SoftBank last week rebranded its Opportunity Fund to Open Opportunity Fund with the intent of opening the fund to other LPs and organizations to back minority entrepreneurs and startups. It also launched a second fund with a $150 million target.
For investor Paul Judge, who will co-own the fund along with SoftBank and serve as its chairman, the job is an opportunity to make a dent in the ecosystem.
However, we’ll need much more than $150 million to do that: Last year, Black founders only received 1% of all venture funding, a slight dip from the 1.3% raised the year before. Still, Judge is hopeful that he can help open the gates wider to underrepresented communities.
“One of the problems in Silicon Valley, traditionally, it’s been about who you know,” he told me during a recent interview. “It’s been about getting a ‘warm intro,’ and people brag about that — ‘Oh, you need to know somebody in order to get a meeting with me.’ My view is, that has led to the system being closed.”
Judge says this new fund aims to change that. “There’s an open forum on the website, there’s an open email address — just raise your hand and tell us about your company. We’ll take a look and we’ll take a meeting. And whether or not we invest, we’ll give you meaningful feedback about how we think you can improve,” he said.
The Opportunity Fund’s first fund invested in 75 companies, half of which were early-stage ventures. Launched in 2020, its portfolio now consists of five unicorns in addition to heavy hitters such as Greenwood, Brex and Cityblock Health. To date, it has seen seven exits.
Previously a part of Opportunity Fund’s investment committee before being tapped to run this rebranded effort, Judge seems to be aware of the challenge awaiting him. He aims to raise the $150 million for Fund 2 and invest it in at least 70 companies in the next three years.
His experience will also help: He’s a managing partner at Panoramic Ventures, a noted presence in the Atlanta venture ecosystem, and he previously co-founded the incubator TechSquare Labs as well as security company Pindrop.
TechCrunch+ recently sat down with Judge to talk about his new appointment, the fund’s potential role in the wake of Silicon Valley Bank’s collapse, and the wider changes that must occur to accelerate society’s move toward economic equality.
(This interview has been edited for length and clarity.)
What is the first thing that you’re going to do next in your new role?
Every day, we will still continue to support the current portfolio. There are 75 companies that are working hard to grow, to build products and sell products, and we’re interacting with them daily and weekly. We will continue to do that.
“Open Opportunity Fund’s legacy should be that we help prove to the world that diversity in the tech investing space is not only the right thing to do, but it is the profitable thing to do.” Paul Judge
And there are conversations with investors. We will continue to interact with other organizations that want to join us and join SoftBank in this mission.
We’ll also continue to invest. It starts off with sourcing companies and making sure we’re showing up at the accelerators, the HBCUs, everywhere diverse founders are, and meeting as many of these promising founders as early as possible, and having an open door.
One of the problems in Silicon Valley, traditionally, it’s been about who you know. It’s been about getting a “warm intro,” and people brag about that — “Oh, you need to know somebody in order to get a meeting with me.” My view is, that has led to the system being closed.
From day one, we’ve had an open forum on the website with an open email address. Just raise your hand and tell us about your company — we’ll take a look, and we’ll take a meeting. Whether or not we invest, we’ll give you meaningful feedback about how we think you can improve.
So when I say investing, a lot of it is meeting startups, understanding what they’re building, understanding the market, building our diligence, research about the market and about the category and about sizing, and then coming to a decision on which companies are fit for investment today.
And then the ones that are [in our] portfolio, [we’re asking]: How do we continue to help them? How do we help them find talent? How do we help them with best practices?
Aside from economics, what must be done to enact change within the venture ecosystem?
There are many layers to change that are needed, ranging from improving access to STEM education for minorities to providing equal access to broadband connectivity. Also, we have to continue to break down barriers to entry. Not only barriers such as access to the right networks to get warm intros for funding but also access to business development and partnership relationships that can help scale businesses.
Overall, one positive shift is that AI and natural language interfaces should help further democratize the on-ramp to programming and computing without traditional computer programming education and skills. If harnessed properly, this could increase minority participation in the tech industry.
Why is it important that the Open Opportunity Fund does cross-stage investing?
Earlier in the life cycle of a company is when, in general, there’s more opportunity for bias to exist in the ecosystem. As the company scales, there’s more data to help drive decisions.
It’s important for us to be present at every stage in the funding cycle. And then, as those companies grow, we grow with them. For example, take QuickNote: We invested in a seed round coming out of Y Combinator, and as that company is going to continue to grow, we continue to invest along with them.
The imbalance in the amount of VC funding that goes to minorities exists at every stage in venture funding, from pre-seed to growth. It is important for Opportunity Fund to be present at every investing stage to meet outstanding founders and participate or lead in those funding rounds.
This is a win-win in that it provides additional capital for overlooked founders while also providing Opportunity Fund with the ability to invest in some of the most promising entrepreneurs.
Silicon Valley Bank was a major cultural player for diverse founders. In the wake of its collapse, are there any plans for the Open Opportunity Fund to fill that gap?
Absolutely. We put together a really interesting community opportunity for 75 companies — that’s over 100 diverse founders in our community. They’re all in the same Slack and the same email groups.
We also do a number of events to build this community. As minorities are building their companies, [it’s important that they] have support and aren’t building in a silo. So the capital that we provide is one thing, but really, that support and that peer group is another: When you can look across the room and see 70 other people who look like you and are going through some of the same challenges of scaling a company.
What do you want your legacy at the Open Opportunity Fund to look like?
Open Opportunity Fund’s legacy should be that we help prove to the world that diversity in the tech investing space is not only the right thing to do, but it is the profitable thing to do.
We should show that diversity in tech doesn’t compromise quality and returns, but it instead is a path to increasing quality and returns. This goes for diversity in every layer of the ecosystem: ownership, management, team and portfolio.
This is similar to what we are seeing in sports. Over the last several decades, there have been more minority players on the field, but very few minority coaches and almost no minority owners. In sports and tech, equal representation just isn’t present throughout every layer. We aim to exemplify diverse participation at all levels and the resulting excellence in performance.