How Arlan Hamilton convey Mark Cuban To Invest $6 Million to her Start-Up ?
Arlan Hamilton spent her entire life in and out of homelessness, working low-wage jobs, being overlooked and underestimated. In 2015 she started an investment fund called Backstage Capital. Today it's worth over $20 million with investors
like Mark Cuban, Marc Andreessen
and Stewart Butterfield.
There are three numbers to watch for in this story: $50,000, Arlan’s first outside investment, $6 million, the total value of her fund and 2, the percent of companies that receive investment from Backstage Capital. Here’s how Arlan Hamilton went from homeless to running her $20 million venture capital fund.
Image of Arlan Hamilton | Image source :LinkedIn
I had been living at the san francisco
airport and she didn't know it
what do you mean living at the san
francisco airport i had been
sleeping at the san francisco
airport why not
work at starbucks or something i'm just
like absolutely i can understand the
question but you have to understand this
is why there are homeless people
if you were lucky enough to have not
grown up poor you might have a hard time
understanding just how deeply it can
drag down
even the smartest most hardworking
individuals
the impact of poverty is at least
twofold there's the physical toll from
the struggle to make ends meet
the sheer energy it takes to eke out a
living is draining it's
expensive to be poor
then there's the mental side of poverty
money becomes the source of
worry and fear
its absence causes pain yet there's
never enough to alleviate that worry
but backstage capital founder arlen
hamilton has no time for that
going from homeless to that in five
years i'm very proud of that
there are three numbers to watch out for
in arlen's story 50
000 arlen's first outside
investment six million
the total amount mark cuban has
invested in backstage capital
and two the percentage of companies that
receive investment
from the fund here's how arlen hamilton
went from homeless
to running her own 20 million dollar
venture capital fund
for cnbc make it i'm nate skid this
is founder effect arlen was born in
jackson mississippi into a household
that was full of love but short on cash
she her mom and her little brother
alfred settled in dallas texas
the small family changed apartment six
times while she was in school
but her mom made sure that she stayed in
the same school district if nothing else
she made sure arlen's social and
academic life remained stable
so i never had to change schools and i
just really appreciate that more and
more as
an adult but it was a little chaotic
arlen says she was always one of the
smartest kids in class she enrolled in
honors classes
and got top marks but spent too much
time in the principal's office
i breezed through the academic part of
mostly mostly
everyone assumed i would go to college i
was voted most likely to succeed
a couple years in a row for half of my
senior year
we were bouncing around from hotel to
friends couches you know we moved back
to mississippi for a few weeks
where we where my mom was born to me the
idea of going to college
even if i got a scholarship i thought
about the living expenses and taking
away time from
helping my mom and finally being an
adult and maybe you know bringing in
more money
it just i couldn't see myself doing that
so to me it was very simple i wasn't
going to go to college even though i
wanted to i don't think um the kind of
fear
or at least the idea that money isn't a
given
and what that can do to you and like how
that can motivate you so i'm wondering
did was there anything within that
experience that still sticks with you
it stuck with me but not in the way that
i think people may
think um i used to hate money i used to
be so
afraid of it and also so just angered by
it because the lack of it was the thing
that was making my mom cry and the thing
that was making us
not you know not have certain things and
i would go to school and
certain clothes or have my hair a
certain way and people would make fun of
that and it just
i understood that that was because of
money and and nothing else
so i always said i'm going to be rich as
a child so i'm going to be
rich so i can just like i'll never be in
this position again
i'll be able to control things arlen's
first lesson in extracting yourself from
poverty came from an unlikely source
while working at pudgy brothers pizza in
dallas texas
i remember that dude it was rodney
it was a white male who went to my
school
i think we were the same age he might
have been a little older he would just
at the end of every
shift he would just pour his money onto
onto
in front of me you know to count it and
it was just like
10 times or even more of what i was
making for the same
hours and and he was running around of
course on his car and making these
deliveries
but what i remember about him was that
he was like stress free
and i was like running from the phones
making pizzas getting everything
prepared for him at first i was upset
