This Venture Capitalist Started Her Own Firm Without Any Investing Experience or Degree. Here’s How She Did It

Arlan Hamilton was homeless, sleeping on the floor of the San Francisco International Airport and couch-surfing for months when it finally happened.

The 38-year-old launched Backstage Capital in 2015, a venture capital firm that invests in under-invested founders, like women, people of color, and members of the LGBTQ community.

Hamilton isn't your stereotypical venture capitalist. She's the first black, queer woman to create her own venture capital firm — and she did it with no investing experience, no college degree, and little money to work with. “Whatever I do, I know I’m going to achieve it,” Hamilton recalls thinking before she launched her firm. “It’s going to take a long time, and it’s going to be really, really difficult. So whatever it is, I really have to mean it.”

Years before she launched her firm, Hamilton spent hours at Barnes & Noble reading tech and investing books because she couldn’t afford to buy them. She taught herself about investing and venture capital by watching YouTube and Vimeo videos. She moved several times, from outside of Houston to outside of Austin, to be closer to the burgeoning tech scene, and then to Silicon Valley. The more she learned, the more she set her sights on correcting what she saw as an injustice: an incredibly small percentage of venture capital funding goes to women, people of color, and LGBTQ entrepreneurs. The aspiring venture capitalist sent hundreds of emails — and received hundreds of rejections.

“I couldn’t stomach the idea of women having to sit around and just not get asked to the party and not get asked to be part of the next 20 to 50 years. It just didn’t make any sense to me,” Hamilton says. “I also thought whoever does do this stands to make a lot of money.”

Now, Backstage Capital has surpassed her own expectations. In May, Hamilton announced her firm would launch a $36 million fund specifically for black female founders. That same month, Backstage Capital had officially invested in 100 founders since it launched – with checks ranging from $25,000 to $100,000, each – a goal Hamilton wasn’t expecting to achieve until 2020.

Next spring, Backstage Capital will launch accelerators — where founders and entrepreneurs can hone their skills in a three-month program — in Los Angeles, Philadelphia, Detroit, and London. Hamilton’s own profile has emerged as a result, landing on the cover of Fast Company, on Vanity Fair’s 2018 New Establishment List, on panels, at conferences, and on podcasts.

While raising more funding and capturing Silicon Valley's attention, Hamilton has her sights on finding the country's most promising founders and companies.

That recognition feels good. “But still,” Hamilton says. “There’s so much work to do.”

How Hamilton made money work for her

As a venture capitalist, Hamilton’s job hinges on securing millions of dollars in funding and choosing where to invest it. But Hamilton says she never liked money. Growing up, she “hated it with a passion.”

“It made my mom cry all the time,” Hamilton says. “It kept me from eating sometimes.” Money is unreliable, and can be devastating, she says. But she never conceded to it.

“I hate it, so I need to tame it,” Hamilton says. “I need to have power over it.”

She says she finally felt comfortable with her finances when Backstage Capital launched when she was 35 years old. And her fraught relationship with money gives her a unique lens to venture capital.

“I don’t have any sort of starry eyes for money,” Hamilton says. “You can be broke and poor and then, with work or winning the lottery, you can attain it. It’s just about what you maintain.”

Even when she played Monopoly at five years old, Hamilton says she was willing to take risks to find financial empowerment. She bought a one-way ticket from Texas to California in 2015 for a pilot program at Stanford University, which brought together 34 investors-in-training for a two-week workshop. She had a scholarship, some crowd-funded cash, and a two-week stay lined up at an Airbnb — but no plan after that. So she slept on the floor of the San Francisco airport for months while attending conferences, setting up meetings with potential investors, chatting with founders, and sharing her insights on her Medium blog.

But she still had to make some cash, so she picked up a gig as a tour and production manager for a band, a job she has worked throughout the years. While on a redeye flight to New York, her blog post titled “Dear White Venture Capitalists” — which criticized how those venture capitalists viewed investing in founders who are female, of color, and/or LGBTQ — went viral. Her emails started blowing up. A few months later, Hamilton got her first check from angel investor Susan Kimberlin, and Backstage Capital was born.

