Analytical Ability — We look for founders that use data to drive decisions — those that know their business, competitive landscape, and market and track key performance indicators (KPIs) consistently. Darwish Gani and Richard Hong of Pangaea embody this trait, and seeing their focus on data and how it has manifested in them becoming the fastest-growing company in our portfolio — and one of the fastest-growing companies in the country — has shown us the power of it. You can’t manage what you don’t measure. Having ambitious goals is great, but supporting these assumptions with bottom-up analytical rigor helps put things into practice and compete at a high level. They use their analytical ability to choose which products and markets to enter, as well as how to optimize their supply chain and resources efficiently.
As part of our series about “5 Things I Need To See Before Making A VC Investment”, I had the pleasure of interviewing Jarrid Tingle, Co-founder and Managing Partner of Harlem Capital, a 40mm dollars venture capital fund on a mission to change the face of entrepreneurship by investing in 1,000 women and minority founders over the next 20 years. Jarrid was featured on the 2019 Forbes 30 under 30 list, 2019 Inc. 30 under 30 list, 2019 The Root 100 list, and the 2018 Ebony Power 100 list. Outside of Harlem Capital, Jarrid is a Board Member on the Penn Fund Executive Board.
He received his MBA from Harvard Business School (HBS) in 2019 where he was a Baker Scholar. Previously, Jarrid was a Private Equity Investment Professional at ICV Partners. Prior to ICV, Jarrid was an Investment Banker in the Global Technology, Media & Telecommunications Group at Barclays.
Jarrid graduated cum laude from the Wharton School of the University of Pennsylvania with a Bachelor of Science in Economics and a Concentration in Finance. Upon graduation, Jarrid received the Wharton Undergraduate Dean’s Award for Excellence.
Thank you so much for joining us in this interview series! Before we dig in, our readers would like to get to know you a bit. Can you please share with us the “backstory” behind what brought you to this specific career path?
After two years of investment banking, I started a role at ICV Partners, a Black-owned private equity firm, in 2015. Even though I had been friends with Henri Pierre-Jacques since 2011, we became much closer after we both joined ICV.
At ICV, we quickly learned how to conduct due diligence, present an investment case, and work with the management teams of our portfolio companies. We were also exposed to legal, reporting, and administrative functions that we wouldn’t have gotten at a larger firm. However, the most empowering experience was the visual example of seeing people who looked like me running a firm with 1 billion dollars+ assets under management (AUM). As a result, I was confident that I could one day run a fund.
As associates at ICV, we did not have any economics in the fund and we wondered if there was anything else we could be doing to invest our money, especially because the stock market did not seem appealing. We also liked the allure of being active investors. After a couple of conversations, one day, Henri asked me if I wanted to put in 10,000 dollars of our own money and start investing. We called each other’s respective roommates and a friend — and by the end of the day, we had pulled together 50,000 dollars.
In December 2015, we had our first meeting in my living room in Harlem to discuss investment strategies for our syndicate. In February 2016, after visiting a Harlem coffee shop we planned to invest in, the inspiration for the name Harlem Capital Partners struck.
We thought that with the right branding, we would have more opportunities and recognition. Otherwise, we would be a bunch of 25-year-olds writing small checks. If we had a brand, people would think of us as a firm. We started investing, meeting people, and developing a strategy along the way, and we ended up investing in 6 start-ups over 2.5 years while growing our network as well.
Henri and I left ICV to attend Harvard Business School in 2017. We kept working on Harlem Capital and solidified our mission to change the face of entrepreneurship by investing in 1,000 diverse entrepreneurs over 20 years. I began recruiting for private equity as the most logical path given my work experience, but I was also very selective about where I would work, since I had a great experience at ICV. Meanwhile, Henri recruited for venture capital, but realized that there was very little diversity at most firms, and also noticed that the notable diverse-run firms were too small to hire him.
