HBCUs have received unprecedented investments, enrollment and attention since the racial justice protests sparked by George Floyd’s murder in 2020. Now there’s an intentional push by some tech entrepreneurs and venture capitalists to use their skills and resources to grow HBCU endowments.
Billionaire tech investor and philanthropist Robert F. Smith shocked the world in 2019 when he announced he would pay off the student loans of every Morehouse College graduate that year. However, the founder, chairman and CEO of Vista Equity wants to do more to help HBCUs.
In June, Smith’s Student Freedom Initiative announced its partnership with Base10 Partners, the largest Black-led venture capital fund founded by Adeyemi Ajao and TJ Nahigia in 2017. According to a press release, the goal is to help expand investment options for specific HBCUs.
The work builds on Base10’s Advancement Initiative, launched in 2021 to help grow HBCU endowments and catalyze wealth creation by donating 50 percent of its carried interest to HBCUs.
The fund raised $250 million to support the work with investments from HBCUs like Florida A&M (FAMU), Howard and Tuskegee universities.
“I hope this is transformational,” Base10 partner Jamison Hill told Venture Capital Journal last year about the firm’s plan to donate half of its profits and help HBCU students with job training and networking. “I spend all day long thinking how to efficiently deploy capital, and this support to HBCUs will certainly help augment the underrepresented talent throughout tech.”
The partnership will also address historical barriers HBCUs have faced when trying to enter the venture capital investment space.
HBCUs have “limited investment capital, smaller endowments, and near-term needs for capital to meet operational expenses,” the announcement stated. “The partnership will help address these barriers directly by offering no-minimum investments, no management fees, a reduced holding period and profit sharing among HBCUs. By doing so, both parties hope to help close the wealth gap between HBCUs and other universities and “build intergenerational wealth for the Black community.”
According to Pensions & Investments, HBCUs had $2.7 billion in combined endowments at the end of the 2017 fiscal year, with Howard leading the pack at $647 million.
Though donations and investments to HBCUs have increased sharply during the covid-19 pandemic, HBCU endowments still lag severely behind their white counterparts.
A June report from the U.S. Government Accountability Office (GAO) found the median endowment at HBCUs was $12 million, while the median endowment size at non-HBCUs was $23 million, Pensions & Investments reported.
“This partnership is another example of what is possible when we are intentional and collaborative,” Smith said in a statement. “By specifically addressing barriers (e.g., minimum investment, liquidity, expenses, and holding period) which have typically prevented HBCUs from gaining access to alternative investments, this solution will become an integral component in addressing the endowment wealth gap between HBCUs and their white counterparts.”
“Thanks to the work of Robert and Vista Equity Partners, private equity has outpaced venture in terms of bolstering others and opening doors to those with underrepresented backgrounds,” said Adeyemi Ajao, co-founder and Managing Partner at Base10 Partners.
“Through this partnership with the Student Freedom Initiative, we’re leveraging the power of the two largest asset classes,” Ajao continued. “It’s particularly meaningful to be doing this as the largest firms led by Black managers in each. We’re looking forward to working together to challenge existing systems and increase opportunity for HBCUs and their students in new ways.”
PHOTO: In this Tuesday, May 5, 2020, photo, Morehouse College senior Lanarion “LTL” Norwood Jr., of Atlanta, works on his computer in a hotel room in Atlanta. (AP Photo/Brynn Anderson)