Each Friday, about two dozen college students meet with a team of venture capital professionals to discuss which companies they should partner with and which opportunities may not make a sound investment.
Last year, leaders for the team at the University Growth Fund recognized a problem. There weren’t many students of color involved in the weekly meetings, or in the industry. Just 1% of the $70 trillion wealth management industry is controlled by women or minority fund managers, according to some estimates. The percentage of Black and Latino workers in the high-income industry is not much higher, experts say.
The education-based private-equity fund recently set up an office in downtown Atlanta to improve its numbers, and they hope, industrywide. Four students of color from the Atlanta area are in the program, and they want to add more.
“Everyone is looking for diverse talent, but that talent is hard to find, especially talent that has any experience or knowledge about this space,” said Peter Harris, 38, one of the fund’s founding partners. “And so we think we can be a bit of a stepping stone for a lot of students to get access to that industry.”
Harris and others say last year’s nationwide demonstrations after George Floyd’s killing awakened them to the lack of racial diversity in the venture capital industry.
The protests prompted many of the nation’s wealthiest companies to increase their diversity, equity and inclusion efforts. Several businesses have focused on education, committing millions of dollars over the last year to Atlanta’s historically Black colleges and universities (HBCUs).
A few companies have looked to create pipelines to recruit students to work for them or in their industries. The UGF is attempting a similar approach. Three Atlanta University Center students, two from Morehouse College and one from Spelman College, are in the UGF.
“We’re kind of like pioneers for the (Atlanta University Center),” said Malik Moses, 19, a Morehouse sophomore majoring in finance. “Our goal is to hopefully bring on more people from Morehouse, Clark (Atlanta University) and Spelman to come work for the fund. ... We could both help each other out.”
The fund started in 2014 in Salt Lake City. It also has an office in San Diego. Ally Financial, headquartered in Sandy, Utah, near the fund’s main office, has invested $25 million in UGF over the years and is covering the cost of its expansion into Atlanta.
Firm managers say UGF is the largest student-run fund in the nation, managing $80 million in investments. There are 50 students from 13 universities nationwide in the program. The students do the homework on companies they may invest in and take an initial vote. An investment committee makes the final call.
Organizers say they chose Atlanta in large part because of the many colleges and universities in the area and the racial diversity of those schools. It’s home to four accredited HBCUs. Six University System of Georgia schools have Black and Hispanic enrollment greater than 33%.
Harris calls venture capital a “tight” industry. You typically must have a master’s degree from an Ivy League school to get in the industry out of college. Harris, who was a student in the program, took an unconventional route. He graduated from Brigham Young University, where he double majored in economics and international business. He became an international business consultant, helping launch over 10 microfranchises worldwide, and has been a guest lecturer at several universities.
The UGF starts the students as interns for a semester, with the possibility of staying in the program until they graduate. Its acceptance rate is 8%. Most students stay in the program for a year or two. They typically work 20 hours a week. Some receive needs-based scholarships.
Many students in the program have finance backgrounds, but it’s not a requirement, Harris and others say. Spelman student Kayla Norman said she knew little about venture capital before applying.
“There’s not many African American women in the industry so I took a chance of being open to it,” said Norman, 24, a fourth-year student majoring in economics. “I’m just here to learn as much as I can and I’m also trying to pass on opportunities to other people at Spelman to join as well.”
On a recent Friday, students and managers reviewed potential deals. About three dozen people gathered to hear pitches, some around a conference table in the Atlanta office, others virtually from other parts of the country. One company sought a $20 million investment. The group reviewed profiles of the company’s management, its EBITDA — earnings before interest, taxes, depreciation and amortization — and projected revenue. The initial analysis from the students: the business has potential. Harris and the advisors debated for several minutes. Some weren’t ready to greenlight the deal. They decided to do more research and reconvene Monday. The students approved the proposal and are awaiting a decision by the investment committee.
The discussions are sober and serious. Millions of dollars are at stake. Morehouse student George Lester, dressed in a blue business suit the following week, spoke of the pressure he feels to do sound research.
“This will really have an impact on somebody’s life, so I need to make sure I take the time to really do my due diligence and be thorough in all the work that I do,” said Lester, 19, a sophomore majoring in finance. “It’s definitely nerve-wracking, but very rewarding.”
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