Around the same time, we received great features from Black Enterprise and then Forbes. We decided to forego an internship to try to raise a fund. It was a very tough process with a lot of highs and lows. We were able to leverage some mentors and luck, securing early investments from top private equity investors and TPG. We were then able to raise 12.5mm dollars before our graduation in May 2019 and closed on a 40mm dollars fund in November 2019.
Is there a particular book that made a significant impact on you? Can you share a story or explain why it resonated with you so much?
7 Habits of Highly Effective People by Stephen Covey. I traveled regularly when I was working at ICV, and my flights were a great opportunity to unplug. In the beginning, I would take naps or listen to music, but I realized that flights were the only uninterrupted time I could commit to reading and found 7 Habits after looking for productivity/self-help books. Up until I read 7 Habits, I was always in awe of how CEOs, executives, and people at the top of their fields got so much done with the same 24 hours I had. Reading the first three habits for self-improvement, the second three for interacting more effectively with others, and the third on recharging gave me a playbook for becoming my best self. After reading this book, I became focused on using my time deliberately and becoming more productive, and ever since, instead of relaxing on flights, I now use the uninterrupted time to reflect, set goals, and read.
In short, 7 Habits activated my growth mindset and was essential for the journey I have had with Harlem Capital.
Do you have a favorite “Life Lesson Quote”? Do you have a story about how that was relevant in your life or your work?
“Advice is cheap, get the money.”
We were fortunate to get a meeting with a legendary private equity investor in 2018. After going through our pitch, I closed with “we would love for you to be an investor…or an advisor.”
He replied “advice is cheap, get the money” with a serious face. This one sentence forever altered our lives.
One of the world’s best investors thought our strategy had potential. With his validation, no one could convince me otherwise. The remark changed my tactical approach to fundraising, leading me to never soften our requests.
Going forward, I never asked for advice from potential investors while we were fundraising. Believing we would be successful with or without the potential investor has changed the power dynamic in meetings, and so we do not have to backtrack if someone challenges our strategy or asks tough questions. Now, anyone listening to us knows we are confident in our firm and, as a result, I believe they have a higher likelihood of investing. This advice has also helped me not to take any “no” too seriously.
How do you define “Leadership”? Can you explain what you mean or give an example?
Setting a vision, creating an example, and helping people become their best selves while showing compassion. Henri and I take our roles as Managing Partners of Harlem Capital very seriously. We have set a long-term vision for the firm and are thinking 20 years down the road for what we want our organization to become. We set high standards for our organization, and yet, we still probably work the most hours, having some of our most productive hours on nights, weekends, and vacations. However, we “work smart” by increasing our productivity and using our time in the highest and best-use ways.
We are fortunate to have a team where everyone is ambitious and intellectually curious, which is ensured since we have only hired previous interns. We use overcommunication and extensive semi-annual 360 reviews to recognize strengths and point out areas of development. As a result, we all have seen tremendous professional growth in a short amount of time. We also see our employees as people, and we believe that staying informed about each others’ families and personal lives helps us all remember what is most important. If anyone ever needs time to support loved ones, focus on moving, or needs time away, we try to be extremely accommodating.
How have you used your success to bring goodness to the world?
I love that there is direct alignment between Harlem Capital’s mission and the positive impact we want to have in the world. There are three key ways we would like to impact the world positively:
- Investing in diverse entrepreneurs: Our mission says it all. We would like to back 1,000 diverse entrepreneurs over the next 20 years. We believe more people should have access to entrepreneurship and capital. We see ownership and equity being the path to more people having wealth and the benefits that come with it. Venture capital is only one type of funding source, but one that can lead to hypergrowth and scalable impact. We believe that by investing in people of color they can grow personal wealth, hire diverse teams at an increased rate, and reinvest in their communities.