“Black founders do not get money compared to white founders," Kimberlin told HuffPost in 2015. "The fact that she’s directing attention and making a material difference to these companies is huge."

Investing in the under-invested

Founders who are female, of color, and/or LGBTQ receive far — far — less venture capital funding than their white, male counterparts. In 2017, women received just 2.7% of all venture capital funding — and women of color received a minuscule 0.2% of funding, according to Fortune.

These founders represent an untapped pool of talent and potential. “I’m making an investment, and my hope is that what it does has a part in building wealth for others,” Hamilton says.

But investing in these under-invested founders should not be treated as an act of charity or aid. “When I think about helping and paying it forward, that comes from personal philanthropic stuff,” Hamilton says. “That has nothing to do with Backstage Capital.”

In three years, Backstage Capital has invested in more than 100 founders with a wide range of companies, from tech to power to food to entertainment to toys to fashion. (Hamilton couldn't produce a figure on her returns: "We're super early," she says.) She backs founders “who have integrity” and are passionate and driven. “There are a couple of founders where if they open a taco truck down the street, I promise you I’d invest in it personally,” Hamilton says.

Backstage Capital backed Blendoor, a recruiting app that targets unconscious bias in the hiring process, which is now used by companies like Salesforce, Google, and Airbnb. Its 33-year-old founder, Stephanie Lampkin, landed on Fortune's 40 Under 40 this year.

With the $36 million fund for black female founders, Backstage Capital will announce two investments by the end of the year and will make between five to six more in 2019, and another set in 2020. “It took off like wildfire,” Hamilton says, and struck a chord.

“Institutionally and as a group — black people and black women — we all have so much time to make up for when it comes to how we see money, how we earn it, how we think about saving, and how we think about wealth and equity,” Hamilton says.

Two women in particular inspired Hamilton throughout her childhood and life: her mother and Janet Jackson. Jackson was Hamilton’s first example of “a strong, black woman outside of my family, who was making money, who had fans, who was creative, who expressed herself, and was herself,” she says. And Hamilton’s mother set the bar high for drive and perseverance. At some points, while Hamilton was growing up, her mother worked two jobs. She was never lazy, Hamilton says, and she knew how to take care of herself.

“I’ve seen her stand up for people and herself,” Hamilton says. “I’ve seen what happens when she doesn’t do that and how she feels when she doesn’t do that.”

Leading by example

With Backstage Capital’s growth, Hamilton has refused to compromise her values for the sake of growth and funding. She made waves in Silicon Valley when she notably turned down hundreds of thousands of dollars from associates of Peter Thiel in 2016, a prominent venture capitalist, infamous for his support of President Donald Trump.

“Why would someone like trust me if I could just change course so easily? If I could just be bought?” Hamilton says. “If I could be bought, then none of this matters. None of what I say would have any weight if you could pay me to say something else.”

Leading by example is how Hamilton runs Backstage Capital — and how she ensures it will continue on without her one day. She'd like to be remembered as a leader who emphasized the importance of self-care. She publicly supports her founders when they face backlash, and she tells her employees to take more time off if they need it.

She’s transparent about the state of her well-being, too. She gives audio updates to her employees each month, letting them know if she’s hitting a wall or frustrated, or proud or optimistic. Developing this strategy comes after decades of working for great leaders and not-so-great ones, Hamilton says.

“I took note of the kind of company I would want to work for and that I would want to build. That company is one where everyone feels like they have ownership, they have impact, and what they say and think and feel matters,” Hamilton says. “If that is not happening on a day-to-day basis, then I’m doing that wrong.”

“I really practice what I preach, because I know you can’t tell someone what to do then not do it yourself,” she adds.

It’s perhaps a different philosophy than what her employees and founders are used to — especially in the tech industry and Silicon Valley.

“They grew up and live in a world that’s so macho in business, where it’s like you sleep when you die and if you’re not hustling on the weekend, you’re not doing it right,” Hamilton says. “No, just take a nap. There’s no reason for that."

“‘Just go take a nap,’” Hamilton laughs. “That’s going to be the name of my book.”