The New Community Transformation Fund-Denver (NCTF-Denver), a Colorado-based black-owned and black woman-led high-touch venture capital firm funded by innovative public-private partnerships, announced the fund’s first close with $10.6 million in commitments from five founding investors led by Bank of America. Total approved investments to date reach $24.1 million. NCTF-Denver aspires to raise a fund maximum of $50 million by 2023.

NCTF-Denver was launched in 2022 by former Colorado Trust Chief Financial Officer Danielle Shoots with the goal of investing primarily in startups and scaleups owned and/or operated by business leaders of color, while providing suitable risk-adjusted returns to its investors. The mission of the fund is to generate above market returns targeted at 25%+ annualized internal rate of return over the lifetime of the fund. The fund will focus on scalable early to mid-stage businesses as well as transitioning succession companies in the industries of information technology, advanced manufacturing, food and agribusiness, biosciences, health/beauty/wellness, tourism, and aerospace. NCTF-Denver will direct the majority of its investments in both current and prospective Colorado companies.

“We are a sophisticated, history-making venture capital fund that understands smart investing means investing in founders of color. We also know great investments are ones that recognize undervalued, underleveraged, emerging markets and founders of color fit that bill,” said Danielle Shoots, NCTF-Denver founding partner and managing director. “We’re honored and grateful to be supported by our founding investors who share our vision for a more equitable economy and are actively seeking others who are just as ready to lead.”

“By accelerating the flow of capital into funds that invest in Black-African American, Hispanic-Latino, other under-represented minority and women-led businesses, we can help level the playing field and drive greater job and wealth creation,” said Raju Patel, President, Bank of America Colorado. “At Bank of America, we are committed to advancing racial equality and economic opportunity, which is why we partnered with NCTF-Denver as they help early and mid-stage companies grow for the benefit of the Denver’s business community and residents. These investments underscore Bank of America’s ongoing efforts to address the persistent gap in access to growth capital for minority-led businesses.”

See related article: Bank of America Publishes Enhanced Task Force on Climate-Related Financial Disclosures

Changing The Color of Capital

The acute lack of diversity within the venture capital industry is not only limiting opportunities for business leaders of color to get the support they need and deserve to make meaningful contributions to respective industries, but also the economies from which they are emerging. According to data from Richard Kerby at Equity Ventures, approximately 58% of venture capitalists are white men, 20% are Asian men, 11% are white women, 6% are Asian women, 2% are Black men, 1% Black women, 1% are Latino men, and nearly 0% are Latina women. Additionally, those 58% of venture capitalists who are white men control 93% of venture capital dollars.

Shifting decision-making in the asset management industry can thus ultimately have a ripple effect that results in better support for entrepreneurs of color in all areas of the capital market. Evidence by the Small Business Administration also suggests that investment decision-makers of color are more likely to direct investments towards entrepreneurs of color.

“Venture capitalists of color are more likely to invest in business leaders of color, and we are starting to see the proof of these investments in returns from similar funds.” Shoots continued. “We’ve made our own table in Denver and are excited to extend seats to business leaders of color who are still waiting to be seen, supported and taken seriously by private equity investors who pledged to give more to underrepresented groups in the summer of 2020 following George Floyd’s murder.”

According to a 2017 report from the U.S. Government Accountability Office, funds led by people of color perform the same as their peers and there is no significant difference in the performance of firms owned by women and minorities when compared to their peers. Yet the point of view persists that venture firms are at higher risk for investing in them. Thus, stakeholders must regularly address unconscious bias in parallel with conscious efforts to advance racial equity.

NCTF-Denver will invest primarily in founders and companies that are currently located and operating in Colorado or are willing to relocate to Colorado. The fund is currently raising additional dollars for its second close to ensure the needs of Colorado’s diverse entrepreneurs can be met. NCTF-Denver is raising funds until the end of 2023.

Source: Bank of America