In the days following the murder of George Floyd on May 25, 2020, a group of Chicago tech entrepreneurs that first met at 1871 came together to openly discuss how their lives, identities, and varying privileges played a role in where they currently stood. As makers and problem solvers by nature, they collectively identified the ways in which “business as usual” continually fails Black founders and the three things entrepreneurs need to succeed: capital, network access, and customers. This series of honest and heartfelt conversations became the guiding vision for Fifth Star Funds, an innovative effort to create generational impact in Chicago and beyond.
Founded by Stella Ashaolu, Kyle Backer, Tim Huelskamp, Audre Kapacinskas, Samir Mirza, Osayanmo Osarenkhoe, David Pawlan, Nate Pelzer, and Tracey Suppo, Fifth Star Funds is a venture philanthropy fund that aims to foster a more equitable Chicago by supporting a startup ecosystem that is representative of today’s world. Its name comes from the four stars on the Chicago flag that represent a pivotal event in the city’s history, and adds a final marker for a group of people that shaped the Chicago we know today: the diverse and underrepresented communities of innovators and leaders.
It’s no secret that there is a critical Black funding and wealth gap in America. Centuries of systemic racism have created unequal access to the opportunities and capital necessary to starting a business, as to this day only 1% of venture funding is invested in Black-led businesses. Fifth Star Funds directly addresses these inequities by filling the need for early stage, “Friends & Family” funding, investing in Black entrepreneurs who have high potential and are ready to launch a new product. Each investment will support tech-enabled software and internet businesses with at least one Black founder on the team.
“The phrase ‘Friends & Family capital’ is a term of privilege in the startup world,” said Samir Mirza, Executive Director of Fifth Star Funds. “Having access to wealth from friends or relatives should not be a prerequisite in founding a startup. Our innovative model enables the city of Chicago to come together to be the friends and family of Black tech entrepreneurs. Our mission is to help Chicago become the inclusive tech ecosystem that we know it can be.”
Fifth Star Funds disrupts the traditional funding model by taking a community-focused, grassroots approach, in which any individual, corporation, or foundation can contribute to the fund as a tax-deductible donation. With a focus on pre-seed investments for Chicago-based, Black-led tech startups, this fund is designed to remove bias in evaluating entrepreneurs and follows an innovative evergreen structure, in which 100% of the returns are reinvested to support future businesses and generations of innovators. In doing so, Fifth Star Funds seeks to not only empower innovators across every neighborhood in Chicago, but also to inspire a more equitable and self-sustaining system of support, one startup at a time.
“We need more entrepreneurs building businesses in this city, and increasing access to funding is a key hurdle in the ongoing effort to create a stronger and more equitable tech environment,” said Betsy Ziegler, CEO of 1871. “Fifth Star Funds knows that innovative ideas come from every corner of Chicago, and they’re doing the necessary work to build a scalable ecosystem of diverse businesses. At 1871, we’ve made the commitment to support any Fifth Star Funds investee with free membership to our community. I’m incredibly proud to see our 1871 members leading the way in this area and look forward to continuing to grow our close partnership with them.”
For the first time, anyone can be part of the solution in addressing the Black funding gap in America. Interested in donating to the fund or applying for investment? Click here to connect with Fifth Star Funds and join the community movement.
Fifth Star Funds Chicago has been created as a Collective Action Fund of Tides Foundation. Tides provides fiscal sponsorship, fund management support, and fiduciary oversight of the fund. The Fifth Star team sources and screens applicants, then makes investment recommendations to Tides, which, after its review of investment recommendations, invests in the startups from the donations raised. All donations are tax deductible and all investment returns stay in the fund to support more underrepresented founders in the future.
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