In a blog post today, Andreessen Horowitz revealed it is starting a fund intended to invest in underrepresented and underserved creators. The Talent x Opportunity (TxO) fund, which a16z says has been in the works for six months, begins with $2.2 million in donations from partners in the firm. In the first year, TxO will be investing in a select number of seed-stage startups and will grow more in size.
Their goods may be non-tech or tech; they will come from underserved areas (welcome to all backgrounds); and hopefully, their company should have an innovative concept, target market, and/or a little momentum to demonstrate the opportunity and potential, “the firm wrote in the post.
A16z says TxO’s mission is to be “like an accelerator for the unknown, where the effect is to get VC capital,” offering networks and training programs for entrepreneurs. The company has not commented on whether it will invest in follow-on rounds for startups.
A16z has $12 billion in cash under administration through its accounts, and from a monetary viewpoint, a $2.2 million investment is not revolutionary, but TxO is noteworthy for the way the company chooses to spend it.
In exchange for equity in the enterprises, the firm will invest the donation-based fund. Any returns to financing future entrepreneurs will remain in the Fund.
TxO’s announcement comes in the aftermath of last week’s Minneapolis police shooting of George Floyd and related police brutality amid demonstrations around the country. Others in the venture capital industry hurried, after days of unrest, to express support for the Black Lives Matter campaign. SoftBank, which recently had a racial uproar with one of its portfolio firms, unveiled this week a $100 million wealth raise fund to invest in color entrepreneurs.
Many say that the tech community should not take the deaths of countless Black men and women to change the way they invest in diverse entrepreneurs. Consequently, the scramble for measures may seem more opportunistic than well-intentioned.
The larger venture capital group essentially has to do two things: hire the people and wire the money. It’s not complicated: Invest in the pioneers of Black. You don’t need to invest in the founders of ALL Black.
Some companies are brainstorming investment pre-seed funds targeted at companies led by black founders. One company, which refused to comment because the efforts are still too early in the planning phase, said the fund could focus exclusively on companies from historically black colleges and universities.
A16z itself refused to discuss whether it is going to source companies, instead of sticking to its blog post. In the post, the company said it has spent the past six months discovering the “names you wouldn’t expect in Silicon Valley on secret genius founders.’
But how effective it is in the fund’s aim to invest in more diverse companies is crucial to the sourcing approach of the company. Venture capital networks are largely male, and white, therefore specific pipelines are needed. Will it originate with HBCUs? Will it attend talent-finding conferences in Black Tech? Will, it co-invest with Black-led companies such as Cleo Capital, Backstage Capital, Precursor Ventures, and Harlem Capital?
Much of the annual operating fees are donated by the Cultural Leadership Fund to charities that promote more African Americans into tech. The TxO fund is different because it will not deliver returns to LPs, unlike CLF. Any returns to reinvest will go back into the fund.