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Investor Arlan Hamilton urges peers to support diverse startups

Backstage Capital founder Arlan Hamilton (left) converses Tuesday with Tawanna Black, founder of the Center for Economic Inclusion, during an event in St. Paul that drew 200 people. Photo by Alex Carroll Photography.

MINNEAPOLIS, MN – Three years ago Arlan Hamilton was homeless and on a good day had $12 in the bank.

Today she is founder and managing partner of Los Angeles-based Backstage Capital, which has invested more than $5 million in 100 startups whose high-potential founders are people of color, women or LGBTQ. Two of those startups are in Minnesota.

If Hamilton’s name sounds familiar, that’s because Forbes and the Wall Street Journal have written profiles about her and Fast Company just featured her on its October cover. This year Backstage has launched a $36 million fund for black women entrepreneurs.

Hamilton posed a challenge to entrepreneurs, investors, business people and others in a crowd of some 200 during an appearance Tuesday in St. Paul.

“If I can do this in three years, what can Minneapolis-St. Paul do in three years? In five years? Ten years?” Hamilton said during a “Power Inclusion” event presented by the St. Paul-based Center for Economic Inclusion.

“We have to do this together. … The people who can write checks need to really write checks,” she said. “They don’t need to be tourists writing checks. Because that’s a quick way for the reputation of the city to plummet across the country.”

Speaking of writing checks, Hamilton has done that and more by investing in two Minnesota startups that are among Backstage Capital’s 100 “Headliners.”

Those companies are Minneapolis-based HabitAware, the winner of the $50,000 grand prize in the 2018 MN Cup entrepreneurial competition, and Civic Eagle, co-founded by Shawntera Hardy, the Minnesota commissioner of employment and economic development.

HabitAware has developed a smart bracelet to make users aware of hair-pulling and other unwanted repetitive behavior.

“The work that Arlan is doing is so important to promote and propel founders of color,” HabitAware co-founder Aneela Idnani Kumar said in an interview. “The experience has been phenomenal because she’s building not just a platform for herself to be a voice for others but a community for these 100 Headliners to share knowledge, share resources and also to help us continue to grow our businesses.”

The other local startup receiving a Backstage Capital investment is Civic Eagle, which uses artificial intelligence to help organizations automate tracking of legislation, said Hardy, head of strategy for Civic Eagle, which has offices in Minneapolis, Atlanta and Washington, D.C.

“We are proud to be one of the Backstage 100 companies,” Hardy said in an interview. “(Hamilton’s) looking for companies that have a great mission, great founders and have traction, and those are the same things that Minnesota investors are looking for. She’s done the work and hopefully they will see the value and invest in businesses of color.”

Tawanna Black, founder and CEO of the Center for Economic Inclusion, said Hamilton’s investments here put locals on notice.

“Having (Hamilton) invested in some Minnesota businesses and having success across the country says to other venture capitalists in our market, other banks and lenders and investors, that it’s possible that we need to change our game,” Black said. “It says there are businesses out here who could shift our economy that are right under out nose that we may not know about.”

Hamilton, in a conversation with Black at Tuesday’s event, said launching Backstage Capital was “the most logical thing in the world. Honestly I still can’t believe someone else hadn’t done it first.”

Less than 10 percent of venture capital deals go to women, people of color and LGBTQ founders, according to Backstage Capital.

“The founders, the people of Silicon Valley are doing some awesome stuff but the investors are so scared,” Hamilton said. “VCs are based on this idea that they’re supposed to be the front lines in innovation. They should be the first people who are looking for black and brown talent because they’ve been overlooked for so long. They should be the first person saying let me get the edge over the next person and they weren’t.”

Hardy joined Hamilton and Black in a post-Q&A discussion.

Also taking part were Clarence Bethea, founder and CEO of Minneapolis-based Upsie, a startup that has raised $3.5 million in funding for its lower-cost warranties on smart phones, electronics and appliances, and Emily Hunt Terner, founder and CEO of All Square, a civil rights social enterprise that combines a restaurant offering gourmet grilled cheese sandwiches and professional development to help formerly incarcerated people gain a productive future.

Former financier Dileep Rao, a Twin Cities-based author and clinical professor of entrepreneurship at Florida International University, said he believes that targeted venture capital funds can achieve more by helping entrepreneurs develop sales and financial-management skills and innovation and takeoff strategies.

“Having been in this business since the mid-1970s, I have seen many incarnations of the same dream,” Rao said. “And it all starts with the assumption or fallacy that all it takes to build successful ventures is money.”

The same holds for a lottery, and once in a while someone wins a jackpot, Rao said. “But you would not recommend playing the lottery as a career for your kids.”

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