How To Series

How To

Change The Venture Capitalist Culture

Herbert L. Drayton III is not your average venture capitalist. After nearly 30 years of establishing, buying, and managing a dozen businesses in a variety of industries, Herbert founded Hi Mark Capital to invest in BIPOC (Black, Indigenous, and People of Color) and women founders in the southeast. Herbert saw how systemic racism and implicit bias put these entrepreneurs at a disadvantage and recognized that something in the very fabric of VC culture had to change. So, he started Hi Mark Capital.

What inspired you to start your company?

May 25, 2020, marked a low point in American history. The death of George Floyd extended beyond reforms in policing. For me, it led to a more comprehensive look at systemic barriers that constrained Black economic mobility. In the wake of George Floyd’s death and the protests that followed, a few of my colleagues reached out expressing the desire to commit resources to the Black community. However, charity was the way they wanted to do it. My challenge to them was to invest in Black-owned companies and change the story of their entrepreneurial journeys.

What has been the most rewarding aspect of your founder journey?

Having conversations with entrepreneurs. Every day, I get to listen to people with great ideas and ambitions and help their dreams come true.

Any lessons learned that you would like to share?

The founder's dilemma is very real, even in early-stage companies. The Founder's Dilemma refers to a common set of challenges and trade-offs that entrepreneurs and founders of startups often face during the early stages of their venture. It was coined by Noam Wasserman, a professor at Harvard Business School, in his book "The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup."

Initially, I tried to do everything on my own because I thought I had the necessary skills to handle any challenge that came my way. However, I quickly realized that lacking the core competencies required for the next level of growth would hinder my progress. One area I thought I knew well was marketing. However, when I worked with vendors who simply followed my instructions without question, the results were consistently disappointing. It was only when I started to challenge the vendors and avoid the simplistic "What do you want to do?" approach that the results began to show improvement.

My challenge to them was to invest in Black-owned companies and change the story of their entrepreneurial journeys.

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Based on your experience, how should BIPOC and women founders approach venture capital firms?

When approaching venture capital firms for investment, BIPOC and women entrepreneurs face unique challenges due to systemic biases and disparities in the startup ecosystem. However, there are a few strategies that can help increase your chances of success.

Cultivate relationships with industry peers, mentors, and advisors who can provide guidance, support, and introductions to venture capital firms. Attend networking events, join entrepreneurship organizations, and engage in communities specifically created for BIPOC and women entrepreneurs.

Craft a strong and concise pitch that clearly communicates your business idea, market potential, and competitive advantage. Emphasize the problem you’re solving and the unique perspective you bring as a BIPOC or women entrepreneur. Highlight your accomplishments and milestones achieved to demonstrate traction and growth.

It may take time to find the right investor who aligns with your vision and values. Rejections are a common part of the fundraising process, so maintain your confidence, learn from each interaction, and adapt your approach as needed.

Our motto is, “where ‘aha’ meets ‘oh shit’.” Tell us about your biggest aha! And oh shit moments.

While I didn’t know it at the time, my biggest ‘aha’ moment came when I realized the value of having a growth-minded mentor. You can’t do everything in a vacuum, especially when it comes to starting your own business. My one and only mentor was James Ferguson. He was a larger-than-life Charleston entrepreneur who gave me every quarter I needed to get my business started.

Entrepreneurs can greatly benefit from having access to mentors who have achieved a level of success that far exceeds their current standing. Aspiring business owners should seek guidance from individuals who have demonstrated an exceptional track record of accomplishments. For instance, if someone has established a $1 million business, they should actively seek out a mentor who has successfully started and scaled a business to $10 million or more.

Holding on to businesses too long can definitely turn into their own “oh shit” moments. If you don’t have an exit plan for an investment, you become the business. And that’s completely counterintuitive to a venture capitalist endeavor, which I found out the hard way.

Did you have any “game-changing” resources or tools that helped you start or grow? Why was that resource a game-changer for you?

I was too much in the weeds and not bringing in new talent when we had exponential growth. Now I counsel entrepreneurs to stick with what they’re good at and find resources to do the things they’re trying to learn. In my experience, that’s the biggest obstacle for BIPOC and female entrepreneurs–finding the resources to fill the gaps in their knowledge and expertise.

Thinking about the local entrepreneurial community or ecosystem, what do you believe is working well? What do you think is missing or a gap that needs to be filled?

As Hi Mark Capital, we are trying to provide the resources and tools for BIPOC and female entrepreneurs in the southeast. As far as I’m concerned, the effort is being done well.

Where the community needs work is in the coordination and communication of the resources that are available to those that need it most. I think everything is underutilized because of fragmentation within the community and a scarcity mindset overall. And there is not enough accountability for those that have the means to get the resources to the people that truly need them.

BIPOC and women-owned companies need specific technical assistance when it comes to starting a business. For example, assistance in developing a comprehensive business plan, including market analysis, financial projections, and growth strategies, can help BIPOC and female entrepreneurs lay a strong foundation for their startups. Beyond that, support in creating effective marketing strategies, developing a strong brand identity, and leveraging digital platforms can help entrepreneurs reach their target audience and stand out in competitive markets.

What do you want your company to look like a year from now – from the market, your product or service, your team or people, the culture, or revenue – describe how you would like things to look a year or two from now. What have you put in place – or going to put in place – to make that a reality?

The goal is deeper than next year. The BIPOC and women entrepreneurs across the state need access to capital and resources. The only way to make this happen is to create more BIPOC and women Angel and VC investing professionals. My goal is to help at least twelve more firms launch in the next ten years.

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