VC10X - VENTURE CAPITAL PODCAST
Venture Capitalists (VCs) & Angel Investors share their investing thesis, screening process, value-add, exits, and more. Hosted by Prashant Choubey (@ChoubeySahab on Twitter)
Darrel Frater is an Investment Associate with Visible Hands VC, where he assists the Visible Hands team in managing a portfolio of companies. Before Visible Hands Darrel was a Venture Fellow at Score3 Ventures, where he helped underrepresented founders raise over $1 million in startup capital, and mentored over 60 founders since joining in 2019. Darrell is a three time founder with his latest company being a live-streaming platform for networking called The Club, which he founded in 2020. He is an MBA graduate from the College of New Jersey, where he studied strategy, innovation and leadership.
We talk about:
Darrel’s story & how he got into Venture Capital
I started out basically learning from my father about entrepreneurship. He's an immigrant from Jamaica, and all my life he was entrepreneur and just really instilled the importance of entrepreneurship my life. And when I learned about venture capital in about 2017, it was an extension of entrepreneurship that got me really excited. I read a book called “Why Should White Guys Have All the Fun” by Reginald Lewis, and that really sparked my interest in venture capital and being able to not only just have impact on the business that I built myself, but being able to invest in other businesses and have impact in supporting entrepreneurship in other ways.
That kind of set me forth to have an interest in going into venture capital after reading that book. And since then, I just did everything I can to position myself to break into venture. I went back to school to get my MBA, where I studied strategy, innovation and leadership at the College of New Jersey. I started a few startups myself, I worked with a few accelerator programs, did a few angel investments, and really just was well rounded in everything about entrepreneurship, start up, investing and venture capital.
After my MBA, literally two weeks after I graduated, I had the opportunity to apply and join the team at Visible Hands VC as an investment associate, myself and 500 other people also applied. But somehow I made it through and it's just been an amazing journey. So I've been officially in VC for about ten months now, working at Visible Hands.
To give you an overview, Visible Hands is a pre-seed venture capital firm investing in underrepresented founders. So we focus on diversity, women and founders of colour, building scalable technology solutions. We make investments through our accelerator program. But it's been amazing working with the team and I'm just excited about the great work that we're doing and the impact we're having on the startup ecosystem.
Increasing diversity & inclusion in venture capital
The facts are out there that less than 2% even are given to black and brown founders. And we are just really excited that we get to play in a space where we have raised our fund one, which is a $10.5 million fund one, and we're deploying capital to black and brown women and underrepresented founders.
Just being out there and working on providing value to the ecosystem is our strategy. We are very open to connecting with founders, whether we invest in them or not. And we're really active in regards to having a presence online with our programming and then just being very open to founders just because there's a strong need in the market.
These founders need capital. And we chose to make these investments and to invest in this space because it's being overlooked by the traditional venture capital industry. And since we're solving a major pain point for these founders and providing the capital and resources they need to build their businesses, it's been really easy for us to build a brand because we're actually doing the work and are helping a tremendous amount of founders each year.
We're excited about the work that we're doing and we've invested in some amazing founders. We look to continue doing this great work of investing in underrepresented founders because they're just very talented, but many times they don't have the resources or opportunities to be able to start their businesses and get investment.
How does the Visible Hands accelerator work?
We primarily make investments through our 14 week accelerator program. With that program, people apply and they are able to go through our application process where we invest up to team. We use a two check model, first check being a 25K investment and the opportunity to receive up to an additional $150K capital from our fund.
That's the primary way of getting capital resource from us. But most recently we've been partnering with other organizations to launch accelerated programming and other fellowship programs. So when we're working with Google for startups and we've recently launched our VHLX program which is for Latino Latinx founders, so for that program we finalized the selection and we're getting ready to start that pretty soon.
We have partnerships with Amazon working with their accelerators for black founders and soon the next program will be working with them is with their accelerator for female founders. Then we have a number of other programs that we're going to be spinning out with other partners in various cities and we're just excited about having our core accelerator as well as these new programs that we're spinning out with our partnerships.