and mad and kind of like this isn't fair
but then i'm like no you know what i'm
gonna do
i'm gonna study rodney
i'm gonna study him
and take what i want from that what she
took away from rodney was that pay
isn't necessarily tied to how hard you
physically work
she labored twice as hard as he did but
didn't make half as much
rather it was the type of work that
mattered even though she knew full well
that a college degree offered her the
greatest chance to escape
intergenerational poverty
she didn't make it more than a few hours
at a community college
before dropping out
i took some some courses at community
college which i
really liked um but again it was just
sort of like focus on work
just focus on getting some money so
we're not all broke all the time
and that's really what it was and people
were going off to all these different
cities and
kind of you know you were hearing about
people what they're up to and
i don't think i suffered too much during
that time of like fomo or anything but i
just felt like
it just to me there was no other option
this is when arlen began showing her
entrepreneurial spirit
so she talked her way into managing a
us-based concert tour
for a little known indie pop band from
norway called
golden boy she turned that into a string
of gigs putting on live concerts across
the u.s
how did you talk your way into that i
sent out a hundred messages
to tour managers and production managers
that i had individually researched and
they were all
you know individual messages uh over
like a two-month period
and i received 20 responses i received
three
in-person interviews and one led to
you know the kind of kickoff of working
on a larger stage
sure the pay was lousy in the nights
long but her job was exciting
at first she was enamored with the
artists but as time wore on
she began eavesdropping on their
management teams i would notice that
they were making investments in
a place called silicon valley and in
tech startups
and i started learning these like
hearing this jargon and hearing these
things but
not in public it would be these i'd walk
past the conversation or somebody would
be
flown in for something and i need to to
prepare their
their flight right and i'm like why why
is this
musician meeting with this
technical person just you know i was
trying to put the pieces together
almost uh the beginnings of erin
brockovich story or something i was just
like what's going on here
and then the more i learn the more i'm
like wait a second i
i know what this is i've seen airbnb
i've seen twitter i know
what they're talking about and that's
when i said well
i've always felt like an entrepreneur
i've always felt i've always started
something
i'll start my own tech company and
i knew that that would that would be my
path that's when i learned that
90 of funding goes to white men in this
country
and affluent white men arlene tried and
failed to get a tech company off the
ground
she was now in her early 30s and had
never earned more than
twenty thousand dollars a year but
during the process
she realized that to make real change
she needed to create an investment fund
of her own
how did you even begin to think about
investing
i couldn't be an angel investor because
i didn't have any money and i was in
fact broke and
homeless and for most of this and you
know it was just a whole thing
but i thought i could negotiate with
people
so i spent three and a half years trying
to raise any money for a fund because i
saw the people had
people had raised funds i can try to
raise a fund and i got no's
left and right hundreds and hundreds of
meetings no or
calls no but then in september of
2015 i got my first yes
from susan kimberlin who is an angel
investor in
san francisco who i met after going you
know one-way ticket
towards silicon valley and i had been
living at the san francisco airport and
she didn't know it
wait what do you mean living at the san
francisco airport i had been
sleeping at the san francisco airport
like on the outside like before the
ticketing because of the way
you know airports are and i would
roll up a pair of jeans and
it would be my pillow and i put my
suitcase and i had a lot
laptop so i could sign on to the wi-fi
but i put my suitcase in front of my
face
so that i wouldn't have to like have eye
contact with people as they're walking
by as i'm
laying on the on the ground you know on
this hard floor and
i would get up and you know freshen up a
little bit
and uh you know public restrooms
you know i mean why not work at
starbucks or something i'm just like
i've been working since i was 15. to
work at starbucks you have to have an
address
i applied to all kinds of places i i was
turned down by airbnb i was turned down
by kohl's i was turned down to work at
kohl's
in retail for i forgot what it was it
was minimum wage or whatever it was
and i was in my 30s and i'm like why
can't i do that and so it's one it's
it's absolutely i can understand the
question but you have to understand this
