Collab Capital launches with a $50 million target and a mission to help Black entrepreneurs

New investment thesis with focus on profit sharing powers early-stage entrepreneurs

The three founders of Collab Capital, the newly launched Atlanta-based fund with a $50 million target and a mission to help Black entrepreneurs, are intimately aware of the struggles that Black founders face — because they are all Black founders themselves.

Managing Partners Jewel Burks, Justin Dawkins, and Barry Givens have all founded companies, have backgrounds in coding and engineering, and know the struggles Black entrepreneurs face when they sit across the table from (predominantly) white investors writing checks.

As the U.S. continues to grapple with its history of systemic racism in the wake of the Memorial Day murder of George Floyd, the financial industry which operates at the engine of commerce and wealth creation is having its own reckoning.

And although the venture capital industry represents a small cog in the greater machine of finance that moves the world’s wealth, given the industry’s outsized role in creating companies that represent a large fraction of the trillions of dollars flowing through the global economy, it’s no surprise that investors are taking stock of their own roles in perpetuating injustices (whether through myopia or malignance).

As the co-founder of Goodie Nation, Dawkins has already helped to build one successful entrepreneur development program focused on social good; while Jewel Burks co-founded Partpic, an object recognition company sold to Amazon in 2016 and the tech behind Amazon’s Part Finder service, and serves as the current head of Google for Startups in the U.S. Last but not least is Barry Givens, the founder and developer of the robotic bartender startup, Monsieur (a TechCrunch Battlefield alumnus), and the managing director of Techstars’ Social Impact Accelerator (whose first virtual Demo Day TechCrunch covered here).

“We all started our companies in 2012, and we all went through our own difficult journeys,” said Givens. “We started coming together and having these meetings with each other as we were getting ready to exit and we decided we wanted to do something for the next set of Black entrepreneurs.”

Those meetings began in 2017, after Burks had already sold her company and as Dawkins and Givens were moving on to other roles. Initially, the founders of Collab started with a studio program designed to work with emerging entrepreneurial talent in the Atlanta area that may not have had access to mentors providing the same kind of advice on the basic blocking and tackling of starting a business.

The studio provided resources and tools on the pre-capital side of the business, while the newly launched fund, with its $50 million target, is designed to help those early entrepreneurs get the capital they need to truly launch their businesses.

First-time fund managers typically raise from a relatively tight network of smaller family offices and high net worth individuals, and for Black investors launching a first fund, that circle can be even tighter — and may be coming from a set of wealthy individuals and investors who aren’t as well-versed in the world of venture capital finance, the Collab Capital founders said.

So in addition to setting up a new fund, the founders have launched a new kind of investment vehicle, modeled after the Simple Agreement for Future Equity popularized by the Silicon Valley-based accelerator Y Combinator.

The Collab team’s portfolio companies ink something that the firm calls a SPACE deal, which stands for shared profit agreement with a collaborative endorsement. Because many of Collab’s investors, to date, are high-net-worth individuals coming from the worlds of sports and entertainment, who may not have as much familiarity with the concept of venture capital investing, these collaborative endorsement agreements bridge the gap between an equity deal and a more typical endorsement contract that these athletes, entertainers or even many corporate executives might not be familiar with, according to Givens.

While the firm is heading toward a $50 million hard target, it’s launching with a more modest $2 million capital commitment (roughly the same initial amount that Andreessen Horowitz raised internally for its donor-advised nonprofit fund targeting underserved founders).

Like every other initiative planned for 2020, Collab Capital’s fundraising faltered as the COVID-19 pandemic spread across the world. “We lost several [limited partners] that first weekend when the stock market crashed,” said Givens. “Other LPs came back and said we need to wait until Q3 and Q4.”

Many of the young firm’s early investors come from the entertainment community and had to put their commitments on hold thanks to shortened or canceled seasons and the loss of touring revenues.

Still, Collab has managed to move ahead, and has committed its first capital to a new investment, the consumer-focused rain hat company, Hairbrella.

And the spotlight that George Floyd’s murder has put on racial injustice in the U.S. has proven to be a spark for change across America’s social and economic landscape.

“The murder of George Floyd has turned the spotlight on [racial injustice] a little brighter,” said Dawkins. “[But] this is not the first time that you have seen a Black man or Black woman abused or murdered by police…What happens in the industry isn’t going to change by having a Black male get killed on the street.”

The industry needs to change by investing in more Black entrepreneurs and venture capitalists, and as the industry changes, the access to that engine of wealth creation can have huge implications for disenfranchised communities, the Collab Capital co-founders said.

“If you want to make a difference this is how you make a difference,” said Givens. “[And] because of the way the system has worked you may need to change the rules a little bit.”

Arguably, the system hasn’t worked in the way it was intended. Givens pointed to fundraising meetings from his days as an entrepreneur where he spent the first 20 minutes assuring investors that he — an engineering graduate from Georgia Institute of Technology (one of the nation’s best research universities) — had actually built the technology he was pitching.

Collab Capital isn’t the first fund founded by Black entrepreneurs to try to tap into the depth of capital, technological talent pool and startup ecosystem that exists in Atlanta. Last year, Clifford Harris Jr. (better known as T.I.) and partner Jason Geter launched Tech Cypha, which wanted to take the syndicate model for investing and form a quasi-institutional vehicle around it. The firm’s first (and only?) deal was in the Los Angeles and Atlanta-affiliated startup, Culture Genesis.

For Givens, the example of Tech Cypha is indicative of the challenges and opportunities that lie ahead for investors. “There are a lot of people that recognize that tech is a way to build wealth in our community,” he said. “[But] you need so much money… You need to make 15 investments, not one.”

Collab’s initiative is also tapping into some of the geographic discrepancies that have limited the tech industry’s growth and now present still another opportunity for savvy investors.

“If you’re in Hollywood you see Hollywood problems. If you live in the Valley you’re seeing solutions to Valley problems. What was missed in the last couple of decades is that a lot of innovators have been grossly overlooked because investors did not see the talent in other geographies,” said Dawkins.