Raudline Etienne, Founder and CEO at Daraja Capital
Whether you're raising venture capital as an emerging fund manager or your first startup, rising interest rates, geopolitical turmoil, and continued fears of a recession make fundraising difficult, particularly if you're a woman or BIPOC.
There is no one-size-fits-all solution to changing the ratio of funding going to women and BIPOC. I've written about how the Kresge Foundation is developing and evolving its DEI portfolio management approach and how making venture capital more accessible to accredited investors would make the economy more innovative, robust, resilient, and inclusive. Daraja Capital is a seeding platform. It will be the first capital into emerging-manager funds and first-time founders and entrepreneurs.
Daraja means "bridge" in Swahili. Raudline Etienne chose the word as the name of her firm because the company bridges the gaps in capital, connections, and knowledge that exist for entrepreneurs and fund managers raising equity financing for the first time. She is the founder and CEO of Daraja Capital.
An emerging manager program is usually offered by a pension fund or endowment where they allocate a certain amount of their portfolio to be invested in an emerging manager. They are generally defined as managing assets under a certain threshold, as having launched only a certain number of funds (usually three or less), or as an investment fund that is majority owned by underrepresented demographics in the industry—specifically women and BIPOC.
Etienne has her undergraduate degree from MIT and MBA from the Haas School of Business at the University of California, Berkeley. She was awarded a Toigo Foundation Fellowship while at Hass. "This is probably my trajectory's most important professional moment," she said. Toigo is a nonprofit that encourages minority MBA students to pursue careers in finance.
Toigo organized a day for West Coast Fellows to visit CalPERS, the largest public fund in the country. "I discovered an industry I had no idea existed," said Etienne. As a New Yorker, she knew about Wall Street but not pension funds. Collectively, public pension plans have $5.6 trillion in assets under management, according to Public Plans Data.
Before starting the firm, she worked at FIS Group, an asset management and investment advisory firm that specializes in emerging managers; RogersCasey, which provided investment solutions to corporations, nonprofit endowments, foundations, governments, and benefit trust funds; and Albright Stonebridge, which help clients understand and navigate the intersection of public and social sectors in international markets. She was also the chief investment officer at New York State Common Retirement Fund, the third-largest public pension fund in the U.S.
"You know, I've had a career that's been more than two decades, and I've invested with everybody," said Etienne. "And that's not an exaggeration."
Having been a consultant, allocator, and investor, she has a unique perspective. She also is a Haitian immigrant who was raised in Brooklyn. "It's a multifaceted problem. First, there's the capital gap. "It is difficult for LPs [limited partners] to say to someone with zero experience, I'm going to give you capital to invest," she said.
The second is the wealth gap. If you're the first generation to have wealth, putting money at risk is challenging. You may be helping your nuclear family and even your extended family financially. And even if you're not, they don't have tens or hundreds of thousands of dollars to invest in your venture. "If you're passing the hat to people who are not wealthy, you will not get the capital to deploy and sustain yourself [until you are profitable]," said Etienne.
The third gap is connections. Etienne has relationships with law, accounting, and infrastructure firms that founders and fund managers need. Having the right service providers builds the trust and credibility that institutional investors look for. "You want to ensure you're institutional grade," said Etienne.
"Daraja isn't a fund of funds even though some characterize us that way," said Etienne. "We're willing to go first, and we're putting capital in multiple ways to help the new firm sustain itself until it draws the interest of a fund of funds [or other institutional investors]." Daraja is focused on alternative investments but wih the sector she is sub-sector agnostic. She will invest in a hedge, private equity, real estate, and venture capital funds, as well as directly into entrepreneurial ventures.
The thesis and the team executing it are most important to Etienne. Daraja builds a track record by investing in the first couple of transactions. For example, to demonstrate an investment thesis, an aspiring VC might raise money for a Special Purpose Vehicle (SPV) in which the fund manager is raising money for a specific deal.
There's a certain je ne sais quoi that Etienne looks for in an emerging fund manager or first-time fund manager. They have passion, humility, a willingness to accept feedback, and perseverance.
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