is why they are
homeless people it is very difficult to
go from
no address you're sleeping on the floor
to then
have any kind of way to work for two
to three weeks before you get your first
paycheck
you go in you know is there's a hygiene
issue
there's all sorts of things that kind of
leave you kind of stunted
in 2020 over 580 000 people experienced
homelessness in the united states on a
single night
that was up nearly 13 000 individuals
from 2019
but it was at an event for venture
capitalists that she realized the power
of her idea
that there was untapped potential in
founders of color
the more race came up as a topic of
discussion the more uncomfortable the
room got
as they leaned back arlen leaned in they
were
uneasy there was no you know i was like
the only other black person in there
in the audience and they shifted and
they got like got real weird
and i'm like that's weird like i just
listened to all these white dudes talk
about money making money
investing diligence all that they're
talking about the exact same thing
there was a person on that panel who had
like a 10 million dollar per year
company that he built from nothing
there was another person that panel who
had invested 100 million or more
they weren't talking about anything that
was that should be
foreign or considered alien right
the reaction from the crowd didn't sit
well with arlen
so while squatting at the san francisco
international airport
she penned a blog post titled dear white
venture capitalists
if you're reading this it's almost too
late it was a combination of drake's
album
his mixtape and dear white people the
movie that had just come out
dear white venture capitalist and so i
wrote this blog post and
overnight uh it just went crazy and and
i got
incredible amount of inbound from it
arlen began forming the basis of her
pitch
underestimated black and brown founders
were finding incredible success while
suffering from a severe lack of under
investment
what if they were properly funded do you
remember the date
you got your first investment
September 15th 2015. what was your pitch
90 percent of venture funding goes to
white men in a country where they make
up one-third of the
of the demographics so you'd have to
believe that
they're somehow smarter better faster
than anyone else including any woman
to believe that that is fair also
because it is proven multiple times
multiple studies and
practicality that diversity breeds
more is more lucrative and also it's
just
you know you have a better chance of
reaching and reaching
a larger audience and on top of all of
that
the the underestimated or at the time
underrepresented founders that i knew
were doing so much with so little
i could compare and say like this this
person didn't have any outside funding
but they somehow
got their product made well this same
type of company
had two million dollars and they have
fewer customers
right i could show those types of
examples so if they're doing so much
with so little what happens when we give
them more
and it was just it was just simple as
that and then to say
you know in a few years and this is 2012
through 15 i'm saying in a few years
the world of tech is going to look more
like the country
do you want to be hit by the wave or
riding the wave
arlen didn't want to be seen as some sob
story asking for a pity donation
she hid the fact that she was homeless
not because she was ashamed
because she knew if she was going to be
successful she needed to be seen as
worthy
not a donation didn't want her to know
that part of things i wanted her to
invest in me because she
wanted to and believed in my thesis and
um it kind of was
sort of slow and and and then i said to
her
early September i said i'm going to go
have a meeting with this organism this
company
if i can negotiate x deal with this
company
having no experience here or whatever
will you invest in me once and for all
and she said if you can make that deal
happen yeah i'll do that
so i go into that company i strike up a
deal with them that's not
monetary it's more like you know you
were able to negotiate something kind of
cool
yeah and i let her know and within 24
hours
she sent me a text and she said i'm in
um
i saw i saw that text
and i just kind of i remember exactly
the corner i was in because it was by an
acai place that i used to
treat myself to and i had any kind of
like if i had seven dollars i was going
there
um and i just kind of did like a little
dance you know it's like whoa
okay and then i just
i buttoned up i kind of got my ducks in
a row
and i got a fly to los angeles and
i promise i mean i didn't celebrate i i
just was
ready what did you do with the money and
how much was it can i ask
originally it was 25 000 because it was
supposed to be like because we were
making 25 i was gonna make 25 000
investments which is kind of an angel
size considered
so she originally gave me that but then
she said you know
you need to have like an office and a
kind of prop yourself up so she gave me
