Money Rehab with Nicole Lapin - Investing in Equality with Arlan Hamilton

Episode Date: January 16, 2023

This episode originally aired on June 4th, 2021. Nicole is joined by Arlan Hamilton, the founder and managing partner of Backstage Capital: a venture capital fund that invests in underestimated founders, including women, people of color, and members of the LGBTQ+ community. 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. 

One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that

I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details.

I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. In honor of Martin Luther King Jr. Day today, I wanted to highlight a voice that is making real contributions toward racial equality. So today I wanted to share the conversation I had with Arlen Hamilton in season one of the show. Arlen is a venture capital founder who has put her money where her mouth is when it comes to equality. She is the founder and managing partner of Backstage Capital, which invests in underestimated founders, including women, people of color, and people in the LGBTQ community. This mission is rare, which is a fucking problem because out of 100 of the top venture-backed

founders, 90% are male and 72% are white. Arlen embodies what it means to make change in every sense of the word, and her voice is exactly the one you need to hear today. So here's our conversation. So Arlen, welcome to Money Rehab. Hey, thanks for having me. Can you explain to us what Backstage Capital 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 U.S.

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. 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 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. 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.

But things took a turn and I think 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 was like, it was a very small story, but it was like, okay, I start raising and I started investing, that itself was the story was like, 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 did, 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, like almost immediately it started happening, but hours later is when I could kind of take it in. And I just started getting inundated with messages from people who were just like, wow, you know, I've either gone through something like that or I'm going, I'm experiencing it right now. 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 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. 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. 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, but 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, and it's happened multiple times. And I, 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've 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 that 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 are bouncing people's houses. They have a week here and a week there and a week there,

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, 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. 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 holds 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 didn't, I wasn't like looking forward to having a lot of money for the joy of it. I was looking forward to it for 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, and, and opening up doors for other people mostly. And it is, 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 hundred thousand dollar deal for myself. And she'll say, okay. And then I'll say, yeah. And then we were able to get like $500 to this, 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, if I will just saw the friends reunion, I think she's the eldest of the characters. And I think she's, 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 percent 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, like it's not going to break me. Like I've seen worse. Oh, hell yeah. That's exactly right. I mean, it's, it really is.

And when you start thinking that this will break you, you've already lost it. It's already, 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 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.

Hold on to your wallets. Money Rehab will be right back. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a time checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35

overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. And now for some more money rehab. 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, you know, 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 $1,300 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

so 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 want 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 was 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 a hundred thousand dollars 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 was very pleased that I won it, 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 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 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 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. Money Rehab is a production of Money News Network. I'm your host,

Nicole Lappin. Our executive producer is Morgan Lavoie. Do you need some money rehab? And let's be honest, we all do. So email us your money questions at moneyrehabatmoneynewsnetwork.com to have your question answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. Seriously, thank you for listening and investing in yourself, which is the most important investment you can make.