SoftBank has launched a $150 million fund aimed at providing fresh capital to Black and Latino startups.
The Japanese technology investor has also rebranded the effort, calling it the Open Opportunity Fund (OOF). The shift is intended to provide greater access for other outside limited partnerships to invest in the fund.
Investor and entrepreneur Paul Judge is chairman of this new fund. He and others will become co-owners of OOF, with SoftBank as a limited partner.
Plans call for the second fund, or Fund 2, to surpass the initial effort by deploying the $150 million within three years. The first fund, launched in 2020, invested $100 million in 75 companies led by Black and Latino founders, including Greenwood, Career Karma, and Praxis Labs.
Judge told BLACK ENTERPRISE via email that SoftBank was committed to the mission.
“One of the key evolution points with Fund 2 is that we are opening access to other LPs. We are excited by the early interest and commitments shown by a wide set of potential investors,” said Judge, adding that Fund 2 is about earning commitments from different types of investors and noting that several corporations, foundations, and institutions have already made pledges to invest in minority businesses.
Judge said minorities and HBCU endowments traditionally have not had great access to the asset class of tech venture capital funds. But as part and parcel of closing the overall wealth gap, Black individuals and institutions need to have access to strong investment opportunities as well.
“One of our goals is to help close that gap by providing access to qualified Black individuals, family offices, and HBCUs to invest in the Open Opportunity Fund,” he explained.
That capital support is certainly needed. Financing has become increasingly difficult for Black founders. BE reported that Black founders raised an estimated $2.254 billion out of the $215.9 billion in U.S. venture capital allocated in 2022.
And financial backing dropped 45% for those businesses last year, making it the largest year-over-year decline for Black entrepreneurs. The numbers offer a grim insight on how challenging VC funding can be for Black founders and business owners.
Simultaneously, many of the nation’s largest corporations vowed tens of billions of dollars roughly three years ago to support economic growth and new opportunities for Black businesses and individuals. But a significant amount of that funding purportedly has not materialized.
OOF will target a broad range of Black companies to support with funding and plans to have a similar ratio and number of Black and Latino founders in the second fund as it had in the first, Chad Harris, vice president of Fund 2, described. In the current portfolio, he said, there are more than 40 Black founders and more than 30 Latino founders.
“This means we will reach almost 150 Black and Latino founders in the combined portfolio,” Harris estimated.
The existing portfolio includes companies operating within financial technology, healthcare IT, enterprise software, education tech, blockchain, and artificial intelligence.
Harris said diverse entrepreneurs are solving some of the world’s hardest problems, noting the work being done by Praxis Labs on diversity, Mayveen on wellness and beauty, and Altro, Greenwood, and Welcome Tech around financial tools.
“Some of these problems are not about the diversity lens but instead are amazingly talented entrepreneurs solving hard problems, like Lumu in cybersecurity or QuickNode in blockchain,” he said.
All told, SoftBank believes it can continue to help Black founders grow. This news release shows some metrics on the progress that’s already been made on that front.
Judge shared with BE that the Open Opportunity Fund not only has a proven team but has also shown that investing in minority companies can deliver successful returns.
“It is not only the right thing to do, it is also a profitable thing to do,” he said.
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