Color of money

Fremont VC strives for equitable equity

For the past three decades Opportunity Capital Partners in Fremont has quietly been tearing down financial barriers and recently received top honors from Black Enterprise magazine.

In its annual report, New York-based Black Enterprise magazine recently recognized Opportunity Partners as one of the top 10 private equity firms headed by an African American partner.

“The reason for this list is to give an indicator of a segment of African American business,” says Derek Dingle, executive editor of Black Enterprise.

“Two years ago we decided to expand our listings to include private equity firms because we thought it was important to look at those companies that are actively investing in businesses. Many of the firms that we’ve identified invest in minority-owned businesses,” he says.

Opportunity, which has $135 million under management, is not an average run-of-the-Sand-Hill-Road VC firm.

“Our philosophies share more similarities than differences; we both are in the business of providing capital to entrepreneurs in a fashion that will allow us to realize returns that our partners will find attractive. There is no difference there,” says Peter Thompson, managing partner of Opportunity.

“The primary difference between us and a ‘general’ market fund primarily has to do with the marketplace focus. Our focus is entrepreneurs of color and women,” he says.

Opportunity’s portfolio, which has funded dozens of startups over the past 32 years, is primarily focused on information technology, communications and health care, but includes few household names.

Its current portfolio companies include antispam software maker BrightMail Inc. of San Francisco, biosciences company BioGenex Laboratories Inc. of San Ramon and plastic dog house maker, Dogloo Inc. of San Francisco.

“Most of the companies we finance do not become public market candidates, so for a good portion of the world, those names are never known,” says Thompson. Most of his companies end up being bought.
Not all ethnic minorities have trouble getting funding, as can be seen by the large number of well-funded Bay Area startups headed by Asian and Indian entrepreneurs.

But Susan Hailey, CEO of San Mateo-based Forum for Women Entrepreneurs (FWE), says women and other groups still have a long way to go to achieve equitable equity.

“Our organization was founded in 1993 based on a study that said something like 5 percent or less of venture capital went to women,” Hailey says.

Despite U.S. Census figures that show women own or co-own almost 40 percent of all U.S. businesses and the number of black-owned companies grew by more than 30 percent in the last decade, African American and women-owned startups each were awarded less than 5 percent of all VC money distributed in 2000, according to VentureOne.

“Women entrepreneurs needed to be educated in not only how to ask for money, but what it takes — what a fundable business looks like,” FWE’s Hailey says.

Opportunity’s Thompson says even in today’s more enlightened business climate, women and ethnic minorities still face additional hurdles to get access to capital.

“There are still roadblocks that result from perceptions from those that are in the position to make decisions as to how capital is allocated,” Thompson says.

“On the other hand, I think that increasingly as there are more instances and more evidence of women and people of color ascending to positions of responsibility and authority within corporate America, the reasonable and objective observer will be less inclined to think that there is a distinction to be made on color or gender,” Thompson says.

Opportunity traces its heritage back to 1970 when Richard Nixon was president and promoted “black capitalism”to fight poverty.

Back then two Bay Area companies, Bank of America Corp. and Standard Oil Co. (now ChevronTexaco Corp.) gathered a group of investors to start the Opportunity fund to target black entrepreneurs.

Thompson says he’s been with Opportunity since it opened in 1971.
“At that time there was really no organized source of venture capital for entrepreneurs of color in the Bay Area,” Thompson says.

Recognizing the dearth of women-owned business, Opportunity expanded its focus to include gender parity in funding.

“Talented entrepreneurs come in all colors and genders. It’s just that women and certain ethnic minorities have been under served and overlooked by the general market funds,” he says.

David Sheldon, CFO of BioGenex, says Opportunity is actively involved as an adviser to his company.

“They look at companies for more than one reason. They look for return on investment but they also consider, like their name suggests, the kinds of opportunities that are being generated by the company. For instance this firm was founded by immigrants and it has quite a mix of people from different ethnic backgrounds,” Sheldon says.

But for startups, getting past the initial funding barrier is sometimes the hardest part.

“Anywhere, if you’re not part of the established network, it’s hard to break in — in Silicon Valley it’s really hard to break in,” says the Forum for Women Entrepreneurs’ Hailey.

Black Enterprise says venture firms like Opportunity are more than mere VCs; they are examples to others.

“I think it’s a very important development in terms of giving minority-owned businesses access to equity capital so they can grow and eventually go public when the IPO market turns around,” BE’s Dingle says.

Opportunity’s Thompson agrees.

“I think we validate the fact that it is possible to achieve attractive results from providing financing to entrepreneurs who are people of color or women,” Thompson says.

He says in the three decades he’s been watching the business world, a woman, Carly Fiorina, was named to head Hewlett-Packard Co. of Palo Alto and Richard Parsons, a black man, is now CEO of AOL Time Warner Inc. of New York.

“With AOL or HP, you don’t think that those two people in particular were promoted to those positions because of an affirmative action quota.”
“It was all about money,” he says.