Money Rehab with Nicole Lapin - Change Maker: Arlan Hamilton, Founder, on How Being Underestimated Can be a Superpower

Episode Date: June 5, 2021

This week’s change maker Arlan Hamilton is a venture capitalist investor. She’s the founder and managing partner of Backstage Capital, which invests in underestimated founders, including women, people of color, and LGBTQ+ folx. She talks with Nicole about hating the “Homeless to Harvard” headlines written about her early on in her career… until she started embracing the label, and skyrocketed to success. 

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. As you know, every Friday we talk with a public figure making change in every sense of the word,

and along the way has been in, or might still be, in money rehab. So today I'm talking with Arlen Hamilton. Arlen is the founder of Backstage Capital, a venture capital firm that aims to minimize funding disparities in tech by investing in high potential founders who are people of color, women, and or LGBTQ. Arlen built this fund from the ground up while also experiencing homelessness herself. She is an incredible entrepreneur. She is an incredible human. And I think we could all learn so much from her. So Arlen, welcome to Money Rehab. Hey, thanks for having me.

We start with a quick round of Money Rehab, Never Have I Ever. I'll ask you a question about your finances, and you can tell me if you have or you haven't made this money move. Never have I ever been audited. I have not. Never have I ever bought crypto. I have. Yay! What kind of crypto?

I've had Bitcoin for several years. I didn't get enough. My mother, on the other hand, has been stacking Bitcoin and Ethereum. And every morning she greets me with a screenshot of how it's doing. That's amazing. Yeah. Your mom is far cooler than all of us, it sounds like. Never have I ever started an LLC. I have.

Multiple. Never have I ever maxed out a credit card. I guess I have. I've just never had a really large limit. Never have I ever writtened out a credit card. I guess I have. I've just never had a really large limit. Never have I ever written a will or trust. I have. So you got married. Never have I ever signed a prenup.

I actually have not signed a prenup. We will probably sign a postnup, but we just, we're doing it our way for now. I can't wait to get into your way, but I'll give you a layup. Never have I ever pitched to an investor. Oh my goodness. You don't have enough time to talk about how many times I've pitched to an investor. Is it like in the thousands, do you think? Or hundreds still? Probably thousands. Really? I've been pitching for a decade for Backstage Capital and I do it every day. So if people don't know what Backstage Capital is, what have they been doing with their lives?

But can you explain to us what it is? Yes. Backstage Capital is an investment firm that I started working on about a decade ago. And we launched officially about five and a half years ago in 2015. What sets us apart is that we invest in mainly underrepresented, underestimated founders. So we invest in women, people of color, LGBTQ founders, et cetera, in a world in venture where 90% of venture funding goes to white men in the US. Think about what the landscape was, what the vernacular was, what sort of the feeling was among underrepresented founders in 2015 or 13 or whenever, you know, we were just discussing it and it wasn't

a fund. And now to think about how so many thousands of founders have said that they have gotten something from backstage inspiration or just support or something to that effect. I mean, even in the last few weeks, I've seen announcements of multiple funds that were started with kind of a Backstage ethos that have raised tens of millions, if not hundreds of millions. When you started that 10 years ago, did you ever think that would be the case? Absolutely. I had to think it. I had to think it would be. I think what's surprising is, it's just the actual pieces of the journey itself, the many directions it's taken. You know, I hoped for this. I aimed for this. I didn't think that I or Backstage would be so known. I thought that it would be very kind of quiet and it would be something that was happening behind the scenes.

It's in fact why I called the fund Backstage Capital. turned out different, but definitely got us to the destination to at least a milestone faster than we would have if we had been more quiet. So do you feel like you're shy or introverted or why didn't you want to be center stage out of the gate? Oh, there are multiple, multiple reasons. One was just because I think, you know, in 2015, when I did start raising and I started investing, that itself was the story. It was a very small story, but it was like, okay, I'm investing. I have this syndicate.

I'm moving on. And then in 2016, I had an article that came out, and it was the headline. I can't remember exactly what the headline was, but it was a like from homeless to Harvard type of headline. And I had requested that that not be the take because it was so little of what I had said in the interview. And so I was sort of, I was never ashamed of having been homeless or having housing insecurity or being on food stamps or any of that that made me who I am. But I didn't want it to be the main attraction. I wanted to be, look at these founders that I'm talking about. Like this is a business case for this. You know, it's not just feel pity for me or the white male investors feel like they're checking their philanthropic thing off for the year.