- Opening the door for more diverse investors: Early-stage investing is very subjective and as a result, people of color have been largely excluded. We believe capital won’t be distributed more equitably without diverse-led firms and increased representation across all firms. Harlem Capital has already hired 3 diverse candidates full-time since we started managing investor capital. In addition, we have had a robust intern program with 58 part-time interns over 10 classes out of nearly 5,000 applicants since 2018. 14 of our previous interns have gotten jobs at investment firms, including our 3 hires, and many others are working at top finance or tech companies. In addition, we recently launched a talent portal allowing hundreds of top applicants to get connected to other investment firms that have historically been weak at hiring diverse talent.
- Building in public: We believe that you can’t be what you don’t see. Outside of our investing and intern program, we want to see the ecosystem for diverse entrepreneurs and investors grow more broadly. We continually release content: social media posts, blog posts, deal announcements, podcasts, newsletters, and investor/entrepreneur features to provide transparency into VC and showcase all of the progress happening. We have inspired up-and-coming diverse entrepreneurs and investors, letting them know what is possible and that they will be supported if they take the leap.
Ok, thank you for that. Let’s now jump to the main part of our discussion. The United States is currently facing a very important self-reckoning about race, diversity, equality and inclusion. This is of course a huge topic. But briefly, can you share a few things that need to be done on a broader societal level to expand VC opportunities for women, minorities, and people of color?
The biggest hindrance to VC opportunities for people of color and women is the lack of diverse investors and closely- held networks and information sharing. The fastest way this can change is by having more diverse-led firms, which we are working on through our multi-layered efforts at Harlem Capital. There are many qualified potential VCs out there, but it has been tough for them to raise capital from limited partners (LPs). Most new firms get funded from friend/family connections, high net worth individuals, and family offices, but given there is much less wealth in Black and Latino communities, people of color have a lot of friction at this step.
Many institutions (endowments, foundations, pension funds, etc.) do not invest in VC. The ones that do are very focused on track record, so you are at a severe disadvantage raising a fund if you have not worked in VC for 10–20 years. Given the lack of diversity, there are going to be very diverse candidates that fit this criteria. The institutions that do invest in VC generally do not want to invest in more than a few dozen managers, and they prioritize the managers that they have backed previously when making allocation decisions. The top firms in VC have been doing well, growing their asset value and raising money faster, which crowds out challenger funds backed by new managers.
If institutions reported the diversity of the managers (either voluntarily or through a mandate), they would likely be embarrassed, face more public scrutiny, and find ways to relax the criteria that don’t drive performance to diversify their portfolios. I also believe that corporations and governments could play a more active role in funding diverse managers. I heard the idea of city/state-run sovereign wealth funds that could invest in funds and all taxpayers share in the upside. I love this idea, and I think it could make a huge difference.
Can you share a story with us about your most successful Angel or VC investment? What was its lesson?
Our most successful VC investment so far is in a company called Pangaea. We had a previous relationship with the team — Henri is best friends with one of the founders and kept tabs through the two previous companies he started. Pangaea is an ecommerce incubator and their first product, Lumin, is a men’s skincare brand launched in Summer 2018. They had the philosophy that brand is less important than marketing and distribution. They were are also very analytical. The business quickly scaled to 8 figures in annual revenue with limited funding, and all signs point to Pangaea becoming a very large company with significant investor interest.
We learned that repeat founders have a competitive advantage since they have started companies before — knowing what to do and what not to do. Their analytical approach is a big differentiator, and they have been focused on fast- growing markets. They have set an example for traits that we now get excited about when we are evaluating companies.
Overall, we are very happy with the 21 investments we have made. It takes 7–10 years on average to get to an exit, so it is still early for our portfolio, even though we have several companies poised for breakout success.
Can you share a story of an Angel or VC funding failure of yours? What was its lesson?
We invested in a company and soon found out it had less cash than management disclosed. We took an active role, working with management to forecast all aspects of cash flow on a weekly basis and assess our options. We gradually found out there were more liabilities. The other investors lost confidence and did not want to invest any more money.
