How My Black-led VC firm is Backing Underrepresented Entrepreneurs
We are living through the strangest of times. As the impact of the COVID-19 pandemic continues to unfold, we are in an unknown period of uncertainty. My thoughts are with everyone who has been affected.
To think that just two months ago it was business as usual. As a Principal and Founding Member at Impact X Capital LLP Partners, a Black-led VC which invests in companies led by underrepresented founders, I was having frequent meetings with entrepreneurs and attending events. Today I am sitting here reflecting on the past 15 months and have been inspired to write my first Medium post.
I really feel this will be a period of firsts for many people. As we adjust to our new reality of being in lockdown, many of you will use the time to do something you haven’t done before. Maybe you’ll use this as a time of reflection. Or maybe you’ll finally get around to thinking about that brilliant business idea that you instinctively feel will be a great success, but until now you haven’t had time to map out your game plan to start. Even if you do have a well thought out plan you may start to worry about how you get funding to get it started. And if you’re Black or a female entrepreneur I can understand why you’d be even more worried. In 2018 Forbes reported, “less than 1% of American venture capital-backed business founders are black”. A report by Pitchbook in 2019 found just 6.7% of companies founded by women secured VC funding — that is considered a record high. Impact X was founded to change that.
Our mandate is to invest in female and minority founders in the UK and further afield. My Impact X colleagues and I saw the disparity in funding as a significant gap in the market. But we didn’t look at this as a problem, instead, we saw it as a real opportunity to empower underrepresented entrepreneurs who have lacked access to institutional capital for decades.
Since the fund launched in early 2019, it has been an incredible journey reviewing hundreds of decks, meeting over 200 founders and investing in 13 incredible world-class companies. Along the way, there have been many successes and lessons learned.
We deem transparency as one of our core values, so I thought it would be helpful to shed light on our investment process and what entrepreneurs can expect when raising money from Impact X, particularly during these challenging times. One thing I will say is don’t be daunted, many great businesses were founded in times of crisis — yours may well be one of them.
How and when to contact us:
In our mission to demystify venture capital, we do not require “warm introductions” and actively encourage underrepresented founders to apply for funding via our website.
We focus on Seed and Series A stage companies, with a clear path to revenue. To date, we have participated in funding rounds ranging from £500k to £3 million. However, that does not mean you should not get in touch with us if your company is at an earlier stage. We set out to build long-term relationships with founders so it’s never too early to apply.
Our investment process:
1. Entrepreneur Intake: At the beginning of our process, companies are encouraged to go to our website and complete our “Entrepreneur Intake” form which can be found here.
2. Initial Screening: For companies meeting our criteria, the next step typically involves an Initial Screening phone call which can last between 15 to 30 minutes. This is an opportunity to gain a better understanding of the founders, their vision and the company. If the business in question fits within our criteria, we will schedule a second call or meeting to deepen our understanding of the business and to provide some feedback. We intend for this to be a mutually beneficial conversation.
3. Partners Introduction Meeting: After the initial screening process, founders will be introduced to one of our general partners, which will help our team collectively determine whether we would like to invest in the company, subject to further due diligence.
4. Deep Dive Due Diligence Meeting: Before our deep-dive due diligence meeting, we will request access to the company’s data room. This will enable us to prepare an investment memo outlining why we should invest in the company and identify the key investment opportunities and risks. Although each company is different and depending on the stage of the company, some, of the keys things we require include:
- 18-month financial projections
- Business model economics
- Sales pipeline
- Go-to-market strategy
- Competitive landscape
- Market overview
- Team overview
- Reference calls
- Customer acquisition plan
For founders, this deep dive meeting can be highly beneficial as we will provide honest feedback on every aspect of your company. For us, the meeting is also used to raise any additional questions.
5. Investment Committee: Shortly after the deep dive due diligence meeting, an internal investment committee meeting will be scheduled where the investment will be formally approved.
6. Legal Process and Funding: Once approved, we will communicate our decision to the founder(s) and will move to the legal phase to review, provide feedback and sign legal documents.
Once this last step of the investment process is completed we intend to transfer the funds immediately after.
While that summarises our investment process, an investment from us is the beginning of a long-term relationship with Impact X. Post investment we plan to actively work with our portfolio companies to provide strategic support and make meaningful introductions.
Despite the current market turmoil, I remain excited and focused on our mission to back underrepresented founders. I’d love to hear from anyone with any comments, suggestions or observations.