Backstage Capital to launch accelerator in Detroit

On the heels of Backstage Capital’s announcement to launch an accelerator for startups led by underrepresented founders, the venture capital firm has selected its fourth location. Backstage Capital decided on three of the cities ahead of time and held a public vote to determine the fourth. Well, the results are in and Backstage Capital has […]

On the heels of Backstage Capital’s announcement to launch an accelerator for startups led by underrepresented founders, the venture capital firm has selected its fourth location. Backstage Capital decided on three of the cities ahead of time and held a public vote to determine the fourth. Well, the results are in and Backstage Capital has landed on Detroit, Mich. for the accelerator’s fourth location.

“It’s a rising standout for entrepreneurs in the Midwest,” the firm writes on its site. “Innovation and technology in the city are booming, and Detroit startups are attracting capital from Silicon Valley as well as local investors and government.”

Backstage Capital is also going to run accelerators in Los Angeles, Philadelphia and London. Through Backstage Capital’s accelerator, the firm will invest $100,000 in each company in exchange for five percent equity. Unlike other Silicon Valley accelerators, there won’t be a demo day because it “seems a little like standardized testing,” Backstage Capital Founder and Managing Partner Arlan Hamilton said at TechCrunch Disrupt San Francisco last month. The deadline to apply is October 15.

Backstage Capital’s mission is to provide early seed funding to founders who are women, people of color, and/or LGBTQ — groups that are vastly underrepresented in Silicon Valley. A few months ago, Backstage Capital launched a $36 million fund. Since receiving its first check from a limited partner in 2015, Backstage Capital has invested in 100 companies — writing checks anywhere between $25,000 and $100,000. You can read more about the accelerator below.

VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’ The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising […]

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel .

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.

VCs say Silicon Valley isn’t the gold mine it used to be

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’ The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising […]

In the days leading up to TechCrunch Disrupt SF 2018, The Economist published the cover story, ‘Why Startups Are Leaving Silicon Valley.’

The author outlined reasons why the Valley has “peaked.” Venture capital investors are deploying capital outside the Bay Area more than ever before. High-profile entrepreneurs and investors, Peter Thiel, for example, have left. Rising rents are making it impossible for new blood to make a living, let alone build businesses. And according to a recent survey, 46 percent of Bay Area residents want to get the hell out, an increase from 34 percent two years ago.

Needless to say, the future of Silicon Valley was top of mind on stage at Disrupt.

“It’s hard to make a difference in San Francisco as a single entrepreneur,” said J.D. Vance, the author of ‘Hillbilly Elegy’ and a managing partner at Revolution’s Rise of the Rest Fund, which backs seed-stage companies based outside Silicon Valley. “It’s not as a hard to make a difference as a successful entrepreneur in Columbus, Ohio.”

In conversation with Vance, Revolution CEO Steve Case said he’s noticed a “mega-trend” emerging. Founders from cities like Pittsburgh, Detroit or Portland are opting to stay in their hometowns instead of moving to U.S. innovation hubs like San Francisco.

“The sense that you have to be here or you can’t play is going to start diminishing.”

“We are seeing the beginnings of a slowing of what has been a brain drain the last 20 years,” Case said. “It’s not just watching where the capital flows, it’s watching where the talent flows. And the sense that you have to be here or you can’t play is going to start diminishing.”

Farewell, San Francisco

“It’s too expensive to live here,” said Aileen Lee, the founder of seed-stage VC firm Cowboy Ventures, amid a conversation with leading venture capitalists Spark Capital general partner Megan Quinn and Benchmark general partner Sarah Tavel .

“I know that there are a lot of people in the Bay Area that are trying to work on that problem and I hope that they are successful,” Lee added. “It’s an amazing place to live and we’ve made it really challenging for people to live here and not worry about making ends meet.”

One of Cowboy’s portfolio companies opted to relocate from Silicon Valley to Colorado when it came time to scale their business. That kind of move would’ve historically been seen as a failure. Today, it may be a sign of strong business acumen.