25 000 to make my first investment and
25 000 to set up shop
the effectiveness of arlen's pitch
created a snowball effect
susan's money helped get arlen off the
streets but her contacts proved to be
much more valuable
a cool thing happened like in early 2016
where
stuart butterfield from slack got in
touch with me on twitter
dm and i had never met him or talked to
him and i still to this day do not know
how he found out about me maybe it's
just seeing the blog or something you
said hey can i invest in your company
and i'm like am i in your fun and like
uh let me check my calendar
yes you can and this was when he had
paper wealth you know he didn't hadn't
cashed out or anything so he was it was
more of an angel investment
but being able to put his name on there
when i
when i reached out to mark Andersen or
actually mark Andersen reached out to
me
and then i reached back with a question
about investing
he was able to see stuart butterfield
and then i would text someone you know
who i had met along the way and say hey
can you get in touch with this person
and
put in a good word and it was just like
all this
forward motion of not not taking a day
for granted
just continually using that momentum
perhaps her biggest win came in 2019 at
the south by southwest conference in
austin texas
when she shared the stage with mark
cuban so he was super cool i thought he
was really you know we're both i'm i'm
from dallas and
my brother my younger brother rook loves
the mavericks he loves cuban
and i watched shark tank for 10 years as
if i'm a
fifth or sixth panelist yelling at the
screen
yeah i just thought he was cool and i
was interested to see how he would be
behind the scenes and he was just
really chill for a billionaire you know
what i mean he was just like
nobody was around and he was just doing
his thing i asked him you know if he
would invest in the fund he said no i
don't like
investing in funds because i i love talk
working with founders that's where i get
my thrill so i said okay
and then about a month after that there
was a press piece
that had incorrectly you know or their
opinion had said that i had failed quote
unquote and raising
my fund because it wasn't raised yet
it was very odd it was very odd and a
lot of people were up were upset about
it because of the way it was phrased it
was very
and a lot of people's opinion including
mine biased
but it it really caused a lot of trauma
to have that and he got in touch with me
that same day mark even got in touch
with me that same day
and he said i'm sending you a million
dollars invest however you want
you didn't fail anything and he gave me
some great terms he gave me higher
uh upside than i've got on any other
fund
his decision i had autonomous uh
investing ability
and then on top of that last year after
george floyd was murdered on television
um he reached out and he said i want to
do 5 million more
i'm looking from your perspective though
which is like altruism is great
and you definitely want to do good but
like you got to make money too
right like like so i'm wondering how do
you think through that like what's your
strategy or philosophy
on um who who to get who to invest in
and who not
what's altruistic versus what's a real
business case i'll say it like this
uh through other things like my
publishing
through speaking through all sorts of
you know academy stuff that i have
i have money right personal money
and through that
i have uh about half a million dollars
into scholarships
right now and that's you know going from
homeless to that in five years i'm very
proud of that
so when i want to do things that are
altruistic when i want to do things that
are
philanthropic i do them but backstage
capital
is for-profit and sharky what do you
mean sharky
i mean we invest in two percent of what
we see you know we are
we are not here for the heartwarming
side of this we are very complimentary
to founders
we're very aligned with founders
and we have some of the like the most
friendly terms
when it comes to deals that we strike
because we don't want
to get in their way right we're not
making investments based on the color of
your skin we're making
investments based on what we believe
will
make us money back for our for ourselves
and for our stakeholders
what's your advice to founders well my
advice is ultimately is like to remain
yourself
because if you heard anything in my
story the one through line is that i
just kind of stayed myself the whole
time
any time i could tell you anytime i
tried to stray from that or i thought
oh i better i better button up or i
better do this other thing because i
have to conform
it went wrong it did not help it made
the situation worse
and so it takes longer to get where
you're going and it's
more difficult to get where you're going
when you're being yourself but once you
get there you you're much happier
because you're there as yourself and not
in a costume.
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