The unhealthy gap between what we preach in America and what we often practice creates a moral dry rot that eats at the very foundation of our democratic ideals and values.Whitney M. Young
In 2016, I was having breakfast with my good friend Calvin Young when I had a random thought. We should work together to create a pre-seed fund to invest in Black-led startups in Maryland. I don’t know what made me think of it at that moment, but I just knew before that Calvin would be all for it. At the time, I was working for the investment arm of the State of Maryland, and we were trying to figure out how to increase the number of Black-led startups getting seed funding. One thing we kept hearing from the Black-led startups that we talked to was how many of them lacked the earliest forms of capital — friends and family capital. It is the friends and family capital that many companies use to get the first version of a product built, to validate their business model, and to prove to the world that they belong.
In March 2017 I launched that pre-seed fund to invest earlier than anyone else in Black-led startups in Maryland. A $40,000 check to be that “friends and family” round. After the first year and nine investments, we raised the investment amount to $50,000, added some wrap-around services, and increased the designation from black-led to women- and all minority-led startups. The following year, we made another nine investments. In 2019, after a lot of hard work, including speaking to legislators, the State of Maryland added $1 million to the annual budget to make it a long-term fund. It was at the time the first and only state-backed pre-seed fund specifically for women and minority-led startups. It is the crowning accomplishment of my career to date. A career that includes getting a top-secret clearance at age 19, being a part of operations and building tools that have affected world events, becoming a senior software engineer at age 24, founding two companies, and selling one.
During those four years working for the State of Maryland to invest exclusively in Maryland-based underrepresented founders and their companies, I noticed a few things:
- You can find amazing startups anywhere in the world. There are amazing entrepreneurs everywhere with great ideas, building dope companies. Not just in Silicon Valley, New York, and Boston.
- Some of these entrepreneurs are building products and serving communities that many traditional VCs don’t understand or aren’t willing to understand. This leads to missed opportunities to fund great companies.
- Many VCs focus so much on getting deal flow through their networks from traditional sources that they don’t take time to look beyond those circles. This again leads to missed opportunities to fund great companies.
- Investing in pre-seed stage companies is a skill and requires a lot of conviction but at a point where you can’t use the traditional metrics to evaluate a company or, more importantly, the entrepreneurs themselves.
- Sometimes founders at the pre-seed stage aren’t as polished, don’t know all the VC lingo, don’t have an amazing network, or don’t know how to construct a pitch. Still, they are just as amazing as founders who have raised tons of money and have deep networks.
- $50,000 is enough to get these great founders started but not enough for them to fully execute on everything to get to the next level. They still end up needing to pitch to angel investors, go to pitch competitions, join accelerators, and anything and everything else they can do to get additional funding along the way.
- I met amazing entrepreneurs with truly original and unique products serving industries that haven’t had innovation in YEARS, yet were still too early even for us.
- There were two types of founders who I got excited about and led to our top-performing companies. Those who thought a lot about and executed on customer acquisition, and, those building products in markets that are often overlooked. These founders are out-of-the-box thinkers, which is a skill that serves entrepreneurs very well.
- Making pre-seed investments, you can make fairly small investments in terms of the check sizes typically found in venture. But even small checks are life-changing for some entrepreneurs, which can lead to pretty amazing return multiples
From these learnings, I was inspired to think differently about how I could invest in these types of amazing founders and make great returns for LPs while doing so.
The 2 founders that changed my life
While investing for the State of Maryland, a founder was introduced through a good friend of mine. When I met her, she told me how she wanted to create a product in a market that hadn’t seen innovation in well over 50 years. Not least of which, it was solving a problem in a huge market that VCs have typically overlooked. No matter how much I wanted to help her, the simple fact was that her company was too early even for our pre-seed fund. No matter how much I tried to explain why it was a groundbreaking idea that could be a category creator and definer, no one saw what I saw. I wanted to help this founder no matter what. So after years of advice and support, and having every door slammed in her face, she came up with a plan to fund her first prototype. She was so excited when she called to tell me all about it. I couldn’t believe the words she spoke over the phone; she was becoming a surrogate mother to get the money needed to bring her dream to life. I was heartbroken and moved to tears. Tears of frustration and anger for this amazing, brave, strong black woman who was putting her body and life at risk for the opportunity to build a company. It was then that I knew I needed to start a venture firm where I could invest in founders like her.
This past June, I had a Latino founder reach out to me on Twitter. As someone who responds to cold messages, I set up a meeting. In our meeting, he goes on to tell me about this amazing company he is building with impressive revenue, an interesting product, a solid plan, and an amazing channel partner. When I got off the phone with him I couldn’t understand why he hadn’t been able to raise. My hands were tied with the State of Maryland, but after a few more calls and some due diligence I made up my mind to pull some capital together and do a special purpose vehicle (SPV) to make a one-off investment in this amazing founder. During the process of pitching the company to advisors of mine to raise the capital, one of them stopped me and said the phrase that would change everything: “Mac, you always say your superpower is finding these diamonds in the rough kind of companies. Well it looks like you might have done it again so I don’t want to invest in this one company, but every great company you find. I want to be the first investor in your fund.”
We are RareBreed Ventures
That was the challenge he presented to me. And it was one that I was willing to accept. I dug in, and over the next three months, went on to have over 1,100 meetings (mostly with people I met on Twitter but that’s a story for another day) from June to September. I met with founders, other investors, and eventually those who wanted to be LPs in this new fund. I called the fund RareBreed Ventures because we will be investing in a rarebreed of entrepreneur.
The Thesis — We want to be the first or one of the first investors in companies building a software product that has a unique or clearly repeatable customer acquisition strategy. Or, in companies building a physical product in a vertical that has lacked innovation in 10+ years. These two types of founders are out-of-the-box thinkers and problem solvers.
Stage of Investments — Pre-seed and Seed, typically in companies with valuations lower than $10M post-money.
Where we Invest — We look to invest all over the United States, primarily outside of the major tech hubs of Silicon Valley, New York, and Boston. We will invest in companies in these areas opportunistically, but our portfolio will be concentrated everywhere else. We will also make a few international investments.
Target investment — Our target check size is $250,000.
Listen to GHOGH with Jamarlin Martin | Episode 31: McKeever Conwell II Jamarlin talks to investor and serial entrepreneur McKeever Conwell II about being inspired by a teacher to become an engineer, getting recruited out of college by a U.S. intelligence agency, and making pre-seed investments for Maryland’s tech development state fund, TEDCO.
Industries we invest in — We are generalists investing in all industries except companies in the life sciences.
Target Fund Size — We are raising a $10M fund. If you are an accredited investor and would like to be an LP in RareBreed Ventures, please go to RareBreed.vc to join our already amazing group of LPs. The minimum investment in the fund is $10,000. This amount will raise over time as we get closer to the target fund size.
We are RareBreed Ventures and we are on the search for rarebreed entrepreneurs!