'This is Critical': Two LA Funds Focusing on Diversity Get an Infusion from PayPal

PayPal Holdings, Inc. announced Thursday it will be transferring money to two L.A. firms as part of a $50 million commitment to eight early-stage, Black and Latinx-led venture capital funds.

Slauson & Co., the new fund from PledgeLA chairman Austin Clements focused on people of color, women and LGBTQ+ entrepreneurs; and VamosVentures, the Latinx consumer-focused, early-stage fund founded by Marcos Gonzalez, are both receiving undisclosed investment amounts.

"For a small fund, this is critical," Gonzalez told dot.LA. "Welcoming PayPal into the VamosVentures family will provide insight and resources in a variety of ways. For example, deal referrals, input on diligence of companies we're looking at in the fintech space, and possible business development support for our portfolio. More broadly, we expect to benefit from more general insight on trends and connections to folks in the ecosystem that we might not otherwise be able to access."

Gonzalez said he thinks it is significant that Los Angeles is the only city where PayPal chose to invest in more than one fund.

"I think it shows that L.A. can be an epicenter for early-stage activity around diverse managers, founders and consumers," Gonzalez said. "More specifically, L.A. is a Latino city and we're working to increase the Latinx communities participation in the tech and VC ecosystem."

Just 2% of VC investment partners in L.A. identify as African American or Latino, according to PledgeLA. Nationally, a 2018 Deloitte study found 80% of investment partners at U.S. venture firms were white; 3% were Black and 3% were Latino. Just 4% of VC employees are black, according to a 2018 survey by the National Venture Capital Association (NVCA), an industry trade group.

Because of the insular nature of how startups get funded – with a big emphasis on existing networks and warm introductions - the lack of diversity has major trickle down effects on which founders get capital.

In an effort to help solve the whiteness problem, VC's like Clements have gone out on their own to start new funds, but raising a first time fund is never easy and has been a "herculean task" this year, according to the NVCA. That's why the PayPal investment comes as welcome news.

"Through our investments, we hope to be a catalyst for positive change for people who face historic disparities in access to capital and opportunity," Clements said in a prepared statement.

While PayPal will be what Clements calls the "inaugural investor" in Slauson & Co., VamosVentures is further along, having already raised $25 million with two months left of fundraising to go, according to Gonzalez.

PayPal said it would also invest in Chingona Ventures, Fearless Fund, Harlem Capital, Precursor Ventures, Zeal Capital Partners, and one additional fund as part of the company's commitment to invest $530 million to support Black-owned businesses, strengthen underrepresented minority communities and fight for racial equity and economic equality.