Arlan Hamilton's Top Insights

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Top Insights

• Increased media attention attracts more detractors and more inbound opportunities (read: deal flow)
• Arlan's Backstage Capital raised $5M in equity crowdfunding in 2021, and their deal was the fastest ever to hit $1M in commitments
• Originally, they had maxed out the old Reg CF $1.07M cap, but the SEC increased the cap to $5M in March 2021
• After Backstage hit the original $1.07M cap, they continued to collect investor contact info which helped them raise millions immediately after the cap was raised
• Arlan's reputation is now compounding because founders enjoy having her in their corner, which drives inbound interest from other founders who want her on their cap table
• Arlan has a $60M target for Backstage's next fund, and is excited about the potential of investing alongside Backstage Crowd (her syndicate)
• Syndicates allow smaller fund managers with great networks to "play in the big leagues"

"What's most important to me is not the headline of 'I have a $60 million fund.' What's most important is if we answer the phone when founder #47 calls us at night and says 'hey, I'm having a trouble.'" - Arlan Hamilton

About Arlan

• Founder & Managing Partner, Backstage Capital (2015-Present)
• Syndicate Lead, Backstage Crowd (2020-Present)
• Host, Your First Million Podcast
• Author, It's About Damn Time
• Past Appearances:
• E1080, June 2020
• Angel S2 E5, Jan. 2018
• E772, Oct. 2017

Raising $5M through equity crowdfunding

• Backstage Capital's deal was the fastest ever to hit $1M in commitments
• Backstage secured $1M in additional interest beyond the $1.07M cap, so they collected contact info from would-be investors that missed out for future reference
• When the Reg CF cap was raised to $5M in March 2021, they were ready and raised the additional funds in ~7 days
• Backstage Capital sold a 10% portion of all future income of the management company that makes investments
• This will collect a portion of the carry (what is earned from investments) and a portion of the management fees (which will be much smaller, according to Arlan)
• Backstage Capital's mandate is to invest in underrepresented founders (women, people of color, and LGBTQ+ founders)

How Arlan's reception in venture capital has changed over time

• When she started Backstage Capital in 2015, many people doubted her and were solidified in their thinking that Backstage was a bad idea
• When Arlan was featured on the cover of Fast Company in 2018, the reception was polarized, with some thinking she was unworthy of a cover story that soon
• Aside from the backlash, there were also a lot of people who were inspired and said "wait a minute, there is something here" and kept a close eye on Backstage going forward
• Arlan has now done over 180 deals, and she considers the Fast Company cover story a turning point in terms of both her deal flow and brand

"... that's really where a line in the sand was drawn. In my opinion, when I look back, that's when people started calling me rather than me chasing them down." - Arlan on the impact of her Fast Company cover story

The state of the U.S.

• In 2021, there is no avoiding the state of injustice in the U.S. "If you are wealthy, the noise is there, whether you choose to listen to it or not."

"I've seen bits and pieces of all the videos, but I don't watch most of them all the way through, it's incredibly traumatic to watch those things over and over again." - Arlan

"Every single time it happens, I just imagine my brother, who has been in that situation multiple times in his life. Including a time where he walked out of a grocery store where multiple officers held guns on him without explanation, made him get to the ground, drop his groceries, and had him there to the point where he could have had a heart attack or anything." - Arlan

• After 10-15 minutes the officers picked Arlan's brother up, apologized for bothering the wrong guy, and let him go
• That situation highlights the risk of escalation, if there was a sneeze or sensitive trigger finger her brother could've been killed
• Arlan supports actions for improvement that don't include completely defunding the police, because people still want to be able to pick up the phone and know that someone's going to come and help them

Arlan's portfolio & Backstage Capital's structure

"It doesn't matter if it's a food company, a toilet paper company, or a satellite company, what we do is we bet on the founders. We bet on the secret sauce and unfair advantage that they have." - Arlan Hamilton

Two highlighted companies:

• Career Karma - helps members navigate their technology careers and matches them with coding bootcamps and job openings
• Partake Foods - gluten-free, allergy-friendly treats, that are available in Target and other large retailers
• Partake Foods is currently in the challenging position of scaling operations to meet demand
• Arlan met Partake Foods founder Denise Woodard in 2017 and recognized the power of her Coca-Cola executive background coupled with the determination of meeting the food needs of her daughter (allergy-free)
• At the time, no investors were listening to Denise
• Arlan's reputation is now compounding because founders enjoy having her in their corner, which drives inbound interest from other founders who want her on their cap table
• Backstage now has 7 full-time team members and several freelancers, they are intentionally keeping the team small
• To streamline reviewing pitches, Backstage uses an application process where they receive thousands of submissions per year
• They also run an accelerator (launched in 2019), for which they received nearly 2000 applications before accepting 24 companies into the first cohort
• Backstage will launch an apprenticeship program later this year, which will be a hybrid of an internship and a scouting program

Arlan's investing preferences:

• Arlan like to invest in the early, exciting stages
• She loves coming up with ideas, sparking things, and catalyzing people at the right time
• She needs traction: it doesn't need to be a lot, but something to show that you can make the most of the available resources

Arlan's Syndicate (Backstage Crowd)

"The crowd is now the biggest competitor to early stage VCs, and to LPs in a way." - Arlan Hamilton

• ~12 investments and ~$2M deployed so far
• Check sizes have been between $100K-$500K per deal
• Arlan started with $25k checks, now the syndicate can raise $100K for a deal overnight
• She plans on eventually deploying $1M-$5M checks via her Syndicate + Fund model
• Syndicates allow smaller fund managers with great networks to "play in the big leagues"
• Backstage Capital's new 506(c) fund will invest alongside the Backstage Crowd syndicate
• Arlan has a $60M target for their next fund, and is excited about the potential of having her fund invest alongside Backstage Crowd

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