And so I was really upset when that happened. I hid under the covers when I came out. And then hours later, almost immediately it started happening, but hours later is when I could kind of take it in. I just started getting inundated with messages from people who were just like, wow, I've either gone through something like that, or I'm going, I'm experiencing it right now. And you've given me the spirit to live another day and to go on another day. And when that started happening, I was like, oh, I just said to myself, I'm being selfish. I'm being so selfish and self-centered if I think that I shouldn't share something that's going to help so many people.

And then in that moment, it became sort of like, this is theirs, not mine. So as long as they'll keep having me, I'll keep sharing it, right? I'll just keep showing up to the party. I approached it from that angle from then on, and it certainly kind of exploded from there. Because people want to root for you. This is not just about P&Ls here. Like, of course, the numbers matter when investing in companies or investing in founders or investing in investors, for that matter. But they want to root for you because of you, the person, of you, Arlen. Hold on to your wallets, boys and girls. Money Rehab will be right back. Now for some more Money Rehab.

Money is such a mindfuck if you have it, if you don't. Everybody has a complex around it in some way. And I think you have really debunked whatever misconceptions there have been. What misconceptions about experiencing homelessness do you think there is? My least favorite question that I can think of, and there probably is worse, been. What misconceptions about experiencing homelessness do you think there is? My least favorite question that I can think of, and there probably is worse, but there's my least favorite question in social settings is when someone says to me, especially someone who is affluent and has been their whole life, says to me, how homeless were you? And it's happened multiple times. And a lot of times when it happens, it's like sort of just I want to know more. Like I hear that and I want to know more about it.

But sometimes it's like this, you need to prove yourself as someone who came from the dirt to whatever. When I was in, I think it was high school, I think we watched a video where we learned that the majority of homeless people in a certain place were women with children. And then it wasn't like a stigma. There's a stigma because of what you see sometimes, what you see out and about, where you see someone and you can kind of fool yourself into thinking, oh, well, they got themselves there. They must have been a drug addict and they're just, they're for some, somehow they deserve that. Well, first of all, no one deserves to be homeless. No one, no matter what happened. But second of all, usually the people saying that are just like a couple of steps away from that possibility themselves. One wrong move, one step in the other direction at one decision they made or one deal not coming through.

And it could have easily been them because not all homeless people are on the street where you see them. There are a lot of homeless people who work with you that are living out of their cars or bouncing around people's houses. They have a week here and a week there and a week there in housing insecurity. They don't have an address. I didn't have an address for so many years, and I didn't go around announcing it. I just think there's such a stigma of, like, that's them, those people, or whatever. And it's, no, it's all of us. Any of us could have been in that, can be in that situation.

And I think about that every day. There are a lot of systemic things that cause so much of this. I think that once you start talking about something that's taboo, it gives other people license to do the same. You know, I've experienced housing insecurity. I wasn't born with a silver spoon in my mouth. I barely had a spoon of food in my mouth growing up. And when I start talking about that, I think that it allows someone else to share their own story. But I think somebody has to go first. Yeah, and I'm happy to.

How is experiencing homelessness so affected how you spend money now? Well, I think that just my whole upbringing up until that 35-year mark has just influenced how I spend money, how I view money, how I earn money, how I raise money. I used to hate it. I used to hate money. I used to think money is a thing that makes my mother sad. Money is a thing that keeps me from having clothes that fit me or don't have holes in them. There's things like that, right? Money was just this evil thing that I hated. And I wanted to control it because then it was like controlling the beast. But I wasn't looking forward to having a lot of money for the joy of it. I was looking forward to it for a kind of revenge. Once I had it, like a kind of revenge. Once I had it, started getting a taste of it, both in raising it for my company and having it personally, the relationship changed completely. And now it's,

I just look at it as a tool. Yeah. It's a mechanism to getting things and opening up doors for other people mostly. And it has no power over me. So it makes me a great negotiator because I can stand to lose. I can stand to lose. And when you can stand to lose, you often win because you have such foundation and conviction. I don't get excited about money in a certain way. Like my wife says, she makes fun of me because she's like, you get more excited about like the smallest things than you do about raising $500,000 in a day. Like I'll tell her how my day was and she'll tell me how her day was. And I'll say, yeah, I did a $100,000 deal for myself. And she'll say, oh, okay. And then I'll say, yeah. And then we were able to get like $500 to this entrepreneur to help them get an LLC.