What’s the role of the advisory committee?
One of the benefits that we are able to provide to our founders is our extensive network and that comes through our various advisory committees. So we have a number of professionals, whether they be prior startup founders, executives, VCs and others within the startup ecosystem, they play important role by being able to help our founders do mentorship, introductions, advice and also help our fund by just having a group of talented people that we can bounce ideas off of.
Our advisory committees play an important role for visible hands and have been very important for us as we have built out our programming and seeking to raise even more capital for our founders to invest in. So, yeah, our advisory group are amazing and we're excited to have them in our corner.
How do partnerships with JP Morgan Chase and Bank of America function?
As a venture capital firm, we have an interesting structure. So most venture capital firms, they raise capital through their fund and then they take management fees and whatever that management fee is, they use it for operating their business. So for us, we have a staff of 18 staff members and we just raised $10.5 million fund. So taking management fees on that is almost impossible to staff a full team of 18 people.
We have a unique structure where we also raise capital on our PBC or Public Benefit Corporation and JP Morgan Bank of America. These institutions have supported us and make contributions to our PPC to be able to help us operate our fund and pay salaries and operations for the programming.
What sectors Visible Hands invests in?
We're completely industry agnostic, just really looking for talented founders at the very early stage led by a woman or founder of colour. We are looking for companies that are venture scalable, so the potential to grow into a large company with a potential large exit, we're looking for talented founders that have that ambition to build something big and meaningful and solving meaningful problems in this world.
What are the benefits of Visible Hands accelerator program?
With our 14 week accelerator program, it starts off with a one week in person orientation. This year we're going to have it in Tulsa, Oklahoma. And in that one week, the founders are getting to know one another, they're getting to know the staff, and we're doing programming and discussions to really talk about topics and things that can help them at the early stage of their business.
Then after that, for one week in person orientation, each founder gets paired with a staff member on our team. And week over week, they are setting goals and reaching milestones within their business. And we're serving as accountability partners to hit those target goals as well as providing them with initial capital and then being able to help them position for when they are seeking to raise additional capital, we're able to help them and invest up to an additional $150K.
Desirable founder traits
In regards to our application process, we're looking for visionaries, founders with vision and strong understanding of the problem that they see in the world and want to be able to address.
Additionally, we're looking for builders. We're not looking for people that are not interested in doing the hard work of building, but looking for people that understand the company building process and can think through the steps it takes to actually build a meaningful, successful company.
So the vision and the ability to build is what we look for. And we have seen some tremendous founders come through our applications, and we're always excited to when we see amazing founders that are looking to have huge impact in this world.
At what stage does Visible Hands invest?
We are truly a pre-seed fund. We invest from idea stage to pre-product to pre-revenue to early traction. So we're usually going to be the first institutional check within these founders companies. And we really love working with early stage founders and helping them go from zero to one with the resources and capital we provide.
How do different roles at Visible Hands function?
We're still a very new firm. We've only been around for about 18 months, but we're moving quickly and we're doing a lot of great work very quickly with our partners and the great founders that we work with.
In regards to the different roles and Visible Hands, it's pretty much broken down to two kind of teams, one being the investment team and the other being the product team. And we're able to have people that are focusing on portfolio and sourcing and investing in founders and selecting great founders to join our program as well as the people on our team that are running the different programs and opportunities to engage with founders.
So between the portfolio team who's on the investment side, as well as the product team, and then our specialists, the people that are doing the marketing, that are doing different functions within the business to operate as a VC firm, everything comes together for us to pursue the common goal of helping underrepresented founders and backing talented founders to build meaningful businesses. And it takes a team to do so. And that's kind of the reason why our structure of having the fund.
The PPC has really helped us stand out as a firm. Because we have the resources to not just hire and pay for GPs. We have a full staff of 18 people that all are skilful and bring unique insights to the team and that's needed to be able to grow and scale and really produce a lot of great outputs from a firm.
Investments Darrel is personally excited by?
So, like I said, we invest through our accelerator program. So last year was our first batch, or first accelerator batch. We invested in 45 founders, and we had some amazing founders that went through our program. And then we made initial investments as well as follow-on investments.