Quinn said that of all 28 of Spark’s growth-stage portfolio companies, Raleigh, North Carolina-based Pendo has the easiest time recruiting folks locally and from the Bay Area.

She advises her Bay Area-based late-stage companies to open a second office outside of the Valley where lower-cost talent is available.

“We often say go to [flySFO.com], draw a three-hour circle around San Francisco where they have direct flights, find a city that has a university and open up a second office as quickly as possible,” Quinn said.

Still, all three firms invest in a lot of companies based in San Francisco. Of Benchmark’s 10 most recent investments, for example, eight were based in SF, according to Crunchbase.

“I used to believe really strongly if you wanted to build a multi-billion dollar company you had to be based here,” Tavel said. “I’ve stopped giving that soap speech.”

Underestimated talent

A lot of Bay Area VCs have been blind to the droves of tech talent located outside the region. Believe it or not, there are great engineers in America’s small- and medium-sized markets too.

At Disrupt, Backstage Capital founder Arlan Hamilton announced the firm would launch an accelerator to further amplify companies led by underestimated founders. The program will have cohorts based in four cities; San Francisco was noticeably absent from that list.

Instead, the firm, which invests in underrepresented founders and recently raised a $36 million fund, will work with companies in Philadelphia, Los Angeles, London and one more city, which will be determined by a public vote. Aniyia Williams, the founder of Tinsel and Black & Brown Founders, will spearhead the Philadelphia effort.

“For us, it’s about closing that wealth gap to address inequity in tech,” Williams said. “There needs to be more active participation from everyone.”

Hamilton added that for her, the tech talent in LA and London is undeniable.

“There is a lot of money and a lot of investors … it reminds me of three years ago in Silicon Valley,” Hamilton said.

Silicon Valley vs. China

Silicon Valley’s demise may not be just as a result of increased costs of living or investors overlooking talent in other geographies. It may be because of heightened competition abroad.

Doug Leone, an early- and growth-stage investor at Sequoia Capital, said at Disrupt that he’s noticed a very different work ethic in China.

Chinese entrepreneurs, he explained, are more ruthless than their American counterparts and they’re putting in a whole lot more hours.

“I’ve had dinner in China until after 10 p.m. and people go to work after 10 p.m.,” Leone recalled.

“We don’t see that in the U.S. I’m not saying the U.S. founders oughta do that but those are the differences. They are similar in character. They are similar in dreams. They are similar in how they want to change the world. They are ultra-driven … The Chinese founders have a half other gear because I think they are a little more desperate.”

Much of this, however, has been said before and still, somehow, Silicon Valley remained the place to be for investors and startup entrepreneurs.

The reality is, those engaged in tech culture are always anxiously awaiting for the bubble to pop, the market to crash and for “peak Valley” to finally arrive.

Maybe, just maybe, Silicon Valley is forever.

Here’s more of our coverage of Disrupt 2018.

Backstage Capital to launch an accelerator in four cities to promote underrepresented founders

After launching a $36 million fund earlier this year to help support black female founders, Backstage Capital isn’t showing any signs of slowing down. Today, the fund’s founder and managing partner Arlan Hamilton announced that it will launch an accelerator to further amplify and support the best companies led by underestimated founders. The four cohorts […]

After launching a $36 million fund earlier this year to help support black female founders, Backstage Capital isn’t showing any signs of slowing down. Today, the fund’s founder and managing partner Arlan Hamilton announced that it will launch an accelerator to further amplify and support the best companies led by underestimated founders.

The four cohorts will be located in Philadelphia, London, Los Angeles and a fourth city to be determined through a public vote.

“We decided on Los Angeles because the ecosystem is really prime for it,” Hamilton said onstage today at Disrupt SF at Moscone West. “There is just the most diverse group of founders and types of companies they’re building. There is a lot there to pull from.”

With London, Hamilton said she visited the city a few times and was blown away by the founders and the interesting challenges they face there.

“There is a lot of money and a lot of investors, but it reminds me of three years ago in Silicon Valley,” she said. “It’s a melting pot of a city and we can pull from different parts of Europe as a launching pad. And there are several groups of African founders who found their way in the ecosystem in London who are doing great things with great resources but are being overlooked.”

