Alloy Alchemist Fund I Founder Diversity
The venture capital industry is widely known to be a terrible supporter of minority founders. Female founders attracted just 2.1% of total venture capital in 2022. Black founders fared even worse, raising just 1% of total capital during the same period, dropping from 1.3% in the previous year.
The numbers are not inspiring.
Historically, banks have also provided lower levels of funding and support to minority populations. While some of the structures that led to these barriers have been addressed, the industry still does not provide consistent levels of service across all populations.
As we were preparing for our annual Alloy Alchemist Fund LP meeting, we were surprised by the degree to which we have broken from the norms of both venture capital and banking, investing in diverse founders 50% of the time.
Investing Where We Are and Need to Be
The Alloy Alchemist Fund is a strategic extension of our bank LPs and Alloy Labs members. We invest in opportunities that we keenly understand because of the insights gleaned from across our bank community. We invest in companies that we can disproportionately impact by accelerating their depth and expansion across banks.
We also invest in opportunities that provide inroads into markets that our banks are not capable of, allowed to, or successful at serving. That means we have a mandate to pursue frontier tech and markets and also find opportunities among the underserved populations; especially minority groups.
Underfunding these communities results in underserved markets and uncaptured opportunities. Opportunities are dismissed as too niche with a tiny total addressable market (TAM). In venture, though, what often starts off looking like “niche” can lead to the largest returns.
Investing in underserved communities is not just right to do; it is financially prudent.
Fund I Founder Diversity to Date
The Alloy Alchemist Fund has invested in 16 companies thus far. Amongst that set of founders are teams with the following diversity stats:
The Alloy Alchemist Fund has built a diverse portfolio of companies, built by diverse founders.
So far, our capital allocation to underserved founders far exceeds the very low bar set by our industry. The capital distribution to-date demonstrates good progress but with many investments still to make out of our initial fund, we have lots of opportunity to reach new founders and communities.
Diversity is not part of our investment criteria. We don’t aim to achieve diversity outcomes when making investment decisions. We simply look for founders tackling unsolved problems, with unique perspectives, for underserved customers. Those founders are referred to us by our network of venture partners, advisors, and colleagues; a group that is 44% non-male, 50% people of color, and 19% LGBTQ+.
Diversity is not a mandated outcome but because it’s an embedded component throughout our process, the results have followed.
As long as the market remains inefficient and underfunds founders from these communities, there will be outsized risk-adjusted opportunities for funds that make contrarian bets into these so-called “niche” segments. We intend to partner with more diverse founders solving hard problems from within and across their different communities.
If this sounds like you and you see a strategic fit with our banks and fund, please get in touch with us. We’d love to partner with you.