The lesson here was to be wary of investing in bridge rounds, and if we do, we need an accurate picture of the cash in the bank and the burn rate. We put more weight on teams who have a strong command of their numbers and companies with strong unit economics. We now also conduct reference checks with existing investors, which leads to helpful information and can indicate any potential issues.
While the company’s board is still trying to sell the business, we were able to sell a license to the product to a strategy that allowed us to clear the liabilities.
Fortunately, it was a small investment, and learning these lessons early likely saved us a lot of money down the road.
Is there a company that you turned down, but now regret? Can you share the story? What lesson did you learn from that story?
We passed on an alternative investment management platform that has since had rapid growth. I sourced the investment from a trusted individual in our network who has made very smart investment and business decisions. The CEO was very strong, the company was differentiated, and there was a large market opportunity. I did thorough diligence and took the potential investment all the way to investment committee, where it was declined.
We had a few calls with other investors that had negative feedback on the deal. Ultimately, my team wasn’t sold on the industry vertical and was also uncomfortable with the deal terms, so we did not have the votes to approve the investment opportunity. My team declining the deal surprised me, and I was upset for a few hours.
We have reconfigured our process to reduce the chance of this happening. Now, we spend time early in our process getting comfortable with the terms/exit model and getting investor feedback. As a result, we focus on very important things first and have alignment before we even have a full team call with management. Our new process is a better way to stage our decisions and helps us avoid any surprises.
Super. Here is the main question of this interview. What are your “5 things I need to see before making a VC investment” and why. Please share a story or example for each.
VC firms generally focus on three key things: team, market, and product. At Harlem Capital, we add another dimension of an ownership target to create our 4-point investment box. My five things will revolve around the founding team since the best teams will align with the best product and market opportunities. Then it is up to Harlem Capital to negotiate for our 7–10% target ownership.
- Vision — We like teams with big plans and a strong perspective on what the future of the business will look like. Preferably, they are explicit about scaling the company with specific revenue, market share, or valuation targets. We know that building businesses are hard and luck is required to get to an attractive scale, but we believe it is essential to have a grand vision, or else the company will likely not have rapid growth. VC is a game of power law, where almost all of a firm’s returns are driven by a select few companies. Founders that can get people to buy into their vision have much stronger fundraising ability. Ruben Flores-Martinez is the CEO of Cashdrop. a mobile-first contactless commerce company. During diligence, he talked about wanting to become a decacorn in the next 5 years and being the next Shopify.
- Passion — We look for teams that are hungry and motivated to run the business. The best founders are driven by more than money. Entrepreneurship is difficult, and despite the upside, there are much better paths on average for building wealth. It requires a lot of emotional control since there are frequent and extreme peaks and valleys to the journey, which we also experienced building our own firm. Having strong passion for the business helps keep entrepreneurs grounded and able to deal with highs and lows. A perfect example of a passionate founder is Emily Hochman, the CEO of Wellory. Emily had explored different diets during college and ended up with some significant health issues. Instead of giving up or trying new medications, she was able to reverse all of the conditions again through food. She became passionate about helping others achieve a healthier relationship with food, received a nutritionist license and went on to build a successful personalized coaching platform. Her focus on this problem is infectious!
- Analytical Ability — We look for founders that use data to drive decisions — those that know their business, competitive landscape, and market and track key performance indicators (KPIs) consistently. Darwish Gani and Richard Hong of Pangaea embody this trait, and seeing their focus on data and how it has manifested in them becoming the fastest-growing company in our portfolio — and one of the fastest-growing companies in the country — has shown us the power of it. You can’t manage what you don’t measure. Having ambitious goals is great, but supporting these assumptions with bottom-up analytical rigor helps put things into practice and compete at a high level. They use their analytical ability to choose which products and markets to enter, as well as how to optimize their supply chain and resources efficiently.
