Backstage Capital lays off majority of staff, pauses net new investments

Arlan Hamilton, managing partner and creator of Backstage Capital, said during her "Your First Million" podcast that the company has reduced its staff from twelve to just three.

Backstage Capital reduced its investment approach to exclusively take part in follow-up existing portfolios over three months prior to the layoff. The VC is battling to thrive both internally and externally, as evidenced by the reduction in employees.

“It’s not that I feel like there’s any sort of failure on the fund side, on the firm’s side, on Backstage’s side, it’s that this could have been avoided if systems were different if the system, we work within were different,” Hamilton said on the podcast.

Backstage declared in March that it would stop making new investments and instead focus its funding on its current portfolio firms. Hamilton acknowledged that there will be those who view the move adversely or who will assume that the firm is no longer active, contrary to its reality.

When a company has fresh funding from a major investor and has announced plans for a $30 million Opportunity Fund, it is unusual for them to claim that their assets under management are expanding while refusing to make new investments. Given that Backstage no longer has much dry powder, this indicates a general slowdown within the company.

“Somebody asked me, ‘why don’t you have more under management? You gotta ask these LPs, you gotta ask these family offices, you gotta ask these people who ask me, ‘how can I be helpful,’ and I say ‘invest in our fund,’ and I never hear from them again,” she said.

Hamilton shared her dissatisfaction with LPs while expressing her gratitude for the contributions so far. She added that Backstage finds itself in a "purgatory kind of position" since some investors believe it already has all the backing it needs. That isn't always the case, though. According to Hamilton, JP Morgan claimed the fund wasn't advanced enough, whereas Apple told the firm that it was far gone to be invested in.

She added that with no other assistance, it becomes more difficult to close out on new investments, add more assets to the management portfolio, and add more follow-on investments.

According to TechCrunch, LPs need to be more accountable for how their funds are spent. This might have a seismic effect, particularly for companies like Hamilton that specialize in backing underappreciated founders. Unfortunately, the ripple effect of imbalance is caused by the absence of support at the top of the VC hierarchy, where various fund managers don't get enough funding, which means diverse entrepreneurs don't too.

About Backstage Capital

Backstage Capital is a venture capital firm that invests in the finest startups in the US that are founded by founders that are underrepresented. The company's headquarters are in West Hollywood, California, and it was established by Arlan Hamilton in 2015.

 Since 2015, Backstage Capital has made investments in undervalued founders. Its portfolio of underrepresented founders is among the largest in the venture capital industry.