Last year, a small group of Emory University graduate students at Goizueta Business School in Georgia began to examine the challenge of getting Black and other historically underrepresented founders access to capital. One way to do that, they reckoned, was to raise a generation of investors who would pay more attention to these groups.
The idea grew into an investment fund called Peachtree Minority Venture Fund, with the goal of teaching students about venture capital while investing in real companies with minority founders. The fund just completed its first group of investments as the idea came to life in the classroom.
Humza Mirza and four other student managing partners — Alexia Brown, Jack Semrau, Dylan Cowley and Miguel Vergara (pictured above) — worked with the inaugural class around the fund’s initial investments while learning about being a venture capitalist.
“We are a fully functioning fund. We have a cohort of 24 students who are doing due diligence on our investment pipeline. And we’re just keeping this kind of ball rolling and growing,” Mirza said.
These lessons and activities resulted in three initial companies receiving funding from this year’s group. Among the first investments from the fund were $25,000 for CommunityX, an app for organizing around particular causes, including creating calls to action, events and petitions.
The firm gave an additional $15,000 each to Ecotone Renewables, a startup producing liquid plant fertilizer from food waste, and FundStory, which provides a platform for accessing and managing non-dilutive capital.
All three startups meet the fund’s criteria of having a diverse founding team with a good idea struggling to find capital.
A student in the program, Bonnie E. Schipper, said she observed a steeper path for underrepresented founders and recognized how the fund was trying to address that.
“Our team made it a priority to look past a lack of funding history or fancy top-tier degree to really assess founders’ experience, passion, knowledge and value proposition to ensure we were putting forth the best investment opportunities rather than falling prey to historical practices that provide unfair advantages to more privileged populations,” she said.
Another student, Ardalan Javadi, said he was drawn to this program because he wants to pursue a career in early-stage venture capital. “My team focuses on the business and financial services; we went through all the pre-screening, sourcing and due diligence of the investment opportunities with minority startup founders,” he said.
“We sourced more than 55 startups and recommended one startup to the investment committee. I think this is unique about the Peachtree Minority Venture Fund. You have the opportunity to learn sincerely all aspects of the venture fund that focus on the minority founders and make a real impact by investing in that opportunity.”
While the students are running the fund, it’s up to the professors in charge of the classroom component to prepare them and help them understand what goes into investing in companies.
Professor Robert Kazanjian, who is teaching the classroom component this semester, said there is a strong focus on understanding the nature of investing in historically underrepresented groups, as well as addressing the challenges they face in raising money.
For starters, he said that people from the fund’s target groups often don’t have access to capital from family and friends, which he explained is “due to decades of economic structural inequality, the structure of VC networks (which are largely male and white), as well as a range of implicit biases observable in VC investing due to a range of psychological factors.”
“We explicitly discuss in class that this is changing and that many VC firms are working diligently to address these imbalances, but the underfunding has proved persistent,” he said.
In addition, he said that he teaches a deep understanding of the full range of activities required by VC professionals, such as deal sourcing, due diligence, legal considerations, and direct data collection from the ventures, including interviews with founders.
The project was the idea of four students who launched it but graduated before it welcomed its first class. Willie Sullivan, one of those original students, told TechCrunch last year that they wanted to solve an entrenched problem around investing in Black-owned businesses.
“When we conducted interviews, one of the main things that came up, which always comes up, is how large of a problem access to capital is still for Black entrepreneurs. And so we were coming up with our recommendations. It was really, ‘OK, how can we as a university address this issue,’” Sullivan said at the time.
The fund received $1 million from the school’s endowment last year. Mirza was part of the group of first-year students involved with the founding team who took over when the founding group graduated. “Willie and the second years conceptualized the fund. They put together the skeleton, all the documents, all the paperwork, the investment vehicles, while working with the dean to get that million-dollar funding,” Mirza said.
Additionally, the program is designed to keep going each year by preparing a group of incoming managing partners who will take over when the prior group graduates, just as Mirza and his crew took over from Sullivan and theirs.
The course and associated fund aim to raise awareness and solve a real access problem that exists for underrepresented founders while creating a new generation of investors who are being trained to look at people with good ideas who have traditionally been left behind by venture investment.
This article was originally published on TechCrunch.com. Read More on their website.