- Adaptability — We look for founders that can adjust quickly to challenges, changes in the market landscape, and competitive pressures. While it is tough to assess founder adaptability pre-investment, we know it is a huge component of success. Things never go as planned in early-stage companies, and given the small size, the adaptability of a CEO is essential to manage the various potential tailwinds. Claire Coder is the CEO of Aunt Flow, a company that provides menstrual products for businesses and schools. When the COVID-19 pandemic hit, we were very worried about the potential impact to Aunt Flow because schools and offices were closed, indicating that revenue could go to zero. Claire pivoted to allowing customers to provide care packages to employees, and upon further reflection, realized that she could use also her FDA status and import channels to get personal protective equipment (PPE) at a time where it was scarce. This quick thinking allowed Claire to hit her original 2020 budget in a month and blow past expectations, putting the company in a great cash position. Another founder may have given up or laid off staff, but Claire used her resourcefulness to come out far ahead.
- Strong Communication — We look for founders with strong communication ability. When we look back at our most helpful LPs, strongest portfolio company entrepreneurs, and best interns, they are all great communicators. Now, “overcommunication” is our #1 value at Harlem Capital and a key factor to our effectiveness. Internally, it is important to be responsive so everyone is in the loop. By having a culture where we are expected to reply to messages within minutes to hours it ensures that we can make decisions quickly, create quick feedback loops, and minimize bottlenecks. Externally, our responsiveness to others (primarily via email) helps us not miss great opportunities and instill confidence in others. We have won some our best deals and achieved press / event opportunities by being on top of our inbox. By responding to every LP or potential LP within 48 hours, we signal that we are well organized and effective enough to manage institutional capital. One of the reasons we were excited to partner with TPG was because of their responsiveness; the firm has a culture of overcommunication, and we were amazed as we realized top executives would reliably reply to us within hours. Our standards have forever increased as we realized the power of this workstyle.
For our portfolio companies, we believe strong communication can help lead to success and, at minimum, make investors feel more confident. I can deal with good news and bad news, but I hate surprises. It’s generally good to know what’s going on, but hearing about bad news as soon as it comes helps investors to help or plan their own response.
You are a person of enormous influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. 🙂
I would love to see more ownership and equity shared widely at companies. Real wages have been flat for over 40 years. There are tens of millions of people in the U.S. who work hard, but do not get any of the upside. However, founders can have almost uncapped upside that no one can take away, even as their role becomes less instrumental to operations. Shifts to globalization, internet, and outsourcing have contributed to massive gains in wealth for business owners.
As Corporate America gets stronger with increased lobbying power, employee stock option plans, defined benefit plans, and unions are becoming less frequent.
I think we all have a responsibility to share more broadly, or wealth inequality will continue to be exacerbated in a way that is unsustainable.
We are very blessed that some of the biggest names in Business, VC funding, Sports, and Entertainment read this column. Is there a person in the world, or in the US whom you would love to have a private breakfast or lunch with, and why? He or she might see this. 🙂
It’s too hard to pick just one! I would love a private meal with Warren Buffett and Elon Musk.
Warren Buffett because he has been one of the world’s most successful investors. The advice he shares publicly is generally high level and simple, but I have to believe there is a more detailed framework he has used to be so successful with returns year after year. I would love to have even one of the secrets. Also, technology investments have seen meteoric rises in valuations in ways that sometimes are decoupled from fundamental investment principles. I would love to hear his thinking and long-term recommendations now that cash flow is less important than growth and market size for public and private market investors.
Elon Musk, on the other hand, is the Thomas Edison of our time. He runs two public companies and does so with a truly unique style and public-facing persona. Most importantly, though, he has pushed innovation in the physical world by leaps and bounds at a time when most companies have become focused on innovating digitally. I would love to hear more about his philosophy and how we can encourage others to be as optimistic and fearless as he is.
This was really meaningful! Thank you so much for your time.