Venture Capital: Impact X Capital’s Thesis For Investing £100M In Black Founders
Only 1% of VC funding goes to Black founders. Impact X Capital wants to change that.
Profits and purpose. Those are the two bottom lines for Impact X Capital, the London-based venture firm conceived by Eric Collins to support underrepresented entrepreneurs across Europe. The firm was in operation long before the birth of the Black Lives Matter movement. It now has £100 million to invest in such entrepreneurs. (Forbes)
Eric Collins’ Thesis
According to Collins, VC funding is a closed club where the limited partners, venture capitalists, and founders shared similar backgrounds (and color).
It’s also about networking – the privileged introductions through friends and connections – all inaccessible to the not-so-fortunate.
Black-led businesses are more likely to be rejected because the reality is most investment goes to companies founded and led by white men, Collins observed in a recent opinion in Sifted.
Recognizing that black founders receive only 1% of VC funding and female entrepreneurs 4%, Collins says this under-funding was a “market inefficiency.”
It could be an opportunity to invest and make a significant profit. Additionally, the investments would have a measurable social impact (the double bottom line).
Impact X Capital, therefore, decided to invest in underrepresented entrepreneurs in Europe at the seed or series A stage. The chosen sectors were digital technology, health, education, lifestyle, media, and entertainment.
The firm would select top-flight entrepreneurs with scalable and proven products that could deliver exponential growth with the help of capital.
In addition, the target companies should have great potential to create jobs and have a positive impact on lives. Further, they should be led by strong management that has invested time and money.
The above-average returns from such investments would be the magnet for more funding to under-privileged founders.
Collins’ thesis was spot on.
Today, Impact X boasts of a diverse set of limited partners and an executive team that managed over £12 billion pounds. The firm helped deliver solid exits that delivered impressive returns.
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