CityRock announced on Wednesday the close of a $24 million Fund II to invest in founders from diverse backgrounds. The fund, which is part of H/L Ventures, will seek to back companies in areas such as climate, healthcare and the future of work.
The firm has numerous legs to it, ranging from a venture studio to standard funds, where it does everything from co-founding companies to deploying capital. It has three funds within its venture studio and now two CityRock funds, which will focus on investing in Series A. It also has a seed program that supports pre-Series A companies within the wider H/L portfolio.
The CityRock Funds focuses on Series A investments, with CityRock Fund launching in late 2019. “It is part of H/L Ventures’ mission to provide a holistic platform of support and investment for our portfolio companies,” Oliver Libby, co-founder and managing partner of H/L Ventures, told TechCrunch. The average check size for CityRock Fund II will be $2 million, with a reserve for follow-on investments in the companies that were backed in CityRock Fund I. The fund is currently being deployed and expects to invest in 14 Series A companies and a similar amount of seed-stage companies through its seed program.
Fund I was $17 million and closed in 2021. It is fully deployed and has backed 15 companies, including AndieSwim, Group Black and Aunt Flow. The firm says nearly 85% of the founders in the CityRock portfolio hail from what the firm describes as underrepresented backgrounds, but the firm defines it quite broadly, including identifiers like gender, race, socio-economic background, sexual orientation, and military services. “Diversity is a strong preference for the fund, not a requirement, but the vast majority of our founding teams have underrepresented founder-CEO,” Libby said.
He says that fundraising was challenging for the firm’s general partners. “Sufficient LPs did indeed back our strategy, which is to invest at the nexus of growth, impact and diversity,” he said, adding that there still seems to be an appetite for diversity within an investment strategy — especially with research showing that diverse founding teams lead to strong outcomes. “The situation has gotten more difficult, both because of the polarized climate and also because in challenging economic times, support for impact and diversity always tends to retreat.”
The firm remains focused on its commitment, though, saying that supporting diverse founders within the areas the fund wants to focus on — like healthcare and climate — is important for innovation. “Diverse founders often come from backgrounds that allow them to see or understand solutions that sometimes more privileged founders might miss,” Libby said, citing topics like energy efficiency in certain communities and health disparities. “We need innovations not just coming from the same old homogenous places, top-down into society, but also from every place within our society.”
H/L was founded in 2009 by Eric Hatzimemos and Libby. Fund II will be deployed over a four year period, with the average check size being $1 million the firm said. In the end, it hopes to back a diverse group of founders “with a positive mission,” that can “lead to great financial success and good for society and the world.”
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