Funding startups by underestimated entrepreneurs is the mission of Backstage Capital. Arlan Hamilton, founder and managing partner, says, “We invest in the very best founders who identify as women, people of color or LGBT in the United States. I personally identify as all three.”
Christie Pitts, Backstage Capital’s general partner, talks about the early days of the Los Angeles-based company and how she got involved: Working in the music industry, Hamilton learned about startups and networked with investors and entrepreneurs. When she asked investors to consider new companies, she noticed a disturbing pattern: “Founders always got a meeting if they looked a certain kind of way and went to certain schools, but if it was, for example, a Black woman who had gone to the same schools, like Stanford and MIT, she wouldn’t get a meeting.”
Hamilton also noticed that since these underestimated founders were optimizing limited resources, backing them could lead to a sizable return on investment.
Working for Verizon Ventures, Pitts learned about Hamilton’s startup and met with her, thinking the fledgling company would be a perfect match for Verizon’s strategic focus on diversity. That didn’t work out, but in August 2017, Pitts left Verizon to become Hamilton’s full-time partner.
Backstage Capital’s portfolio
“We see healthy performance from our portfolio companies,” Pitts says, praising Backstage Capital’s entrepreneurs as resourceful and creative in meeting challenges. “They don’t get the same amount of money that other startups get, so they have to come up with other strategies to be successful.” Currently, Backstage Capital “has invested in 200 companies led by underrepresented founders,” according to their website.
Interviewing founders while still raising funds, Pitts says, has given the partners “a unique sense of empathy because we know what it’s like to want to do something and not have the money to do it.… When she started Backstage, Arlan went all in on this idea. She changed careers without a safety net, to the point where she became homeless in the pursuit of starting Backstage.”
Meet one of Backstage Capital’s clients
Dawn Dickson, an African-American serial entrepreneur, is the founder of six innovative companies, including Flat Out of Heels and PopCom. She’s one of the founders Backstage Capital has enthusiastically invested in.
In 2011, while living in South Florida, Dickson got the idea for Flat Out of Heels during an event she was attending. After spending hours on her feet in increasing levels of pain, she thought comfortable, immediately available roll-up flats could meet a real need. She explains, “I wanted to sell the shoes in vending machines in places where women are actually experiencing the pain point,” like nightclubs, airports and concert venues. Traditional snack dispensers, however, wouldn’t do. Unable to find suitable equipment, she decided to design her own smart vending machines, which led to the founding of her fourth venture, PopCom. A few years later, the need to develop hardware and software led her to Backstage Capital.
Dickson had started Flat Out with $100,000 from her personal network, but realized she would need more money to produce vending machines that could take credit cards, track inventory, send emails and engage with customers via artificial intelligence and facial recognition. Anticipating future possibilities, she says, she also wanted to use “technology with an opt-in to verify a customer’s identity to dispense a product that’s regulated, like alcohol, cannabis, tobacco or pharmaceuticals.”
A success story
An investor she contacted introduced her to Hamilton, who was just starting Backstage Capital. The new firm invested $95,000 in Dickson’s companies, which helped Flat Out acquire inventory and ramp up marketing efforts, and PopCom to develop their now-patented PopShop machine.
In 2013, Dickson had placed her first smart machine for a beta test in a concourse of Hartsfield–Jackson Atlanta International Airport, where it would be highly visible to travelers with sore feet. In 2019, working with companies interested in using them, she began mass production of smart kiosks to roll out later the same year.
She encourages female entrepreneurs to continue to play on women’s unique advantages: viewing things holistically and being compassionate and understanding rather than engaging customers on a purely transactional basis.
This article originally appeared in the Summer 2019 issue of SUCCESS magazine and has been updated. Photo by Daenin/Shutterstock