Black Startups Could Benefit From New $150 Million Investment Fund

SoftBank has launched a $150 million fund aimed to provide fresh capital to Black and Latino startups.

The Japanese technology investor is also rebranding the effort, calling it the Open Opportunity Fund (OOF). The shift is intended to open access for other outside limited partnerships to invest in the fund opposed to it being mainly supported by SoftBank.  And investor and entrepreneur Paul Judge will be the new fund’s chairman. He and others will become co-owners of the OOF with Softbank as a limited partner.

Plans call for the second fund, also known as Fund 2, to surpass the scope of the initial effort. The new fund hopes to deploy the $150 million within three years. The first fund launched in 2020 invested $100 million in 75 companies led by Black and Latino founders, including Greenwood, Career Karma, and Praxis Labs.

Judge told BLACK ENTERPRISE via email that SoftBank plans to remain committed to the mission with the new fund.

“One of the key evolution points with Fund 2 is that we are opening access to other LPs. We are excited by the early interest and commitments shown by a wide set of potential investors.”

He added: Fund 2 hopes to earn commitments from various types of investors, noting several corporations, foundations, and institutions have made pledges to invest in minority businesses.

Judge added minorities and HBCU endowments have not had great access to the asset class of tech venture capital funds. As part of closing the overall wealth gap,  Black individuals and institutions need to have access to strong investment opportunities as well.

“One of our goals is to help close that gap by providing access to qualified Black individuals, family offices, and HBCUs to invest in the Open Opportunity Fund.”

The capital support is needed. Financing has become increasingly difficult for Black founders recently. Consider, BE reported Black founders raised an estimated $2.254 billion out of the $215.9 billion in U.S. venture capital allocated in 2022.

It was also revealed financial backing dropped 45% for those businesses last year, making it the largest year-over-year decline for Black entrepreneurs. The numbers offer a grim peak of how challenging VC funding can be for Black founders and business owners.

Simultaneously, many of the nation’s largest corporations vowed tens of billions of dollars roughly three years ago to support economic growth and new opportunities for Black businesses and individuals. However, a hefty amount of that funding has purportedly not yet materialized.

The OOF plans to have a similar ratio and number of Black and Latino founders in the second fund as it had in the first, says Chad Harris, vice president for Fund 2. In the current portfolio, he says there are over 40 Black founders and over 30 Latino founders.

“This means we will reach almost 150 Black and Latino founders in the combined portfolio.”  Harris works with Fund 2 vice president Cami Osunsanya.

The OOF will target a broad range of Black companies to support with the funding  Harris says diverse entrepreneurs are solving some of the world’s hardest problems.  For instance, he pointed to work being done by Praxis Labs on diversity, Mayveen on wellness & beauty; and Altro, Greenwood, and Welcome Tech  around financial tools.

“Some of these problems are not about the diversity lens but instead are amazingly talented entrepreneurs solving hard problems like Lumu in cybersecurity or QuickNode in blockchain.”

He noted the existing portfolio includes companies operating within financial technology, healthcare IT, enterprise software, education tech, blockchain, and artificial intelligence.

All told, SoftBank is convinced that it can continue to help Black founders among others to grow. This news release shows some metrics on the progress that has been made.

Judge shared with BE that OOF has a proven team and is a fund that has shown that investing in minority companies can also deliver successful returns.

“It is not only the right thing to do, it is also a profitable thing to do.”

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