The upstart VC founders discuss how economic empowerment and inclusion will help build a new generation of tech-enabled companies whose values are aligned with the customers they serve.

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Not all venture capital is created or distributed equally. Only 1% of VC-backed founders are Black, and fewer than 2% are Latinx, even though research repeatedly shows that companies with diverse leadership significantly outperform their all-white, all-male counterparts. 

In the world of venture capital, where data and profit drive decisions, it’s surprising that more VC firms aren’t allocating funds to minority founders when the data proves advantageous. Perhaps that’s because more investors ought to root their intentions in economic empowerment and inclusion. That’s a conversation that Ajay Relan and Austin Clements had been having for more than a decade before deciding to launch the inclusion-driven VC fund Slauson & Co. earlier this year.  

The firm, named after a prominent thoroughfare in South Los Angeles, has already received backing from Ashton Kutcher, will.i.am, and PayPal, and will primarily invest in and guide founders from underrepresented backgrounds. Their ultimate aim is to build a new generation of technology and tech-enabled companies whose values are aligned with the customers they serve.

The pair are certainly no rookies in the space. Relan is an accomplished investor from his work at Queensbridge Venture Partners and Community Entrepreneur. Clements is a former Principal at TenOneTen Ventures and is founding Chairman for PledgeLA, a citywide initiative that promotes diversity, equity and inclusion in tech.

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I recently sat down with the duo to learn more about how their lived experiences lead to their plans for democratizing access to entrepreneurship, and how it can be a model going forward.

What drives the relative dearth of venture funding to people of color?

Clements: In our industry, it’s called “pattern matching.” The thinking goes, “If the last few successful founders went to certain schools, worked at certain companies and looked like this, then why wouldn’t I invest in more just like him?” But the rapidly evolving demographics of this country suggest that it might be time to start looking elsewhere. 

How is Slauson & Co. challenging these structures?

Celements: Ajay and I both grew up right off Slauson Avenue, where we saw that so much of the talent and ambition didn’t — and still doesn’t — have access to the resources, guidance and capital that would enable them to build the next biggest company

Relan: When you’re a sole small-business owner, you’re wearing many different hats and having to juggle all your tasks with very few tools and technology to support your business. We’re coming at it from the perspective that small businesses employ a significant percentage of Americans. We want to help support and mitigate the daily struggle of operating their business.

What will be the average stage and deal size of the fund?

Clements: In order to move the needle, we needed to be in a position to lead rounds at the earliest stages. We are often the first institutional commitment to an emerging company. We invest from $250,000 all the way up to a few million dollars, while simultaneously helping to bring in complimentary investors in our network.

What are red flags you see when founders pitch to VCs?

Clements: The biggest red flag is when founders don’t have a big enough vision for the company. If you’re raising from VCs, a founder should be looking to create the leading company in their category. 

How important do you feel it is for founders to build their personal brand?

Relan: It’s extremely important to demonstrate your thought leadership and personal values in everything you do. Communicating those values to your consumer is vital. The more you invest in your personal brand, the cheaper it is to attract like-minded customers or investors towards you. By sharing yourself authentically and imperfectly, it gives people the chance to get a sense of who you are. Your lived experience is your competitive advantage.

What lesson do you find yourself having to learn over and over?

Relan: You get what you pay for. [Laughs]

Clements: I’m really enjoying Reimagining Capitalism in a World on Fire by Rebecca Henderson. She is a supporter of capitalism, but makes a thoughtful case about how we need to be more intentional about our impact because it will ultimately enhance our prosperity.

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What are your final thoughts on democratizing access to entrepreneurship?

Clements: We know that if we lower the barrier to entry for small-business owners to compete, it creates wealth disproportionately for people of color. We’re not lowering the industry standard, but simply building a court so those outside of Silicon Valley can participate. By starting local, we plan to be impactful globally, stimulate the economy and open doors that are walked through for generations to come.