The Case for Investment Clubs
If you've read my book, then you already understand why Black investment clubs are such an important step to organizing our human and financial capital in a decentralized and resilient manner. And I'm sure you're aware of the extreme lack of Black representation and ownership in the venture capital and private equity industries...well, pretty much in all asset classes. While encouraging diversity within these firms is a partial solution to enhancing human capital, the reality is that true change comes from the source of funding. We need Black funded and managed investment funds.
It's actually very simple. VC/PE firms are dominated by white males because people who fund them (commonly called Limited Partners or LP's) are overwhelmingly white and male. Until we organize large pools of capital, Black investment managers who want to get to any significant scale will have to continue to rely on the benevolence of white men, who may throw us some scraps in the name of tokenism, but will never provide the level of funding we truly need to investment managers that truly care about empowering our communities.
We need to stop spending so much energy and time on symptoms and start attacking the underlying problems. Lack of diversity in the investing space is not a problem. It's a symptom of the lack of Black LPs, which is a symptom of disorganized capital within the Black community. And unlike in other communities, we don't have a lot of wealthy individuals or institutions in a position to be consistent LPs. And the wealth we have is concentrated in the hands of Black people, who either don't have any loyalty to the Black community or wouldn't have a clue on how to use it if they did.
This is why I talk about the need for a network of investment clubs in my book. We are going to have to take a more grassroots approach when it comes to funding our own empowerment.
Imagine every chapter of every Black organization, church congregation, and family having an investment club, and those clubs being able to access the entire network of clubs for deal flow. You don't need a lot of money to get started. 10 people contributing $50/month into a joint account adds up to $6,000 a year. That's not much, but with the proper investment strategy it's a start and can build and grow over time. But the real power comes with scaling this out at a national level.
Let's take the National Society of Black Engineers (NSBE) for example, with its 82 professional chapters. If 10 people from each chapter collectively invested $100/month each, that comes out to $984,000 a year. With that money, they could invest $100K in 9 Black-owned startups or tech-enabled businesses a year. And instead of constantly having major white corporations fund their programs and recruit at their events, Black engineers coming through NSBE could start working for these companies that they've funded.
NSBE’s mission is "to increase the number of culturally responsible Black Engineers who excel academically, succeed professionally and positively impact the community." I can tell you with reasonable certainty that they will fail in this mission, particularly the positively impact the community piece, if they continue to rely on major (white-owned) corporate partners. Black economic empowerment "brought to you by Lockheed Martin" simply isn't going to happen, but at the moment NSBE doesn't have a choice because these corporations are where the funding is. Until we can invest in and build large Black-owned companies that need a lot of Black engineers, this will always be the case.
If the leaders of these organizations truly care about the Black community and their missions, rather than simply acting as elite gatekeepers to Black success and House Negroes for corporate "diversity" programs, then they will join us as we establish a national network of Black investment clubs. If not, you should leave these organizations and join those that do. We don't have time for complacent, corrupt, or incompetent leadership from these organizations anymore. It's time for us to think bigger and get serious about real solutions. Business as usual clearly isn't working.
If your family, friends, church, fraternity, sorority, alumni chapter, or professional organization wants to easily set up an investment club and get access to a network of clubs to share knowledge and deal flow, join us. I'll be helping a limited number of organizations get started for FREE for a limited time. Simply email us to get more info and apply.