And I'll just like light up about it. And she's just like, that's so weird. But she gets it and I get it. And it's because I think it's a Lisa Kudrow effect, if I will. Just saw the Friends reunion. I think she's the eldest of the characters, and I think she got the gig latest. And I think she has mentioned a couple of times in the past 20 years

that that really set her up for being ready for it and not having so much of a spin-out. And I think that's what this is. I think it's just for 85% of my life, I had no money. Now it's not like, I don't feel like I'm at Disneyland. I feel like I got myself here and a lot of other people helped me get here. And now I'm going to make us all proud. And I think that you're going to be okay no matter what. At least that's how I look at it. Like I've seen death in its eyes. So if this deal doesn't go through, it's not going to break me. I've seen worse. Oh, hell yeah. That's exactly right. I mean,

it really is. And when you start thinking that this will break you, you've already lost it. That's a scary place to be. You kind of want to optimize for peace with however it's going to go. It's a mindset of money can't make or break me. If it does, what is my life? That's easy to say when you have it. It's harder to say and to believe when you're looking at your bank account and you have $12 or you have a negative balance. So I get that too for anybody who hears that. But just know that I've seen it both ways and I feel the same way. Yeah. I think it is high class problems to be able to say that money without meaning is just paper, especially for people who don't have it. It doesn't feel the exact same way. But it sounds like you've done so much work around money as a tool because it can be used to, you know, like a hammer, build a house or tear it down.

When I think about spending, because you asked about spending specifically, if you don't mind me sharing a story. Please. So I recently won an auction, Janet Jackson's 1956 Chevrolet. Dang, a casual auction. It's a casual auction. So it was the first time I've done an auction auction that wasn't at an event. And she had 1,330, I think, items. And it was like a once in a lifetime, I'm going to do this.

And she's sharing it with a charity, but mostly it's just, she wants to do it while she's alive, right? So there are two vehicles, but this was the only item of 1300 plus that came with a phone call because it has such sentimental value to her that she wanted to tell the bidder, the highest bidder, what that was. They understood what they were getting. And so I learned about this a couple of weeks prior to the auction. And I said, well, I'm going to go for it. I'm going to try it. I mean, there's no way I thought I was going to get the truck. But just to go back to what I was saying, I went in, I had a number that I knew I could afford and I knew wouldn't be consuming me.

And I won it. Now I did cry after I won it and most people in the room thought I was crying because I got Janet's truck and absolutely a big part of it was that she has meant so much to me in my life since I was 13 and it was half that, you know, it's 50%. Like I got this thing I wanted. But it was what hit me and struck me at the time that made me cry without me realizing I was going to was six years ago, I was living on the floor of the San Francisco airport. And today, I just held up a paddle to buy something for more than $100,000 that I wanted, that I felt was a good investment. I just, it was just so overwhelming because I don't have much time to think about that. Do you talk to Janet? I will soon. She is very, she was very pleased that I wanted and we're excited to talk to each

other. Like how excited? I'm thrilled. And I know I probably am sounding so low key about it, but just honestly, the 13 year old and the 20 year old and the 30 year old in me is, is, is jumping up and down for joy. But I just feel like it's, it's a full circle moment and I feel very grounded and rooted in it. And I just am going to be thrilled to have the call and to be able to tell her a few things that I've waited my whole life to.

I'm not nervous and I'm not, I'm very excited, but I'm also like this, this was supposed to happen. Wow. I love that. What money advice would you give your former self for how to change your mindset around money? I don't know if it's advice. It's just sort of like a clarity and to make it okay that what you are right now doesn't necessarily have to follow you for the rest of your life or be what you are for the rest of your life. You can always evolve. You can always change. You can always change your mind. And what you are in that moment at 24, at 18, at 47, at 75 doesn't have to be what you are the following year. You can always change your circumstances. And in the circumstances that you're in right now, keep note of it, you know,

because you're going to need those clues for the next step in your life. You're going to need all the things that you're learning right now and experiencing right now to help you with the next step. Here's a tip from Arlen you can take straight to the bank. You do not have to start a venture capital firm in order to support underrepresented founders. You don't even have to start a business. You can do this as a consumer. Arlen talked about how systemic issues beyond her control affected her life. As consumers, we can make choices that dismantle these systems. It's in the votes we cast, not just in electing political leaders, which is certainly vital, but also in the votes we cast every single day when we decide which

businesses we support, which voices we amplify, and where to donate money and time. Votes we cast every day when we interact with and consequently signify support of public figures or organizations that uphold the system of privilege. So next time you're about to swipe your credit card, ask yourself, where is this money going? Instead of a big chain, could I buy this latte from a local Black-owned business? The answer is, and should be, yes. Money Rehab is a production of iHeartMedia. I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Catherine Law.

Money Rehab is edited and engineered by Brandon Dickert with help from Josh Fisher. Executive producers are Mangesh Hatikader and Will Pearson. Huge thanks to the OG Money Rehab supervising producer, Michelle Lambs, for her pre-production and development work. And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.