Collab Capital Closes $50M Fund for Black Founders

Collab Capital Reaches $50 Million Goal to Invest in Black Founders

Long before investment in cities beyond San Francisco and New York gained popularity, Jewel Burks, Justin Dawkins, and Barry Givens recognized the potential of Atlanta. Each of them personally understood the systemic biases that negatively impact Black founders, while simultaneously demonstrating the innovative spirit and opportunities present within their community.

Addressing a Funding Disconnect

Recognizing a gap in the market, the trio established Collab Capital last year. This firm was specifically created to provide investment to Black founders.

The firm initially launched with $2 million in capital and set an ambitious target of $50 million. Today, Collab Capital announced it has successfully achieved this goal.

Significant Backing from Major Companies

The fund’s backers include prominent organizations such as Apple, Goldman Sachs, Google, The Andrew W. Mellon Foundation, Mailchimp, and PayPal. This makes it one of the largest funds to date, closed by a firm led entirely by Black individuals and dedicated solely to supporting Black founders.

A Fund Sized to Meet the Opportunity

“Our aim was to create a fund that appropriately reflects the significant opportunity we observe among Black founders,” explained Burks. “In reality, even $50 million is relatively modest considering the sheer number of Black-led companies actively seeking funding.”

Investment Strategy and Targets

Collab Capital intends to invest in 50 companies over the next three to five years.

Initial investments will range from $500,000 to $750,000 per company. The firm has also allocated up to $2 million per investment for potential follow-on funding rounds.

The target ownership stake for each investment is between 10% and 15%.

Current Portfolio and Focus Areas

To date, Collab Capital has invested in six companies operating in the healthcare, edtech, and future of work sectors. These include companies like Music Tech Works and Hairbrella.

Commitment to Atlanta and Beyond

The Collab Capital team will maintain its base of operations in Atlanta. Burks, the founder of PartPic (a TechCrunch Battlefield company acquired by Amazon), emphasized the firm’s commitment to reinvesting in the local community.

Notably, the firm’s first three investments were made in Atlanta-based startups.

As remote investing gained traction following the onset of the coronavirus pandemic, the team expanded its reach to include startups in Kansas City, Washington, D.C., and Miami.

Focus on Underserved Cities

“We are enthusiastic about supporting founders throughout the United States,” Burks stated. “However, our primary focus remains on cities with a strong concentration of Black innovators and a relative scarcity of available capital.”

The Landscape Prior to June

A core aspect of Collab’s strategy involves mitigating risks associated with coastal urban centers, but networking remains crucial. The firm’s success in attracting substantial investment from entities like Apple and PayPal serves as significant validation of its focus on Black founders.

According to Burks, a contributing factor to increased investor interest in firms like hers is the heightened awareness of racial injustice following the deaths of George Floyd, Breonna Taylor, and numerous other Black individuals due to police actions.

The murders of Floyd and Taylor catalyzed a worldwide movement led by Black Lives Matter, protesting police brutality and systemic racism within the United States. Burks explains that Collab Capital had only secured a few million dollars in funding at that point, but subsequently observed “a change in the perspectives of those controlling capital allocation.”

Burks observed that during Collab Capital’s initial fundraising efforts, prospective investors suggested adopting a more inclusive approach to the types of entrepreneurs they supported. Some proposed establishing a fund dedicated to underrepresented or multicultural founders. Early pandemic-related volatility in the venture capital market led some of Collab Capital’s Limited Partners (LPs) to withdraw or postpone their commitments.

“Our firm remained steadfast in its commitment to addressing the funding disparity faced by Black founders, and we were unwilling to expand our focus. We recognized the existence of numerous firms supporting diverse founders, yet Black founders often remained underserved even within those structures.”

Despite the continued dominance of white men in venture capital fund management, Black-led venture capital firms are experiencing a period of notable success. Collab Capital’s recent achievement follows announcements from Harlem Capital, which secured a $134 million seed fund earlier this year; Cleo Capital, aiming for a $20 million target for its second fund; and MaC VC, which raised $103 million for its first fund.

Beyond a growing recognition of the value of diversity within the technology sector, Burks highlighted the role of Zoom in facilitating progress.

“Had you asked me a year ago if I believed we could successfully raise $50 million through Zoom meetings, I would have expressed considerable doubt,” she stated. “However, it’s possible to forge strong relationships with individuals without physical meetings. This was a surprising discovery – and the benefit of reduced travel is also significant.”