Cincinnati-based Lightship Capital made history Friday when it announced what is likely the largest-ever venture capital fund dedicated to investing in minority-led startups. This is also believed to be the largest initial fund run by a Black woman to date.
Lightship Capital is creating a $50 million fund that will support startups led by BIPOC, the LGBTQ+ community and people with disabilities. It will focus on five sectors: artificial intelligence, consumer package goods, sustainability, e-commerce and health care. While the fund states it has a "Midwestern" focus, that definition is broad.
"All ventures will be based or have a presence in the middle of America, which includes any location outside of the three most overserved regions in the United States: Silicon Valley, New York City, and Boston," fund officials said.
To start, the firm has secured $20 million from SecondMuse Capital, the financial investment arm of consulting firm SecondMuse. For more than a decade, SecondMuse has invested in businesses and real estate that help create new economies that are "growing, resilient and inclusive." They do so by designing, developing and implementing a mix of innovation programming and investing capital.
"The Lightship Capital Fund has the potential to be one of the greatest economic opportunities of this generation, as systemic racism has led to the majority of VC investment being allocated to White male founders," Todd Khozein, SecondMuse founder and co-CEO, said in a statement. "By investing in remarkable underrepresented founders in the Midwest, where the least VC competition exists and the best exit outcomes are yielded, Lightship Capital has identified the formula for a highly impactful, highly profitable venture fund."
"With this $20 million commitment to our fund, SecondMuse is creating an equitable future for us all," Lightship Capital General Partner Brian Brackeen added. "If we are right, our returns will show the world that these founders can't be ignored."
With only a handful of existing venture capital firms led by women of color, the Lightship Capital and SecondMuse collaboration likely represents the largest fund in history dedicated to funding ventures founded by underrepresented minorities operating the Midwest, the firm said.
"The venture capital market has failed BIPOC, and ultimately, itself," Brackeen said. "There are incredible deals that are being overlooked and all VCs who aren't intentionally diversifying their portfolio, who aren't exploring deals in every community, are just not going to see outsized returns."
Lightship Capital said in a release that an additional close is scheduled for August.
"Sometimes the events and special people all come together at a pivotal moment, the most opportune time, to make change," Brian Brackeen said. "This is a time of great change, and yet it offers an opportunity to change how we select and fund the CEOs and the companies of the future."
