Black-led venture capital firm Kapor Capital, focused on ‘impact’, raises $126 million

The funding, which makes Kapor Capital one of the largest black-led venture capital firms by assets, will help it continue to invest in “closing the gap”, high-impact startups.

In 2011, Mitch Kapor and Freada Kapor Klein founded a venture capital firm with a mission: to generate elite returns on investment by investing in impact-focused startups that contribute to financial services, healthcare, and more Create a level playing field.

Now, more than a decade later, the company they founded, Kapor Capital, is taking its biggest step yet — and becoming one of the largest black-led firms in the venture capital space, with funding for black entrepreneurs emerging so far this year went backwards.

Oakland, California-based Kapor Capital announced that it raised $126 million to invest in pre-seed, seed-stage and Series A startups with a mission to make a positive and measurable impact. The fund started investing last year and is still in the process of making 15 investments to date. They both have a co-founder who believes people of color are underrepresented.

Officially Kapor Capital’s third fund, the firm’s first managing partners Uriridiakoghene “Ulili” Onovakpuri and Brian Dixon, two early employees who will now lead the fund without Kapor’s direct involvement. The pair are the fund’s first checks for an undisclosed amount, along with more than 70 other limited partner backers, including Bank of America, the Ford Foundation and PayPal.

Kapor Capital previously invested in a $25 million fund allocated by Kapors in 2015, followed by a $60 million investment from 2018. By doubling the size of the firm’s fund, Onovakpuri and Dixon said they hope to invest more in emerging winners in their portfolios. The company also plans to conduct more rounds than before.

In interviews, Kapor Capital’s partners and their founders said they hope the ability to write such checks will help the firm’s investments stay true to the mission it established in 2011. dialogue,” Onovakpuri said.

They also want to demonstrate that such a mission does not come at the expense of financial results. In 2019, the company publicly released its financial results, reporting an internal rate of return (IRR) of 29%; its “total value paid,” which is a multiple of the value of its investments relative to its invested capital, was reported at 3x at the time . Both measures put Kapor Capital in the top quartile of funds of comparable size, the firm claims. Kapor Capital said it remains in the top quartile of funds today.

“Sometimes when people hear impact, they hear subpar returns. They hear impact versus return trade-offs,” Dixon said. “Our funding and our thesis are fundamentally based on the idea that you can have both.”

Under the leadership of Onovakpuri and Dixon, Kapor Capital is now one of the largest black-led firms in the venture capital industry, joining the first Base10 Partners to reach $1 billion in assets, Harlem Capital, MaC Venture Capital, 645 Ventures and more well-known peers. As an early team member, Onovakpuri launched the firm’s summer intern fellow program in 2011 to study venture capital before leaving to start a healthcare startup. Dixon was a program manager at Education First and was a founding member of the program. He then stayed at Kapor Capital and became a partner in 2015. Onovakpuri rejoined the firm the following year and was promoted to partner in 2018.

Kapor people say Onovakpuri and Dixon have been planning to take over Kapor Capital for a long time. That was after the murder of George Floyd in May 2020, and the subsequent reckoning in tech and other industries over inequality and the lack of opportunities for black participation and success. With institutional commitment to investing in underrepresented funders and founders, Dixon and Onovakpuri set out to raise Kapor Capital’s first outside fund, whose founders didn’t write all the checks.

However, raising capital was more difficult than expected. Onovakpuri argues that PayPal, Bank of America and others back their public statements with dollars. But for others, the firm’s target fund size was deemed too large to be backed from the smaller pool of capital they allocated for emerging investors (a term that can be applied to emerging venture capitalists, but usually means those from a representative sexually deficient background). The evaluation criteria for such investments also sometimes minimize Kapor Capital’s decade-long track record, Dixon said.

In a meeting with potential backers, whom she declined to name, Onovakpuri recalled that investors told Onovakpuri that their institutions could not write checks to Kapor Capital because it had “no dark money.” Onovakpuri said she responded by saying she also welcomed a “green dollar.”

Kapor Klein, who was sitting in on the virtual pitch, said she was “shocked.” “I’ve ruled out a whole bunch of variables that could explain it, and I’m left with racism,” she added.

Onovakpuri and Dixon said they wanted to make long-term assessments through their portfolios rather than their backgrounds. “Shout out to the LPs who pick up our call and say, ‘We don’t have black empowerment, or invest in impact firms and companies, but we see your numbers and are excited,'” Onovakpuri said.

In addition to proving its financial returns, Kapor Capital’s leaders will need to continue to demonstrate the dollar’s clout. After the 1995 sale of Lotus Software, which Kapor co-founded, to IBM for $3.5 billion, some of the Kapor family’s most notable investments in its history are still early checks. These include work collaboration company Asana, camera business Dropcam, communications API maker Twilio and ride-hailing company Uber. These investments, while noteworthy, predate the company’s impact focus and are not included in its financial results. Recent bets, such as education software maker ClassDojo, worth over $1 billion, general payroll software maker Gusto, listed on investment platform AngelList and Cloud 100, and the last payroll software maker worth $9.5 billion, are also unclear. Venture capital supporter. social mission.

This mission has challenged Kapor Capital in the past. In 2017, after the Kapor family spoke out against what they called Uber’s toxic culture (they were among the earliest investors), they drew criticism from other Uber backers and some in the investment community.

Behind the scenes, they say, the resistance is even greater. Speaking at the SXSW tech conference, Kapoor said one of his founders told him that other investors were reaching out to Kapor Capital’s portfolio entrepreneurs, warning them not to trust Kapor and Kapor Klein and encouraging them to ask Kapor Capital to sell its shares to other investors. (Kapor Capital declined to comment when asked if such sales had occurred.) “It was seen as a break with the norm,” Kapor said. “That tells you a lot about where VCs can use a little ethics training.”

Tensions with Uber and its other backers were resolved after Kapors praised the changes the company had promised to make, and the two spoke to senior Uber managers at the invitation of CEO Dara Khosrowshahi. But it’s a warning of how confusing calls for change can become. “One of the great myths of venture capital is that there are some value-neutral investments,” Kapor Klein said. “Investors are trying to get themselves out of the woods by saying, ‘Oh, we have nothing to do with this, we’re just here to make money,'” she said. “Making money is a value. It doesn’t hide all sins. But it finances all sins.”

Looking ahead, Onovakpuri and Dixon said they hope to back the new fund to invest in companies such as Philadelphia-based Cayaba Care, which raised $12 million in May and helped more than 1,000 mothers in communities of color gain access to safer Reproductive Care. “Our founders are often the most successful when they build companies based on their own life experiences or those close to them,” Onovakpuri said.

Dixon said their process of raising money for Kapor Capital’s new fund is similar to what the type of founders Kapor Capital likes to support are doing their own thing. “We definitely had challenges. But that’s the beauty of fundraising,” he said. “As an entrepreneur, you learn by doing.”

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