And then even most recently, we've finalized our selection for the next cohort that starts in this September. So a few of the great founders, all of them are great, but a few that just stand out, that I've been talking to very closely and been supporting and helping them along their journey.
One Noella Costa. She's the founder of Noula Health, and they are a personalized reproductive health information company. They make reproductive health support easy for people using at home testing and one on one digital coaching. They've raised $1.4 million, preceded Round. And it's just been amazing watching Noel and her journey to building a new health.
Another one from our first cohort that I'm really close with, his name is Marcus Collins. He's the founder of Nested Funds, and they're a financial service platform that's designed to help adult children provide seamless financial support for their aging parents. And this company has just been very interesting to me because in my family, I have three siblings and myself, and we are super just thinking about our parents and their retirement and what Marcus and Nested Funds do. They provide an easy and seamless way for siblings to be able to work together to help the parents plan for and to finance yourself in their retirement. So that's a pain point that my family faces directly, and I would love to see the progress with what market is building.
And then lastly, out of our latest cohort that we recently made investments into, I've been getting very close with a founder. His name is Nicodemus Mededo. He's building Jump Button Studio and they're super successful already. And we're just happy that he's allowing us to join him on this ride. But they're an award winning studio and they're on a mission to reimagine diversity and inclusion in the gaming and animation industry. And he's done some amazing work partnering with some amazing organizations and companies such as Niantic, who is the creators of Pokemon Go, Nickelodeon, Snapchat, and just so many other phenomenal companies. But like I said, from our first batch of 45 we've invested in last year then we've just selected 45 for the upcoming batch between the 90 founders that we've made offers to and invested into.
We have some amazing, talented, all underrepresented founders that are just doing amazing work in this world, and we're lucky that we get to back them at the earliest stages of company building.
What should a founder do before applying to Visible Hands?
We invest at the earliest stage. Even ideas are fine with us. Founders should just always be improving their self, improving their knowledge, learning as much as they can, and just getting as much progress in validating their problem and the potential solution that they want to create for their customers as much as possible.
Because the more validation that they have about the problem and the need and the opportunity that presents itself, they can tell a clear story as to why this is needed in the market and can tell a story of how they are the right founders to be building this and how they're going to take it to market and be able to be successful. So as long as they're just working as hard as they can to get the validation and being very thoughtful about the company building process, you can reach out to us anytime and we're always open.
We make ourselves very available to founders that are interested in working with us.
What is validation?
Validation comes in so many different forms. In my prior work as a founder, one way that I've done strong validation is by building strong relationships with the customers that have the pain points that I'm looking to solve. So being able to validate that this is a real problem that people are facing and creating a solution that can solve that pain. So you can do that through customer discovery interviews. You can do that through actually creating an MVP or prototype and getting direct feedback from them. You can go build the full product and try to get sales and see if they buy it. But validation comes in just so many different ways.
You just need that confidence and that validation that shows in a high confident way that people are willing to buy this or people are willing to use this product or service that you can then build a business model around.
Visible Hands approach to recent slowdown
At Visible Hands, since the timing was just right for us, we concluded our fundraiser, raised $10.5 million, and since we've already completely finished our raise, we're deploying as normal. So we just finalized investments for our second cohort. So we've made offers to 45 founders, and we'll be making investments to those founders, and the next time we'll be making investments will be for the next cohort, since we operate out of investing out of our accelerated program. So nothing has changed for us.
The timing didn't affect us, and we're just excited that we get to help support the founders that we're backing, as well as just founders in the ecosystem.
Visible Hands website: https://www.visiblehands.vc/
Follow Darrel on Twitter: https://twitter.com/DarrelFrater
Follow Visible Hands on Twitter: https://twitter.com/VisibleHandsVC
Portfolio companies mentioned in the episode:
Noula Health - https://noulahealth.co/
NestedFunds - https://www.nestedfunds.com/
Jump Button Studio - https://www.jumpbutton.com/
Hosted by: Prashant Choubey