Backstage Capital has downsized its staff from 12 to three people, managing partner and founder Arlan Hamilton said during her “Your First Million” podcast that was published Sunday.
The layoff comes nearly three months after Backstage Capital narrowed its investment strategy to only participate in follow-on rounds of existing portfolios. This workforce reduction further underscores that the venture capital firm is struggling to grow, both externally and internally.
“It’s not that I feel like there’s any sort of failure on the fund side, on the firm’s side, on Backstage’s side, it’s that this could have been avoided if systems were different if the system we work within were different,” Hamilton said during the podcast.
Hamilton did not respond to TechCrunch’s request via email for further comment.
Backstage announced in March it was pivoting to fund only existing portfolio companies and would no longer make new investments. At the time, Hamilton said that “there will be people who take this negatively or will take this as us not being active, and it is anything but.”
It’s rare to see a firm say they are growing assets under management while declining to make new investments, especially considering it had fresh capital from Comcast and filed plans for a $30 million Opportunity Fund. Now we know that Backstage doesn’t have much dry powder left, so it shows a general slowdown at the firm.
During the podcast, Hamilton said that the changes have “taken a toll; it’s been a depressing, deflating time.” She also said she’d been medically burnt out for at least three years.
Saying she’s grateful for the support so far, Hamilton also expressed her frustration with LPs, adding that Backstage has found itself in a “purgatory kind of position” because some investors feel it already has all the support it needs. However, that’s not necessarily the case. Hamilton said that Apple told Backstage the fund was too far along to invest in, while JP Morgan said it wasn’t far along enough.https://ift.tt/8SOqNJ4
Without more support, it becomes difficult to close shop on new investments, bring more assets under management, and bring more follow-on investments, she said.
“Somebody asked me, ‘why don’t you have more under management?’” she said during the podcast. “You gotta ask these LPs, you gotta ask these family offices, you gotta ask these people who ask me, ‘how can I be helpful,’ and I say ‘invest in our fund,’ and I never hear from them again.”
TechCrunch has noted that LPs need to take more responsibility for where and to whom their money is deployed. Such an impact could be seismic, especially for firms like Hamilton, which specialize in funding overlooked founders. But alas, the lack of support from the top of the VC food chain causes a domino disparity effect — where diverse fund managers aren’t receiving enough capital, meaning diverse founders aren’t either.
During the podcast, Hamilton said that she still plans to grow Backstage’s assets under management to over $100 million. Because the firm doesn’t “have dry powder right now,” Hamilton told founders to look at some of the 26 funds she has invested in as potential investors.
To date, Backstage Capital has invested in 200 companies, all of which are led by historically overlooked founders, and has landed more than $20 million in assets under management over six years. Most recently, Hamilton founded recruitment startup Runner, which raised around $1.5 million from a breadth of investors, including Backstage Capital itself.
Beyond Hamilton, general partners Christie Pitts and Brittany Davis remain on staff for the main fund. Hamilton said that the duo is working on a special project, which she will announce soon.
Current and former Backstage Capital employees can contact Natasha Mascarenhas by e-mail at natasha.m@techcrunch.com or on Signal, a secure encrypted messaging app, at 925 609 4188, or Dominic Madori-Davis at dominic.davis@techcrunch.com or on Signal at 646 831 7565.
