On Tuesday, Living Cities’ Blended Catalyst Fund (BCF), announced that it has made a capital investment in Aux21 Capital Partners (Aux21), a newly-formed, BIPOC-owned seed-stage venture capital firm that supports entrepreneurship by 1st and 2nd generation U.S. immigrants and their communities, by increasing access to early stage growth capital and sourcing diverse micro-funds that invest in underrepresented entrepreneurs.
Aux21, led by founders Chinedu Enekwe and Mark Fleming, believes “companies must have a global strategy embedded in their DNA to maintain a competitive advantage in their respective sectors.”
BCF’s investment in Aux21 is part of Living Cities’ Capital for the New Majority strategy (CNM), a multi-faceted, long-term vision for how capital can be used to address the challenges faced by Black and brown fund managers and improve their ability to make equitable capital allocation decisions to, ultimately, increase support for founders of color and achieve better outcomes for all people living in U.S. cities.
The BCF team was introduced to Aux21 co-founder Chinedu Enekwe through Living Cities’ Builders & Benefactors network, a community of fund managers of color in the private equity and venture capital space.
“We are excited to partner [with] Living Cities,” said Chinedu Enekwe, Founder and General Partner at Aux21 Capital. “The investment by BCF will accelerate Aux21’s speed to market and ability to hire top talent in the early innings of our firm’s inaugural fund.”
Living Cities
Founded in 1991, Living Cities is a cooperative of the world’s largest foundations and financial institutions, working across sectors to connect “those who are willing to do the hard work of closing racial income and wealth gaps.”
Its roster of member-supporters includes major U.S.-based multinational financial firms Bank of America, Deutsche Bank, MetLife, Morgan Stanley, Prudential Financial and Wells Fargo. Living Cities is also supported by leading foundations, including the Bill & Melinda Gates Foundation, the Ford Foundation, the Robert Wood Johnson Foundation, the Rockefeller Foundation and the Surdna Foundation.
Living Cities partners with cross-sector leaders in cities nationwide to “imagine and create an America in which all people are economically secure, building wealth and living abundant, dignified, and connected lives.”
BCF is one of two structured debt funds that Living Cities manages to support mission-oriented investments. BCF is a $37 million fund that focuses on closing the racial wealth gap by supporting job, income and wealth development for people of color. Living Cities’ other investment vehicle, the Catalyst Fund, is a $38 million fund that is fully deployed, having made 19 investments, 12 of which have matured and been fully repaid.
Since its close in 2008, Catalyst Fund financing has supported more than 2,400 units of affordable housing, 585,000 square feet of commercial and community space, more than 60 small businesses, social services for 3,000 people, and employment for more than 2,100 people. In February, ImpactAssets50, a showcase of leading social impact fund managers, recognized the Catalyst family of funds as one of the world’s top impact funds for a ninth consecutive year.
Recent research finds that while entrepreneurship nearly all net job creation in the U.S., particularly high-growth businesses, while total gross receipts at firms owned by people of color are growing faster than white-owned firms, at least 77% of venture capital is invested in college-educated, white men.
Similarly, Living Cities writes, despite having professional experience and credentials equal to that of their white peers, or even greater, fund managers of color continue to face systemic barriers that prevent their access to larger markets. As of 2019, less than 1.3% of global financial assets under management are managed by women and people of color.
Meanwhile, recent research suggests that disparities in business ownership have widened since the onset of covid. Per Living Cities, between February and April of 2020, the number of working African American business owners in the U.S. dropped by more than 40 percent, Hispanic-owned businesses by 32 percent, Asian-owned businesses by nearly 25 percent, and immigrant-owned businesses by 36 percent.
“As applied researchers, we see capital as a key driver of social change and an important tool needed to shift who gets to make capital allocation decisions in the market,” said Living Cities Managing Director Demetric Duckett. “We have learned that traditional capital market channels have failed fund managers of color, so we are committed in our partnership with Aux21 to leveraging our unique risk models to test innovative investing approaches to better address their realities and expand their ability to make different decisions.”
BCF is also expanding its own support of fund managers of color. They point to research from the Library of Congress (and other sources) showing that managers of color make different capital allocation and operational decisions than white managers do. Investing in these fund managers will, they hope, have a concomitant effect on entrepreneurs of color, in which these fund managers may also invest.
Black Star Fund
Apropos of diverse fund managers making early stage investments in diverse entrepreneurs, Tuesday also brought news of a commitment from Black Star Fund, a fund calling itself “the antidote to the so-called 2% problem in Silicon Valley,” explicitly scouts startups with diverse founders.
The fund’s CEO, Kwame Anku is a co-founder of the Black Angel Tech Fund, a mentor for the AT&T Aspire Accelerator for telecommunications-based startups (whose program participants have included 70 percent women-led and 51 percent minority-led companies), and an Aspen Ascend Fellow at the Aspen Institute.
On Tuesday, Black Star Fund made a significant six-figure equity investment in ReviverMX, Inc., developer of what might be considered a “DMV disruptor,” the world’s first digital license plate.
Black Star, known primarily for taking stakes in early stage tech companies founded by African Americans, cited Reviver’s digital license plate solution as an “industry-changing technology with the potential to affect tens of millions of people on the planet.”
“I can envision digital license plates becoming standard equipment around the world.”Kwame Anku, CEO of BlackStar Fund
Currently, Reviver’s plates, which work through an encrypted app, can instantly and without paperwork renew auto registration, display varied designs and banners, flash stolen and amber alerts (DMV and police are informed ASAP), and tell you where you left your car and if it’s been driven outside a selected radius. By next year, says Reviver co-founder Neville Boston, they will likely be able to pay tolls, parking, and summon roadside assistance.
Reviver’s Rplate and Rplate Pro, currently being sold in California and Arizona, are legal for driving across all 50 states. Eleven other states are actively engaged in adopting Reviver plates in the near-term. The company is currently selling its DLPs through multiple channels including car dealerships, affinity groups such as professional sports teams and college alumni associations, and to small-to-medium commercial fleets.
Other Black Angel portfolio companies include blockchain-based sports technology and stadium analytics firm Bandwagon (which calls itself an “identity infrastructure” company), and next-generation VR entertainment platform CEEK VR.
