Backstage Capital Is Funding Startups by Underestimated Entrepreneurs

Funding startups by underestimated entrepreneurs is the mission of Backstage Capital. Arlan Hamilton, founder and managing partner, says, “We invest in the very best founders who identify as women, people of color, or LGBT, in the United States. I personally identify as all three.”

Christie Pitts, Backstage’s general partner, talks about the early days of the Los Angeles-based company and how she got involved: Working in the music industry, Hamilton learned about startups and networked with investors and entrepreneurs. When she asked investors to consider new companies, she noticed a disturbing pattern: “Founders always got a meeting if they looked a certain kind of way and went to certain schools, but if it was, for example, a black woman who had gone to the same schools, like Stanford and MIT, she wouldn’t get a meeting.”

Hamilton also noticed that since these underestimated founders were optimizing limited resources, backing them could lead to a sizable return on investment.

Related: How Have You Overcome Being Underestimated? 

Working for Verizon Investors, Pitts learned about Hamilton’s startup and met with her, thinking the fledging company would be a perfect match for Verizon’s strategic focus on diversity. That didn’t work out, but Pitts started working part-time with Backstage. In August 2017, she left Verizon to become Hamilton’s full-time partner.

“We see healthy performance from our portfolio companies,” Pitts says, praising their entrepreneurs as resourceful and creative in meeting challenges. “They don’t get the same amount of money that other startups get, so they have to come up with other strategies to be successful.” The founders Backstage invests in are 80 percent people of color, 68 percent women, 52 percent women of color and 13 percent LGBT, far outstripping industry averages in all categories.

Interviewing founders while still raising funds, Pitts says, has given the partners “a unique sense of empathy because we know what it’s like to want to do something and not have the money to do it.… When she started Backstage, Arlan went all in on this idea. She changed careers without a safety net, to the point where she became homeless in the pursuit of starting Backstage.”

Related: Why Mentally Strong Women Don’t Fear Breaking the Rules

Dawn Dickson, an African-American serial entrepreneur in Columbus, Ohio, is the CEO of two innovative companies, Flat Out of Heels and PopCom. She’s one of the founders Backstage has enthusiastically invested in.

 

She encourages female entrepreneurs to continue to play on women’s unique advantages.

 

Dawn Dickson

In 2011, while living in South Florida, she got the idea for Flat Out of Heels when she noticed women leaving galas and clubs, shedding their high heels and walking barefoot for blocks rather than suffer in those impractical shoes. She thought comfortable, immediately available roll-up flats could meet a real need. She explains, “I wanted to sell the shoes in vending machines in places where women are actually experiencing the pain point,” like nightclubs, airports and concert venues. Traditional snack dispensers wouldn’t do. Unable to find suitable equipment, she decided to design her own smart vending machines. That led to her fourth venture, PopCom (short for pop-up commerce), which she launched in 2012. A few years later, the need to develop hardware and software led her to Backstage.

Dickson had started Flat Out with $100,000 from her personal network but realized she would need more money to produce vending machines that could take credit cards, track inventory, send emails and engage with customers via artificial intelligence and facial recognition. Anticipating future possibilities, she says, she also wanted to use “technology with an opt-in to verify a customer’s identity to dispense a product that’s regulated, like alcohol, cannabis, tobacco or pharmaceuticals.”

An investor she contacted introduced her to Hamilton, who was just starting Backstage. The new firm invested $95,000 in Dickson’s companies, which helped Flat Out to acquire inventory and ramp up marketing efforts, and PopCom to develop patent-pending software and hardware.

Dickson placed her first smart machine for a beta test in a concourse of Hartsfield–Jackson Atlanta International Airport, where it would be highly visible to travelers with sore feet. She’s starting mass production for smart kiosks to roll out later this year and working with companies that want to use them.

She encourages female entrepreneurs to continue to play on women’s unique advantages: viewing things holistically and being compassionate and understanding rather than engaging customers on a purely transactional basis.

Related: How Women Are Rising in Business

 

This article originally appeared in the Summer 2019 issue of SUCCESS magazine.
PHOTO COURTESY OF BLACK ENTERPRISE

The post Backstage Capital Is Funding Startups by Underestimated Entrepreneurs appeared first on SUCCESS.

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