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Harlem Capital raises $134M for its second fund

Brandon Bryant, Harlem Capital Partner, joined Yahoo Finance Live to discuss Harlem Capital's latest funding round and the company's plans for its second fund.

Video Transcript

- Harlem Capital raising $134 million for its second fund. That's well above its target of $100 million. We want to talk about this with Brandon Bryant. He's Harlem Capital's managing partner. Brandon, it's great to see you. Congratulations on this. Let's talk about your second fund.

BRANDON BRYANT: Thanks for having me.

- You're maintaining your commitment to minority, and also, female founders. But you're shifting your focus a little bit with this fund. How so?

BRANDON BRYANT: Yeah, we're going even earlier stage. We saw that in the past. There was times, where we wanted to wait for revenue or even some type of strong traction. But with the technical founders who are in the space these days, how hot the markets are, how much capital other venture capitalists are putting under their helms and putting to work, like it's just too hot of a market to wait that late. So we're building it as early as we can right now. We're super excited to be jumping in with this second fund.

- So Brandon, I'm going to brag about you a little bit. First, you're a Cleveland native, and you know, I love Cleveland having spent so many years there. So already to me, that's about 70% of the ingredient you need to be successful. This fund that your team is launching, when you say that you're going to shift the focus to early seed stage investments and companies that are opposed product, I'm not a business guy. What does that truly mean? They're already up and running with the product, so that you don't have to walk them through those steps.

BRANDON BRYANT: Yeah, so post product means that the product is built out. There might not be revenue or customers, et cetera. But there's a clear roadmap of how you're going to build out that product. Are you going to put people into the pipeline to pay for that product, and how are you going to scale, go to market strategy, et cetera, et cetera? So there's another kind of stage called pre-seed, which is, basically, idea stage, pre-product, et cetera. So we're moving from seed, where things are already built out, to post-product right after the pre-seed round.

- Brandon, talking about you being so successful, this fund was oversubscribed by quite a large amount. How did you attract so much interest? I mean, what is the key to getting so many people and so much funding here on board with your vision?

BRANDON BRYANT: Well, look, we've been doing this for five years. We started investing in people of color, women run startups with our personal capital, and then we started building research in a space, where we had the opportunity to build the largest report of Black and Latinx founders who have raised over $1 million. We also built a big report of diverse VCs in the space.

So after becoming a thought leader, I started to do great relationships with folks, like Techstars, who's one of the largest accelerators across the globe. TPG became one of our anchor investors in our first fund. We also have a social media following of well over 300,000 across all of our platforms, and we also have been finding extremely talented founders, who are letting us play a small part of their journey to accomplish their dreams.

- So when you're looking for these 45 companies, how does this work? Do you approach them? Did they approach you? Who have you already got in your sights?

BRANDON BRYANT: Yeah, so we saw 1,600 deals for our last fund last year. We invested in 10 each year, so for this fund, too, we'll be investing in 15 each year. And we don't think there will be a problem for us to find anywhere between 1,600, 2,000 plus deals. For the founders that we're looking at, we look for folks who have strong business acumen.

They're good storytellers. They're in a billion dollar plus market. We've invested in enterprise software, future of work, future of e-commerce to fintech space, wellness technology. We're also looking at real estate as well. Really, since we're investing so early, we're focused on the founder, their storytelling capabilities, the vision, and the people that they can get around the table.

- Brandon, I also want to bring up a point here with this fund, because you're also introducing the idea of culture carry. Can you explain to us what exactly this means, and why you think this is a good idea to include in this fund that you have?

BRANDON BRYANT: Yeah, in the venture capital space, there is a power law of returns, where it's typically out of a fund. Only one or two companies really have outsized returns. For our companies that we invest in, we want everyone to participate in upside.

So we're giving folks the opportunity in our fund to have 1% of our carry, so that, if it is the power alone of only one person or one company winning, we hope that everyone else still will get a chance to win. So it's more of, like, lifting all tides and lifting all boats, and that's the kind of point of what Harlem Capital is supposed to be doing here, right? Like we're changing the face of entrepreneurship.

We're also changing the face of what a typical investor looks like, and we're also building the tech ecosystem on the diversity side. So we thought that this made the most sense, and we're doing this for fund two. But also, we're implementing this for fund one as we close with these last five investments.

- You know, as we were coming into the stream, I don't know if we pointed out that fund one, $40 million. But now, your firm is managing, what? $174 million in assets. What is the trajectory for Harlem Capital post fund two? I mean, you're going to be a big player. Not only in New York City, but nationwide.

BRANDON BRYANT: It's a good question. I think our goal is to invest in 1,000 diverse entrepreneurs over the next 20 years. That means we definitely plan to be big players in the space. We've been able to invest alongside some of the tier one VCs.

We have some breakout founders who are building companies, and we're expanding the platform, where we're inviting other folks. We're hiring a community manager to help us with storytelling to also help us with events, both virtual and in-person post-COVID. And we're excited to really be at the place that we are right now, 45 deals. We've got a long way to go before we can start thinking about the future, but we feel like we're in a pretty good position right now.

- Brandon Bryant, we're excited for you. We love having you on. We hope you come back to join us here on Yahoo Finance, again, soon. Harlem Capital's managing partner, Brandon Bryant.