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Society is facing a range of complex challenges, yet investors often overlook those who are closest to the solutions. The traditional venture capital model is heavily concentrated in certain populations geographically and along racial and gender lines. And consider this: Only 2.4% of venture capital raised has gone to Black and Latinx startup founders since 2015.
Philadelphia-based Plain Sight Capital is working to change that.
The fund identifies and invests in underrepresented founders to lift up entrepreneurs and communities while creating financial returns. Plain Sight Capital is included in ImpactPHL’s index of impact investments, which lists investments that create positive social outcomes in Greater Philadelphia.
Giving Compass spoke to Alex King, co-managing partner for Plain Sight Capital, about the organization’s work and how impact investors can effectively support underfunded founders. The interview has been edited for length and clarity.
Q. How do you identify founders who are underfunded by traditional capital?
Since we are African American entrepreneurs, our existing networks include Black and Brown entrepreneurs who are starting all types of businesses. My partner and I have started companies, we've raised capital, we've been through the process. And we’ve seen that it’s not just African Americans who are underrepresented or underfunded. Women are underrepresented and underfunded. You can have a specific disability, be a former member of the military, or have a sexual or gender preference or identity. We want to include all these groups that are traditionally overlooked by venture capital.
Q. How are you thinking about intersectionality in your work?
When it comes to intersectionality as a whole, you need continuous empathy from everybody. We need to have a better understanding of where people are coming from, what they might have gone through, and try to see the other side of the table so that we can have meaningful connections and meaningful outcomes.
Our advisors, professionals who really believe in what we're doing, have \compassion and emotional awareness about these issues. It has helped us get to greater outcomes. For example, one of our advisors hosted a safe space for us to discuss financial issues that plague Black and Brown communities. We were allowed to share personal experiences without the feeling of judgement. That meeting set the stage for additional conversations that has led to programming that we believe will produce meaningful outcomes for black and brown communities.
Q. Plain Sight Capital offers more than just financial support to founders to help ensure their success. Can you talk about what that actually looks like?
Plain Sight Capital was birthed out of a tech and innovation nonprofit, Coded by Kids. We saw brilliant students coming through that program. Just like most underrepresented founders, we know that they will hit roadblocks when they attempt to scale their ideas with funding. That’s where Plain Sight Capital comes in.
We are also spinning out a nonprofit venture studio to provide some of the technical resources and assistance that founders need. How can we support them at every step? We're looking at providing coaching. We’re exploring providing them with fractional employees. We're also looking at doing really deep research to assist them with product validation. Additionally, how are we supporting the mental well-being of these founders as they're going through their journey? It's not easy for anyone. It's definitely difficult for people who are underrepresented. Capital doesn’t solve every problem.
Q. What advice do you have for impact investors who want to play a part in building success for underfunded businesses and communities?
First, simply invest. You don't learn if you don't have skin in the game. You can't do it by reading books, you can't do it by reading articles, you can't do it by listening to friends, you can't do it by participating in groups. You have to put your money where your mouth is; you have to invest.
Second, allow your investments to fail and then invest again. Whether it's a program, whether it's a business, whether it's a fund, no matter who it is, you invest. Let it fail. Invest again. If you look at statistics, traditionally the majority of businesses fail. If you look at the startup community, within itself, failure is promoted as a learning exercise. Venture Capitalists love to back repeat founders, even if they have previously failed. It gives VCs reassurance that the entrepreneur has experiences that they have grown from. Impact investors have to do the same thing with all of their projects.
Third, listen and optimize for the future. Create that strong feedback loop where you're empathizing with your partners, understanding where they're coming from, understanding where their weaknesses might lie, and promote their strengths. Once you go through that process of working with that partner and whether it's a successful outcome or not, there will be a lot of lessons learned. There will be the ability to do it again and to optimize for success. You'll find out what works best and you'll be better.
This is meaningful work. This is hard work. And all of it has outcomes, whether it's social impact, whether it's financial rewards, there are true outcomes tied to this. A lot of times funders might get involved and say, "This is for charity or for PR,” but what they really need to be thinking about is, "How do I create a sustainable impact investing strategy that can grow scale time?" One can create a sustainable impact investing strategy by defining one or two investment themes that are core to their respective mission. Begin to source opportunities within those investment themes. Define a multi-year capital commitment that you are comfortable with. Meet with organizations that meet your themes, perform due diligence on the ones that you view will meet your social impact and/or financial needs, and invest. Additionally, I would encourage meeting and working with other funders who are investing in your space.