this $250 million growth fund will divert half its profits to historically black colleges and universities
The Pursuit of Racial Equality and HBCU Funding
Significant discussion surrounding racial equality has emerged since the tragic death of George Floyd in Minneapolis. However, achieving true equality remains a complex challenge given the existing disparities. A report by the U.S. Government Accountability Office reveals a stark contrast in financial resources: Historically Black Colleges and Universities (HBCUs) possess an average endowment of $15,000 per student.
Endowment Disparities and HBCU Impact
In comparison, non-HBCUs of similar stature maintain an average endowment of $410,000 per student. This discrepancy is substantial. While many institutions of higher education prioritize student body diversification, HBCUs play a crucial role in cultivating the nation’s Black middle class.
The Role of Endowments in Institutional Strength
A larger endowment directly translates to a stronger institution, enhancing its capacity to support faculty, researchers, and public service initiatives, particularly within public HBCUs. Venture capitalist Jamison Hill recounts his father’s experience at North Carolina A&T State University in Greensboro, emphasizing how the education received there enabled him to secure a well-compensated position and build a successful family.
Base10 Partners and the Advancement Initiative
Hill, alongside Laura Weidman Powers, co-founder of Code2040, and Luci Fonseca, formerly of McKinsey & Co., have joined Base10 Partners, a venture firm, to address this imbalance. Together, they are launching a new $250 million growth-stage fund.
A Unique Investment Strategy
This fund, named the Advancement Initiative, represents Base10’s first venture into later-stage investments. Unlike traditional opportunity funds, it will not rely on follow-on checks. Instead, its strategy centers on generating substantial returns by investing in companies nearing their initial public offerings.
Directing Profits to HBCUs
A significant portion – half of the firm’s profits, or “carry” – will be directed to HBCUs, bolstering student scholarships and strengthening university endowments. This innovative approach by Base10, a Bay Area firm that recently closed a $250 million early-stage fund, offers a compelling way for founders to contribute to positive social impact while pursuing financial success.
Early Success and Portfolio Companies
The fund has already secured investments in eight promising companies: Attentive, Nubank, Brex, Plaid, Aurora Solar, Wealthsimple, CircleCI, and KeepTruckin. These investments were made in highly competitive funding rounds, with founders willingly allocating capital to Base10.
Scholarships in Portfolio Company Names
Furthermore, Base10 has committed to establishing scholarships at HBCUs in the names of each portfolio company, such as “The Plaid Scholarship” and “The Brex Scholarship,” to support STEM students. This initiative presents a novel method for the venture capital sector to address racial inequality in the U.S.
HBCU STEM Contributions and Endowment Gaps
Base10 highlights that HBCUs award nearly half of all STEM degrees to African-American students. However, the combined endowments of all 107 HBCUs amount to only 7% of Stanford University’s approximately $30 billion endowment. The fund will operate as a typical growth-stage fund, prioritizing companies with high return potential, regardless of founder demographics.
Long-Term Vision for Systemic Change
Hill expresses the hope that this initiative will not be a one-time effort, but rather a catalyst for broader change, potentially incorporating requirements regarding eligibility for investment. Some returns will flow directly to HBCUs that are limited partners in the fund, including Howard University and Florida A&M University.
Expanding Access to Investment Opportunities
The remaining returns will be channeled into a donor-advised fund, specifically designed to increase financial inclusion for HBCUs lacking the substantial endowments necessary for private market investments. The fund’s limited partners also include organizations dedicated to serving minority communities and mission-oriented foundations.
Mitigating Risk and Generating Returns
While success is not guaranteed, the Advancement Initiative’s focus on late-stage companies with established revenue models and positive market momentum minimizes risk. The fund’s proposition is proving attractive to potential partners.
Facilitating Conversations with CEOs
Fonseca notes that securing meetings with CEOs is the primary challenge, but once the fund’s vision is presented, companies are readily receptive. The fund intends to invest between $10 million and $20 million in each portfolio company.