Minneapolis-based venture-capital firm for founders of color aims to raise $50 million

As they researched the funding gaps that communities of color face, Paul Campbell and Chris Brooks kept coming back to the same troubling fact.

Less than 3% of venture-capital dollars in the U.S. go to startups with Black or Latino founders.

"We were like, 'We need to solve that,' " Brooks said.

That's what they are aiming to do with Minneapolis-based Brown Venture Group. It's not only unusual for a venture-capital firm in that its founders are Black, but it's also Minnesota's first venture-capital firm that is focused exclusively on investing in Black, Latino and Native American entrepreneurs.

Founded in 2018, it's one of a small, but growing number of investment funds dedicated to backing founders of color around the country.

For its inaugural fund, Brown Venture Group has set an ambitious goal of raising $50 million, which would be quite large for any Minnesota-based venture-capital firm and would make it one of the largest funds in the U.S. with a diversity mandate. New York-based Harlem Capital, for example, raised $40 million in its debut fund in 2019.

"It's definitely a big goal, but we don't think it's unrealistic," said Campbell, who added that they are talking to investors from Silicon Valley and Wall Street as well as here in Minnesota. "We feel very good about the interest we've received."

Brown Venture Group started raising funds in June, and Campbell said they are already a quarter of the way to $50 million. He said they expect to hit the goal this spring or early summer.

They plan to invest in startups in various industries across the U.S., but hope a number of them will be based in the Twin Cities.

Campbell and Brooks noted that the energy following the police killing of George Floyd has brought more awareness to racial and economic disparities, and increased financial commitments from corporations and other groups to address those issues.

"George Floyd's tragic murder has turned into an opportunity to have conversations that nobody was having before," said Brooks. "And for us, it's turned into opportunities to have conversations about investments and creating wealth in communities of color that just haven't candidly been had this way."

Campbell is a St. Paul native who has worked in telecommunications and sales, with previous stints at AT&T, Sprint and Oracle. He has started several businesses and has been a business consultant, too.

Brooks, who is from south Minneapolis, has a diverse resume that includes executive roles at nonprofits, a diversity coach, corporate consultant and a chaplain for Hennepin County juvenile courts.

To beef up their team's expertise, they brought two more Twin Cities executives on board as partners last year. Jerome Hamilton is a former 3M and Stratasys executive and Chris Dykstra is CEO and founding partner of software company Warecorp and a serial entrepreneur.

"I think a really important aspect of our work is developing the entrepreneurs themselves who haven't had a shot," said Dykstra.

They plan to do that by using a "venture studio" model in which they will work to connect founders to mentorship, training and partnerships to help them flesh out their ideas and scale up.

They know that many entrepreneurs of color don't have the generational wealth of many of their white counterparts to raise early-stage funds in what is often known as a friends-and-family round that typically comes before the seed-funding phase. That means it's also more challenging for them to build up a track record to attract venture-capital investment.

"We just always had to hustle that much harder," said Campbell, noting that he often had to bootstrap his companies and was turned down for bank loans when he was starting out.

"Traditional venture capital hasn't worked for communities of color," he added.

To help fill in that gap, Brown Venture Group aims to provide that initial, pre-seed check of between $10,000 to $100,000 for some entrepreneurs who are just starting out in addition to issuing larger checks of $1 million to $3 million for more mature startups.

In the last year or so, Timi Ogundipe, who was born in Nigeria and now lives in Fridley, has met with about a dozen venture-capital firms as he looks to raise his seed round for his startup, Safe Resell. Launched in 2019, his website provides a cashless system for buying and selling items.

His conversations with Brown Venture Group felt a lot different from the rest, he said.

"With Brown, I was able to be myself," he said. "I don't like feeling like I have to impress anybody and that's what I loved about Brown. The first meeting, it felt like I've known them for a while."

The other firms grilled him on his numbers and many assumed he had done or could do a friends-and-family round of funding, he said. But Brown didn't make that assumption. They understood why he was solely self-funded. He added that Brown seemed most focused on his vision and his passion.

Safe Resell is one of the five portfolio companies that Brown Venture Group has committed to so far, and the first one based in the Twin Cities. The others are based in Colorado and Florida.

Brown is also the lead investor in the seed round for Ecolution KWH, which was founded by Latino entrepreneurs and aims to harness unused energy from trucks and trailers into electricity. Brown's specific monetary contribution was not disclosed.

While they are talking to investors and startups across the U.S., they hope the Twin Cities region will play a big role in their efforts.

"We're a Twin Cities-based company," said Brooks. "Paul and I were both born and raised in the Twin Cities. We want to see our city solve this problem. We want the story of the Twin Cities to change from Black boys don't graduate from high school and police murder Black people to, 'Wow, they invested in entrepreneurs of color and there are amazing businesses springing up out of that place.' "

Campbell added that they think there's a lot of untapped potential.

"What would it look like if we were to establish a Fortune 500 company here in the Twin Cities founded by a Black or brown founder?" he said. "That would be an incredible story."

Kavita Kumar • 612-673-4113