We Raised $50m+ To Back New Venture Capitalists Who Don’t Look Like Me

It’s weird to try and help fund people who are going to compete with me, right? Well, I couldn’t be more excited to do just this.

The 10 initial Screendoor Venture Advisors

Ok, the headline is announcing Screendoor, a $50m+ collaboration of some like-minded early stage investors to back new VCs from underrepresented groups (basically people who don’t look like me). Alex Konrad/Forbes covered the announcement and has some good details, plus our own blogpost. This initiative matters a lot to me because we’ve purposefully designed our fund (Homebrew) to not grow in partnership size and not be multigenerational. So in some ways, alongside the companies we’ve backed directly, Screendoor represents the best way for our values to live on beyond our firm. A few additions to the links above that I think are worth emphasizing or sharing our thinking.

Why Now?

Satya and I have been thinking about ways to punch above our weight in this area since we started Homebrew, but in order to have the credibility to do so, needed to get our own firm built first. We want future “Homebrews” to be started by all different sorts of people and believed adding capital commitments to mentorship would be the best way to accomplish this. It can’t just be about supportive tweets or ‘office hours’ – write the damn check.

Besides hitting a point with Homebrew where we felt like we could add on Screendoor’s responsibility, the events of the last few years galvanized our desire to work on economic inclusion. And frankly, much of the venture industry is moving too slowly, making incremental hires or diluting the impact of their diversity statements with self-serving content marketing efforts. I know this is ‘apples and oranges’ comparison, but it always makes me laugh when I hear my peers say “diversity is important but it takes time to implement” while also watching my industry quickly embrace any new way to make money (SPACs! Crypto!).

Screendoor is 100% an economic vehicle, not a philanthropic one, but we decided to make it ‘no fee/no carry’ so that all the profits flow back to the investors, not us middlemen. And we’re all LPs (investors) in the fund itself, which means we have skin in the game.

Partnering With Other VCs To Get This Done

It was important from early on to get some of our favorite other firms involved. Homebrew may have helped catalyze and structure Screendoor, but it’s bigger than us. It’s stronger because of the people involved and their relationships within our industry. It proves that firms which often compete in the market can come together for a bigger purpose and mission. And it augments the lived experiences that Satya and I possess with other men and women from different backgrounds, cultures, etc to create a broader value proposition for the firms we’ll be backing.

Making Sure The Capital We Raised Was Additive

This one is a bit subtle, but for us, meaningful. If the $50m+ raised by Screendoor was pulled from sources of capital that was already earmarked for underrepresented emerging managers then all we’d be doing is transferring it from one allocator to another, not growing the pie. This is specifically one of the reasons we fashioned it as an economic vehicle, not a philanthropic one. The LPs backing us are all heavily committed to the venture ecosystem but have deployment models which often make it difficult for them to invest in smaller, first time funds. Why? It’s typically an issue of their check size vs fund size. A first time manager might be raising a $5-$50m fund but large institutional investors write $10m, $25m, $50m+ checks into venture funds. Also, they are looking to back mangers who have track records, etc. Screendoor hopefully will help solve the ‘chicken and egg’ issue of “you want to back managers with track records but I need to raise a fund to get a track record!” And over time, I believe many Screendoor managers will create direct relatonship with our institutional LPs.

Honoring Others Doing This Work (and Hopefully Collaborating With Them Too)

I call it “Columbus’ing” – the tendency in tech for individuals new to spaces already inhabited to pronounce “look what I discovered!” as if they’re pioneering something completely radical despite the fact others have already been there doing the work. We honor and appreciate everyone tackling diversity in tech. We want to collaborate with them, learn from them, go to *their* spaces to talk about Screendoor. We’re going mess some stuff up probably. We’re going to be slow to respond to everyone while this gets started (did I mention we’re hiring) but we’re 100% committed and going to hopefully make this an evergreen effort, not just a one off fund.

I’ll try to add new questions/answers here as they occur to me or you ask them. And please visit Screendoor for everything you need to know about applying for backing from our group.

Update 3/20/22

We announced Screendoor’s first nine investments, an increase in our fund size and our first hire. On Twitter, Geri Kirilova asked two questions that I offered to respond to:

1) How did you get 14+ huge institutions with $200B+ AUM to allocate team bandwidth to an $87M program?

We consider Screendoor an economic vehicle with a societal mandate. Our offer to participating LPs was something to the extent of “we believe there’s tremendous economic opportunity in backing underrepresented emerging managers in their early funds. We’re [the 10 founding Screendoor VCs] going to commit our own capital (as LPs in Screendoor) and our ongoing time to this effort (there’s no fee or carry structure for this first vehicle).”

They’ve pledged to commit time ongoing (in addition to capital) because they endorse the societal mandate Screendoor represents (in addition to the economic opportunity) and because they appreciate the chance to build relationships early. I anticipate that over time many of Screendoor’s LPs will become direct LPs in the firms we’ve backed. So my hope is that the dollars they commit to “Screendoor firms” will be larger than Screendoor itself. We have our own growth ideas but ultimately we want the universe of LPs to invest in Screendoor-backed funds (and we’ll be working towards that end, even bringing LPs into the conversation who didn’t yet participate in Screendoor itself).

Of course the other part of this “how” is the 10 of us (and the first LPs to commit), putting our own credibility into this. The ask is easier for LPs to understand when it comes from a manager group that many of them have successfully been in business with for 10+ years.

2. How do you mitigate potential conflicts of interest? [in fund selection]

Ultimately investment recommendations are made by a three-person committee currently comprised of two of the 10 VCs and one of the LPs. To start the process, every firm complete our open application and every application is reviewed by a Screendoor team member (currently there’s just one). From there, firms who move forward in the process start by talking with one or more of the participating VCs (like me). We try to match them with someone they don’t know well (if they have existing relationships with some of us) and only combine other feedback to the process once that initial conversation has occurred.

Between the first conversation and the final recommendation, a firm may talk with another 1-2 SD VCs and always the three investment committee members (unless one of the members has already spent a lot of time with the applicant for some other reasons). We do references among the 10 of us and outside of Screendoor where applicable (firms often provide us references and/or we backchannel people we know).

No one participating VC can approve or deny an applicant. Screendoor LPs (outside of the investment committee member) are generally only made aware of an applicant if the recommendation is to fund them, otherwise we don’t want our passing to influence the LP at all in future conversations with the manager. I’m sure exceptions exist here – sometimes a SD applicant will already be talking with a Screendoor LP and will let us know that, etc. But by and large, the process is designed to not present negative decisions to the LP base.

In some cases we’re funding firms that are not previously known to us in our ‘day job’ – especially when they’re specifically focused on verticals like climate. Many other times one or more of us do know the managers, maybe even have been on cap tables with them. I’d consider this to be a ‘feature’ not a ‘bug’ in the process, *if* we’re making decisions based solely upon our best of their expected performance as a fund and their desire to build a lasting institution (we care a lot about backing firms, not just funds).

Besides having some skin in the game via our own investments in Screendoor, I think the more important element is that none of us are afraid of funding competitors. That is to say, if we’re not backing people who are going to grow and succeed in the market, we’re doing a disservice to Screendoor’s stated mission. We also all know each other well and will call bullshit if we smell it.

It’s also important to note that outside of providing traditional reporting back to Screendoor, none of the managers we back are obligated (or even asked) to send dealflow or share deal information with the participating VCs. This isn’t a scout fund and it’s not about using SD to access anything privileged.

So overall I think we’ve been pretty thoughtful. That doesn’t mean our processes aren’t always improving and I’m not foolish enough to think there aren’t unconscious biases that we always need look out for as we grow.