But it was Philadelphia that served as location inspiration.

When Philadelphia is thinking about what it means to become a tech city, it’s not about ‘how do we retrofit this Silicon Valley model, but more so how do we use technology to do what Philadelphia does best,” said Aniyia Williams of Tinsel and Black and Brown Founders, who was onstage with Hamilton.

Williams will spearhead the Philadelphia chapter of the accelerator to provide more resources for founders there.

“It’s our privilege to be helping out with the Backstage Accelerator. We’ve been thinking through an ecosystem of how to support founders,” Williams said. “Philadelphia has one of the highest poverty rates of American cities and one of the highest populations of poor black and Latinx people. So for us it’s about closing that wealth gap to address inequity in tech. There needs to be more active participation from everyone.”

SAN FRANCISCO, CA – SEPTEMBER 05: Black & Brown Founders Founder and CEO Aniyia Williams speaks onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California. (Photo by Kimberly White/Getty Images for TechCrunch)

Backstage Accelerator will be accepting applications throughout the rest of this month, and six companies will be chosen per cohort. The accelerator will invest $100K in each company in exchange for 5 percent equity.

Participants can look forward to a different kind of accelerator experience, Hamilton said, starting with the demo day model.

“Demo day to us seems a little like standardized testing,” she said. “It’s important to a lot of the accelerators, but we’re wondering what could be an alternative to a demo day? We’re just thinking about things through a different lense, and at the same time having very high standards like we always do.”

Hamilton said it took awhile for her to be convinced to launch an accelerator.

“We really do things that we feel we can dominate,” she said. “I just didn’t think we were ready for it; why would there need to be another accelerator?”

She said Backstage reached 100 companies this year and put from $25K to $100K in those companies, providing strong value.

“In most cases we are the first call our founders make — either for a good or bad reason,” Hamilton said. “We have the most impact without having to raise hundreds of millions of dollars, but it’s not happening fast enough. We don’t like to wait for other people to catch up to us, so it makes a lot of sense to us today [to launch an accelerator], and it was after very deep and strategic thought to get to this point.”

Christie Pitts, Backstage Capital investment partner and chief of staff, will head up the accelerator, which is one of the programs that came out of Backstage Studio.

“My purpose is changing the narrative in tech and who is allowed to be a successful tech founder,” Pitts told us after the Disrupt panel. “Being a successful entrepreneur is not a zero-sum game. You can have a successful company, and I can have a successful company. And we feel like there is an opportunity in this space for underestimated founders where they can learn how to fundraise.”

SAN FRANCISCO, CA – SEPTEMBER 05: Black & Brown Founders Founder and CEO Aniyia Williams (L) and Backstage Capital Founder and Managing Partner Arlan Hamilton speak onstage during Day 1 of TechCrunch Disrupt SF 2018 at Moscone Center on September 5, 2018 in San Francisco, California. (Photo by Kimberly White/Getty Images for TechCrunch)

To help build out programming and work with the cohorts in the four locales, Backstage Capital will enlist the services of Wayne Sutton and Melinda Epler, co-founders of Change Catalyst, a firm that promotes the importance of creating inclusive tech ecosystems. Microsoft and MailChimp are also partners in the accelerator’s launch. Mark Levy, formerly the global director of people at Airbnb, will also contribute to the accelerator.

Hamilton remains steadfast about the importance of diversity and inclusion in tech.

“I just think that Microsoft and MailChimp are understanding that we’re now the cool kids,” Hamilton said. “It’s the right side of things to be talking about. And you can only talk so much before it’s time to act.”

Hamilton said that the firm’s $36 million fund it announced earlier this year will yield results by the end of the year. She also says we’ll see Backstage with a $100 million fund by the end of 2020.

“We’ll keep doing what feels right to us, and try to leave things a little better than where we found them — that’s always our goal,” she said. “The accelerator will allow us to continue with our growing deal flow. And maybe by 2021, there’s a chance we could be in 10 to 12 cities investing in 100 companies a year.”