Pioneering Solutions Venture Capital

September 27, 2024 at 07:48 AM EDT

Originally Posted On: https://www.equities.com/impact-investing/pioneering-solutions-venture-capital/

Musa Capital’s Allen Smith aims to close the racial gap in venture funding

This article is the first in a three-part series featuring Musa Capital. If you want to learn more, go to musacap.com.

Allen Smith is pioneering a program that seeks to address racial disparity in the world of venture capital.

A Stanford graduate and former NFL player, Allen is a managing partner at Musa Capital, an early stage venture capital firm focused on underrepresented founders, where he is gearing up to launch the Eligible In-Kind Securities program (or EIKS, pronounced like “eeks”).

The program aims to help Fortune 500 Black tech workers invest in the firm’s VC fund.

Before we get into EIKS’s potential for impact, let’s take a step back.

Training for impact

Allen is the son of two Arizona State University professors whose legacies live on through the A. Wade Smith and Elsie Moore Memorial Lecture on Race Relations, named in honor of his parents.

Allen carved out his own legacy playing football at Stanford University alongside teammates like Andrew Luck and Thomas Clinton “T. C.” Ostrander, who today is a member of Musa Capital’s investment committee. Allen went on to play in the NFL for the Oakland Raiders, before knee injuries sidelined him for good.

As a student at Stanford, Allen had seen business and innovation in his future. He studied science technology and engineering with a focus on management as an undergraduate. After his NFL career ended, Allen sought out jobs to deepen his understanding of owning and running a business.

In his early days he endured the rigors of being an investment banking analyst. Later, he worked as a consultant. Both jobs were fertile grounds for long days, crunching numbers and navigating back-office operations.

Cold calling a billionaire

With business experience in his back pocket, Allen landed a job at LinkedIn a few years after it was acquired by Microsoft. He joined a team tasked with creating a go-to-market strategy for the first joint integration called Microsoft Relationship Sales. The successful launch went from zero to more than $150 million in just three years.

But Allen’s trajectory got the biggest boost from a gutsy cold call — or actually, a “cold email” — to billionaire and LinkedIn co-founder Reid Hoffman.

Pexels/Christina Morillo photo

It was March 2020. At LinkedIn, Allen was part of a discussion among members of the company’s Black Inclusion Group (BIG) on what could be done to offset the rise in economic disparity in the Black community during the COVID-19 pandemic.

In brainstorming, it became clear that BIG members offered substantial expertise in many areas of business. But creating a funding solution to help underrepresented groups was not one of them.

With encouragement from Allen’s Stanford scholarship donor, he typed up an email to the LinkedIn founder, and hit send.

Hoffman quickly replied to offer intel on the VC world. His support and mentorship helped set the stage for Allen to launch Musa Capital in 2021, not only to focus on Black founders, but also to address the racial gap among VC investors through the EIKS program.

Through the program, Allen seeks to give Black tech workers the opportunity to participate in the success of Musa Capital Fund I.

Empowering Black tech workers as LPs

Here’s Allen’s plan for how EIKS will work.

Musa’s investment committee identifies and invests in groundbreaking startups with a primary focus on Black founders. Like with many startups, these founders need guidance and resources in addition to funding to reach the next level of growth. That’s where the in-kind trade-off comes in.

Black tech workers are given the option to participate in the fund by committing a portion of their vested stock units. They are not required to sell or transfer the shares at signup but are asked to offer their time and deep skill sets in areas like coding, marketing and operations. Once they complete 50 hours of service, they earn an LP position in the fund 100% worth the value of committed stock, thereby giving them access to venture as an asset class, in a non-cash, non-debt, non-taxable transaction.

EIKS participants are new limited partners with the ability to directly impact the companies in which they invest. With EIKS, a wider segment of the population can access the wealth-building potential of private investing.

As Musa Capital builds out their portfolio of companies, the firm encourages those aligned with their mission to become Scouts. Scouts help identify innovative companies run by Black founders. They also earn a referral fee for companies selected by the investment committee at Musa Capital. To learn more about the Scout program, you can provide your contact details here.