How we raised $6.8M from underrepresented investors

See why we committed to diversifying our cap table to help make a positive impact and build an equitable company.
Courtney Seiter
November 30, 2021
Hologram Series B finalized - how we raised 6.8 million dollars from underrepresented investors

Building a strong, long-lasting business relies on building the best team — a team with diverse experiences who can see the world in vastly different ways, so we can better serve our entire range of customers.

This is a core belief for us at Hologram — one that's carried through in our values, our hiring goals, and our practices and behaviors as we work together.

So when we decided to embark on a new fundraising round this summer, it was only fitting that we extend our philosophy around diversity to this effort. We made the decision to diversify our cap table by allocating $5 million of our planned $65 million funding round specifically to underrepresented venture and angel investors, primarily focusing on women and people of color.

It's one of the best decisions we ever made.

Today, we're proud to announce the results of that effort: We completed a $6.8 million capital raise — 36% above our goal. We added nineteen incredible new angel and venture investors to the cap table, including but not limited to Founders Circle Capital, Mindset Ventures, Chingona Ventures, and Converge. And we increased Hologram’s preferred shareholders to more than 25% women and/or people of color.

Along the way we made many new connections and relationships, got help from a lot of new friends, and learned a number of important lessons. Here's the inside story of our journey, and some tips for any startup who might want to diversify their own cap table.

The business case for pursuing underrepresented investors

At Hologram, we believe that a deliberate focus on diversity is not only the right thing to do, it’s also a business-savvy decision.

We were lucky to connect early on with Rousseau Kazi, CEO of Threads, who has created a public blueprint for pursuing underrepresented investors with a very convincing Twitter thread. In it, he shares four specific advantages worth calling out:

  • ADVICE. These investors have become successful under harsher constraints which means their advice tends to be more focused, efficient, and effective (by necessity).
  • LANDMINES & OPPORTUNITIES. With more perspectives, companies can avoid landmines and capitalize on more opportunities. This benefit compounds over time.
  • CLOSING CANDIDATES. There's something formidable about knowing the company is getting advice from many different perspectives.
  • DIVERSE INVESTORS, DIVERSE COMPANY. If you care about hiring a diverse group of people, getting a diverse set of investors is one of the highest ROI projects you can pursue.

Additionally, the research is clear: Startup founder and investing teams that are diverse —specifically with more than one gender and/or one race or ethnicity represented — are more innovative and make more money.

In fact, venture capital investing teams limited to any one gender and/or any one race actually damage innovation and risk limiting financial outcomes, according to Paul Gompers and Silpa Kovvali in Harvard Business Review: "The difference is dramatic. Along all dimensions measured, the more similar the investment partners, the lower their investments’ performance."

So the decision to proactively seek out a more diverse cap table became a relatively simple one. We believe that as a result, Hologram will make better decisions, see opportunities that we wouldn’t have otherwise, be able to recruit from a more extensive network, and have a higher chance of building a thriving business.

What's a cap table? In its simplest form, the cap table is a ledger of who owns shares in a company. It breaks down a company’s equity capitalization – essentially a company’s ownership.

The larger case for pursuing underrepresented investors

Hologram's more diverse cap table will be a key strength and differentiator for us, but there's also a larger goal.

The opportunity to invest in a high-growth, high-potential company like Hologram is a big deal, and it’s a privilege that has typically been reserved for a very select group of highly connected (and usually quite homogeneous) investors.

According to data from Carta and #ANGELS, women only own 9 percent of employee and founder equity in Silicon Valley. And only 7 percent of VC investment partners nationally identify as African American or Latino, according to the National Venture Capital Association.

However, just because investors from diverse backgrounds have traditionally been excluded from investing early in "rocketship startups" doesn't mean that these talented and knowledgeable investors don't exist — it means access has been vastly unequal when it comes to venture capital.

When women and people of color are missing from cap tables, they're missing out on the kinds of wealth-building opportunities that could fund the next generation of world-shaping products and institutions.

As a company where diversity is a key focus, we know that while talent is equally distributed, access is not. We want to take concrete actions to provide the kind of opportunity access that has historically been much less available to women and people of color.

How we raised the round

Once we made the decision to diversify our cap table, we developed our approach plan and specific strategies.

Special thanks here to Rousseau Kazi for the guidance, and to Alejandro Guerro and Emanuel Pleitez of Cap Table Coalition and The Diversity Rider initiative, who showed us what was possible as well as provided many wonderful introductions and resources. The Cap Table Coalition is on a mission to diversify venture capital by helping startup founders take control of their cap tables and bring on underrepresented investors.

We knew things would move quickly once we began to talk to investors, so we got clear on our general action items early:

  • We aligned around the idea that the most important element was to run a competitive fundraising process. Everything starts with a competitive round.
  • We decided what portion of our funding round we wanted to allocate: Our original goal was 7.7 percent, but we ended up with more than 10 percent!
  • We met with as many underrepresented investors as early as possible so we'd be prepared when active fundraising began.
  • We negotiated to reserve a portion of our round to be allocated to investors from underrepresented backgrounds. Our original ask was to reserve $5M of the $65M, but this expanded to $6.8M as the round became oversubscribed.

Important questions we focused on:

  • How do we define underrepresented? For us, that was anyone who has traditionally had the least access to these kinds of circles, primarily women and people of color.
  • What type of investors are we looking for? Given our early stage, we focused on investors who would add strategic value to Hologram in the form of business perspective for a company of our stage and relationships, related to both commercial and fundraising.

It's important to reiterate that every piece of this process was in place because it was beneficial to the company as a whole.

Lessons learned and next steps

Focusing on diversity on the cap table is not just a win for underrepresented investors; it's also a huge win for us at Hologram — our new investors will be a key strength and differentiator for us.

Here are some key lessons we learned through this process:

  • This work takes time... Collectively, we had more than forty calls to define our strategy for this round and close all the investors. Ben Forgan, our CEO, and Annie Rosen, our CFO, did an enormous amount of work to make this round happen.
  • ...but the value we gained outweighs the capital we raised. We met so many incredible investors and connections and learned so much. Some of the connections and relationships we've built through this effort we see spanning many years, opening key doors for Hologram, and setting us up for long-term success.
  • There's tons of capital to be found. There are plenty of experienced investors out there who can add value and have capital to deploy into startups who are not getting access to deals. Startups would be wise not to ignore these pools of capital and value.
  • Access multiplies exponentially: As businesses get more successful, the world seems to get smaller (and more homogeneous). But this project showed us that if you open just one or two new doors that other companies might ignore or dismiss, a whole new group of experienced people becomes accessible and excited to connect with you. The relationships have an exponential effect.
  • Best known ≠ best: We have an obligation to find the best people possible for Hologram, but our network has been limited. When we intentionally began to take steps toward fixing this imbalance, we were able to establish a much broader network of highly talented individuals.
  • We win together: We're excited to see the many ways we can leverage these new relationships. Meanwhile, we're motivated to make sure Hologram is successful for these investors, who all have had plenty of investment and operational experience but in many cases still were limited in their access to deals. We hope Hologram can be the next step of the journey to their world-changing work.

This isn't the end of our work

We want to continue to meet and support women and people of color in joining, founding, building, and leading tech companies, and doing the work to ensure everyone can get on the cap table.

Additionally, we're making plans to bring on an independent board member who fits with our value-add and diversity goals.

Meanwhile, we are rapidly growing the Hologram team and building an iconic company where our team can do the best work of their careers. We only succeed in this goal if we truly reflect diversity in every area and at every level — so come join us!

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