KEY INSIGHTS:
- Nex Cubed is launching a $40 million fund for HBCU founders and Costco is joining as an anchor investor in the fund.
- The fund will invest in early-stage companies raising pre-seed and seed rounds with a standard initial investment of $120,000.
- The first cohort of eight to 10 companies will be chosen this spring, with a focus on startups working in fintech, digital health, property tech and edtech.
Nex Cubed, a global accelerator that invests in diverse founders, has launched its latest accelerator fund, the HBCU Founders Fund, which will invest in startups where at least one founder is an HBCU student, alumnus or faculty. Costco is joining as an anchor investor in the fund with a $5 million investment, a key part of the eventual $40 million goal for the Founders Fund.
“[Costco’s investment is] a level of validation in our thesis that there’s plenty of talent at HBCUs to support a $40 million fund,” Marlon Evans, CEO of Nex Cubed, told The Plug.
This is just the latest move Nex Cubed has made to support HBCU founders. In 2020, the organization launched the HBCU Founders Initiative (HBCUFI), which has since evolved into an independent nonprofit dedicated to supporting HBCU founders on their entrepreneurial journey.
Over the past two years, HBCUFI has held multiple pre-accelerators for founders to help them build an MVP and this summer the organization created a Startup Look Book, a directory of HBCU-founded companies.
“We recognized that while there was a lot of great activity happening on campuses — whether it be pitch competitions or hackathons or demo days, what have you — there wasn’t a lot of programming that said, ‘Okay, now what? How do you actually sustain and launch your business?’” Evans said. “We also knew that funding was an issue as well because many of the founders didn’t have access to angel investors and VCs to fund the businesses that they were launching.”
The HBCU Founders Fund will continue expanding on HBCUFI’s work by now giving founders access to funding and a four-month accelerator with a dedicated advisor to get them to their next stage of growth. The accelerator will culminate in a pitch event in Silicon Valley.
The fund will invest in early-stage companies raising pre-seed and seed rounds, Evans said, with a standard initial investment of $120,000. They will be aiming to receive eight percent equity in the companies and plan to have an average of $250,000 in follow-on funding available for the founders.
“We want to make sure when they leave our program that they’re in that place to go out and raise that next significant round of capital, a million-plus round,” Evans said.
The first cohort of eight to 10 companies will be chosen this spring, with a focus on startups working in fintech, digital health, property tech and edtech. Evans said some of the founders who have gone through the HBCUFI pre-accelerators will be in this first cohort. The fund is planning to have a second cohort this fall if fundraising continues to go well.
Evans aims to eventually raise a $40 million fund by the end of this year or early next, but he does not want to help just HBCU founders, but the HBCUs themselves.
“We would love to have the endowments at some of these HBCUs serve as [limited partners] in the fund,” he said. “That would be the ultimate goal because then all of the money stays really in the community. So when the fund wins, it goes back to the institutions which then goes back to support the schools, the students.”
Ultimately, Evans hopes the HBCU Founders Fund is just one player in a larger ecosystem of funding and support for these founders.
“Of all the things in my career, and I’ve kind of been at it for a while, this is the one that is most rewarding for me,” he said. “This wasn’t a solution looking for a problem. There was an identified problem there that our program was able to help solve and we’re just hoping that it serves as a catalyst for others to jump in with us whether it’s via the fund or investing directly into the companies that go through our programs. We’re just happy to be able to play our part.”
