SoftBank Opportunity Fund Invests $50 Million in Tech Startups

SoftBank started the Opportunity Fund less than a week after George Floyd was murdered. The company pledged to invest $ 100 million in companies run by underrepresented racial minorities and created the largest fund of its kind. A year later, SoftBank has already allocated half of the cash and expects to have a second by year-end To launch funds.

It is far too early to say whether the investments will be successful. The money will benefit about 50 young tech companies in the US and give them the chance to demonstrate the strengths of their business before seeking more capital at SoftBank or elsewhere.

All investments are made in startups founded by Black or Latinx entrepreneurs. The average check is $ 1 million, and a half dozen or so are already preparing to raise their next round of funding. "Seed and A, that's where you can make the biggest difference," said Shu Nyatta, Managing Partner at SoftBank Group International, who runs the fund. "The wrong way to do it is to have loads of money."

Historically, minority entrepreneurs have rarely had access to seed capital, let alone piles of money. Of those who received venture capital from 1990 to 2016, 4.2% were Black or Hispanic, according to a study by Harvard Business School.

Floyd's death served as a catalyst for venture capitalists as well as racial justice protests that swept the globe. In addition to SoftBank's fund, a new firm called Concrete Rose Capital raised $ 15 million to invest in underrepresented founders and minority-focused companies. Base10, the largest black-run VC firm, said a year ago it would donate 1% of profits to racial equality organizations and presented a new plan to Bloomberg Businessweek last month to increase the foundations of historically black colleges and universities strengthen.

SoftBank Investment Advisers, the division that manages the $ 100 billion Vision fund, launched an initiative last year to serve entrepreneurs from underrepresented groups. The Emerge program is an accelerator typically aimed at companies earlier than the Opportunity Fund with investments of $ 150,000 or more. Fourteen US companies were enrolled in the program last year, and SoftBank expects to expand the program to Europe this year.

For the second Opportunity Fund, SoftBank can tap its own coffers again or the Japanese company could look for a partner. Nyatta, the managing partner, intends to expand the fund's reach, possibly at events beyond the companies in its portfolio. "Imagine a Sun Valley conference with only underrepresented founders," he said, referring to the annual Idaho Technology and Media A-listener summit. "We want to do something very special in this area, otherwise we won't do anything."

One company that raised money from the Opportunity Fund is Vitable LLC, a Woodlyn, Pennsylvania-based startup that provides home and virtual visits by medical service providers. The company raised $ 1.6 million last year and received a number of valuable referrals from its new partners at SoftBank, said Vitable founder Joseph Kitonga. These included executives from insurance company Lemonade Inc. and delivery startup GoPuff, which are larger companies that are also supported by SoftBank. And last Thursday, Kitonga spent a lot of time on the phone taking advice on building marketplace with one of the fund's founding partners, Stacy Brown-Philpot, former CEO of TaskRabbit.

VC firms are increasingly competing for investments in long-neglected, minority-run technology companies. Last month, Atlanta-based Collab Capital announced it had raised an initial $ 50 million fund to support startups led by black founders. The company has a broader definition of success than a typical VC. Not only are companies looking for high-growth companies, but also smaller ones that can generate consistent profits, said Barry Givens, managing partner of the company.

Givens shrugged off the risk of competing with other VCs to invest in black-run tech startups: "If there's one competition in the world that I want, it's this competition."

Before it's here, it's at the Bloomberg Terminal.

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