s why, at least for now, you’ll want to figure out how you can move forward with less external capital.
For example, if you think you need $10 million, what can you do to need only $5 million instead? Think about ways that you can cut down on the amount you think you need. Here are some things Arlan suggests:
You can still start getting to know investors. Backstage, for example, has office hours you can sign up for to get feedback and help on your elevator pitch or pitch deck. Find other firms that do something similar, and start building meaningful business relationships. Just understand that it’ll likely be the beginning of a very long conversation—you won’t secure new funding right then and there. Overall, during this time, spend more time strategizing than knocking on new doors.
4. Allow Yourself To Feel Your Feelings
All of the above are great suggestions, but Hamilton also stresses stepping back and taking a moment (or two) to breathe. You do not have to be doing something every moment in order to qualify as an entrepreneur. Yes, the pandemic may have created new opportunities, but these are really wild times in the world—it’s okay to be scared, upset, worried, concerned, sad. It’s okay to take a break.
Want to hear more from Arlan? She has a top business podcast, The Bootstrapped VC, and her new book—It’s About Damn Time: How to Turn Being Underestimated Into Your Greatest Advantage—is one of the best business books of 2020.
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