Two 28-year-old former investment bankers are taking on venture capital's diversity problem with $40 million and a new kind of venture firm

• Henri Pierre-Jacques and Jarrid Tingle started Harlem Capital Partners out of Tingle's living room in New York City in December 2015.
• The fund was initially operating more like a private equity firm, which both Pierre-Jacques and Tingle had experience in, but quickly tuned into the venture side of things and began fundraising during the summer of 2018 while at Harvard Business School.
• The firm focuses primarily on backing women and minority founded startups, the two 28-year-old men told Business Insider. 
• Pierre-Jacques said that, although Harlem Capital has invested in companies from nine cities, none have come from San Francisco.
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Instead of heading to a traditional internship during business school, Henri Pierre-Jacques and Jarrid Tingle jumped head-first into the murky world of venture capital.

The roommates had been toying with the idea of starting an angel syndicate back in 2015 when they gathered in Tingle's New York City living room after work one day. The men had been working in private equity, and were cubemates at a major investment bank at the time, but felt they could do more on their own. So as roommates at Harvard Business School in the summer of 2018, they officially began fundraising for a new kind of venture firm.

"We were investing our own money into our communities," Pierre-Jacques told Business Insider. "It became clear that the conversation was about the lack of diversity in founders, but we knew there was also a lack of diverse investors."

Pierre-Jacques said that, even though they were writing small angel checks at the time, he and Tingle were consistently asked to appear on panels and grant media interviews. The exposure proved that there was "a lot of white space" in the venture industry for a firm focused on racial diversity in addition to gender diversity, Pierre-Jacques said.

In November, Harlem Capital closed its first fund. The $40 million fund was nearly $15 million more than the pair had initially targeted, but will allow them to increase the number of investments they can make and the size of investments they can participate in. That gives them an edge because, as an early-stage fund, Harlem Capital operates in one of the most competitive stages for venture firms hoping to land a deal. 

"There's a lot of subjectivity in venture, but we will always do a process when we can," Tingle said. "We went big. Some funds will start with a small startup fund, but we thought it was important to come out and be able to execute on day one. $40 million is a great signal to the market that we can do things structurally that other firms can't do on day one."

The black renaissance of venture capital

Those processes include things like the 50-page investment memos that are common in private equity but regularly disregarded in Silicon Valley venture firms, where they're perceived as barriers to the "move fast and break things" mentality. But the practice helps Harlem Capital remain open with its highly-vetted LP base and has yet to slow down any hot deals.

"If it's a really hot deal, we can do a 50-page memo in five days," Pierre-Jacques said. "The sweet spot is really two weeks just to give us a breather, but it will never be a barrier to getting a deal done."

Many of those deals aren't coming from the "move fast and break things" epicenter in Silicon Valley and San Francisco, though. Pierre-Jacques said that the firm, which is itself fully remote but centered in New York City, has invested in companies from nine cities. None are from San Francisco.

"That's not on purpose, but we don't see a ton of people of color coming out of San Francisco," Jacques-Pierres said. "Long term, San Francisco is not going to be where diverse founders come to the top."

It was "never a discussion" that the firm would be effectively headquartered in New York City, he said, given the men's network and robust network of minority founders. 

"Harlem represents black excellence and the black renaissance," Jacques-Pierre said. "It's about the symbolism of what Harlem represents to us and to the world. If we do it right, we will impact culture. Making money is great, but the long-term system change we can have in underserved communities is so much more important."

SEE ALSO: A new VC firm doesn't give startups any funding because capital is 'commoditized.' Here's why Sweat Equity's founder says his work-for-equity model is a better deal for startups.

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