VC Firm Base10, Vista Equity CEO Partners in Support of HBCUs
- Venture capital firm Base10 is partnering with the CEO of Vista Equity Partners to support historically black colleges.
- HBCU endowments have often been barred from investing in venture capital and private equity.
- Vista CEO Robert F. Smith has pledged to pay off Morehouse’s Class of 2019 student debt.
The recent venture capital boom has been very beneficial for universities. But not all schools shared in the spoils — in particular, historically black colleges and universities.
It’s something that Base10 Partners, the largest black-led venture capital firm in assets under management, and Robert F. Smith, the founder, CEO and chairman of Vista Equity Partners, the largest private equity firm -black-led investment in assets, seek to resolve . Base10 and Smith are now joining forces to help HBCUs grow their endowments and prepare their students for tech careers.
Base10 partners with the Student Freedom Initiative, a nonprofit started by Smith, to tackle black student debt. Smith pledged to repay student loans for the Morehouse College class of 2019 during his commencement speech at the school that year.
Ade Ajao, co-founder and managing partner of Base10, told Insider he was partly encouraged by Smith’s commitment to Morehouse to set up venture capital firm Advancement Initiative, a fund that donates half of its stake to HBCUs. As Base10 devised other ways to support HBCUs, including an internship program for students at those schools, it sought partnerships with other like-minded institutions.
This mission has personal resonance for the Base10 team, Ajao told Insider. “Fundamentally, every member of our team has experienced or been personally impacted by HBCUs in some way,” he said. “What Robert did at the time was very inspiring to many team members and me.”
Smith told Insider that he believes getting more HBCUs involved in venture capital and private equity is critical to the long-term viability of these schools. While the top 10 university endowments collectively controlled $200 billion in 2020, the top 10 HBCU endowments had only $2 billion in total over the same period, the Brookings Institution wrote in August.
Many HBCU endowments have been restricted by outdated guidelines that prohibit them from investing in venture capital or private equity, Smith said. As a result, they have invested heavily in fixed-income securities, which have offered relatively paltry returns since interest rates were at record lows until recently. This hampered the growth of endowments.
“There are a number of HBCUs whose endowments are not sufficient relative to the population and base they support,” Smith said.
SFI now works with a group of 15 HBCUs, including Virginia Union University. One of the organization’s goals is to partner with companies such as Base10 to direct more funds to black-led investment managers, said Keith Shoates, chief operating officer of SFI, to Insider. Venture capital firms run by partners from underrepresented backgrounds have often struggled to attract substantial funding.
That’s started to change since the 2020 murder of George Floyd renewed the focus on racial equity. Even so, several venture capitalists told Insider that these special funding initiatives do not replace the long-term capital provided by the institutions that traditionally support venture capital funds, including endowments, pensions and grants. foundations.
“George Floyd’s wave of capital — it’s already been drained,” said Marell Evans, the founder of seed-stage venture capital firm Exceptional Capital.
As HBCU endowments grow, Smith thinks they could help close that gap. For now, they are venturing into private investments just as market turmoil has chilled corporate valuations. But that shouldn’t deter schools from stepping into the ring, he told Insider.
“You can’t market a lot of time,” he said. “You have to grow your program and then actively invest in it for the long term.”