HBCUs Tapping into Uncommon Venture Capital Investment Opportunities

However, now in support of stronger commitments to keep HBCUs afloat, new efforts are being made to increase the participation of those schools as limited partners in venture funds — a potential revenue opportunity long denied to predominantly Black institutions, CNN reported.

“The time, the moment, is now, given HBCUs obviously have a commitment to educate Black and African American students,” said Keon Holmes, managing director at investment consultant firm Cambridge Associates, CNN reported. “The events of this year really highlight the opportunity we have to invest in a diverse way.”

When a venture firm raises a fund to invest in startups, the fund is supported by partnerships that typically include large institutional investors, like university endowments or nonprofits and high-net-worth individuals and can range from several million to $1 billion — while limited partners invest in the fund, according to CNN.

Firms such as Sequoia Capital, one of Silicon Valley’s most high-profile VC firms, have started reaching out to HBCUs to build relationships as a stepping stone to invite them to participate as LPs in future funds, according to a source familiar with the matter.

“The ability to create a wider base of [limited partners], specifically HBCUs, that’s very important,” Hampton University alumnus and founding managing partner Lo Toney of Plexo Capital told CNN. “The ability to increase diversity within the ranks of firms top to bottom, from the analyst all the way to the general partner, and the ability for these larger funds to start looking at more deal flow led by Black entrepreneurs, these things are all critical.”