The Maryland Technology Development Corp. wants to invest $10 million in minority-owned, early-stage venture capital funds — and is looking for a firm to help identify them.
TEDCO has issued a request for proposals for a firm that would recommend three to four minority-owned and run funds out of a group of at least 10 funds. Responses to the RFP are due Aug. 10.
The program is part of the state-backed group's focus on funding companies led by underrepresented founders. Other similar initiatives include the builder fund, the inclusion fund and the possible creation of a $500 million Equitech growth fund.
"It's not just about investing in companies, but also investing in fund managers who are also underrepresented," TEDCO CEO Troy LeMaile-Stoval said.
Studies show Black founders are struggling with earning VC money compared to their white counterparts, a disparity that has been worsened by the recent economic crisis. Black founders have earned 1.2% of total venture capital dollars so far in 2022, compared to 1.3% in 2021, according to Crunchbase.
A 2021 report by Fairview Capital said that diverse VC firms tend to raise less money than their peers, so they are often overlooked by large institutional investors. A 2018 Deloitte study found that only 6% of investment partners are Black or Hispanic.
Partnering with outside venture capital funds is not completely new for the state agency. TEDCO has worked with eight venture capital funds committed to supporting Maryland startups in the past, with a financial exposure of roughly $49 million.
The money TEDCO is using for the VC funds comes out of the state small business credit initiative. TEDCO received $50 million from the government program. Outside of the venture capital limited partner program, the $50 million will be used for the venture equity fund, seed funds equity program, and the social impact fund.
Several Baltimore-based minority-led VC firms are raising funds. Jeff Cherry is seeking $50 million for his second Conscious Venture Partners fund. Cherry has already gained support from some of the biggest names in Baltimore such as Under Armour's Kevin Plank and Brown Advisory. Local executive Luke Cooper is hoping to raise a $250 million fund in West Baltimore.
