By David G. Barry
Amazon has
a new line of business: investing in venture capital funds.
The online retail giant has established Amazon Catalytic Capital to
invest $150 million in VC funds, incubators, accelerators, and venture studios
that provide funding to entrepreneurs from underrepresented backgrounds.
Amazon will invest in funds that focus on Black, Latino, Indigenous, women and
LGBTQIA+ founders. It said it expects to support more than 10 funds and over
200 companies through the next year.
Olivia Jacobs, an Amazon spokesperson, tells Markets Group that the initiative
is the corporation’s “first dedicated effort to invest directly in VC funds as
a [limited partner].”
To date, Amazon has used Catalytic Capital to invest in funds from four firms:
Collide Capital, a Black-owned seed and pre-seed venture capital fund; Elevate
Future Fund, which focuses on backing underrepresented founders working on
solutions aimed at accelerating a more sustainable and clean future; Share
Ventures, which is focused on human performance; and Techstars Rising Stars
Fund, a pre-seed fund investing in underrepresented founders of color.
In addition to capital, the companies in the funds’ portfolios will receive
mentorship from Amazon executives and gain access to resources to support their
business and technical strategy. Amazon will also work with the startups to
identify partnership and product collaboration opportunities.
The effort is aimed at helping groups that have traditional struggled to
attract capital. Women founders, according to PitchBook, received 2% of venture
funding in 2021 while Black-founded and Latino-founded startups attracted only
1% and 2%, according to Crunchbase News.
In a prepared statement, Peter Krawiec, Amazon’s senior vice president
of worldwide corporate development, said Amazon has “seen incredibly innovative
ideas from underrepresented entrepreneurs—from companies offering inclusive
health services for women, to startups helping companies mitigate climate
impact for underserved communities — and we’re convinced that an inclusive
investment strategy leads to better returns and innovation. We want to ensure
that these companies and their founders have the same access to capital as
anyone else.”
Amazon joins a growing list of institutional investors with programs aimed at
backing funds investing in diverse entrepreneurs or funds led by diverse teams.
Massachusetts Mutual Life Insurance Company (MassMutual), for instance,
announced that it is investing an additional $100 million in diverse,
first-time fund managers. MassMutual had previously invested $50 million
through the First Fund Initiative, which is focused on funds led by Black,
Latinx and Indigenous fund managers focused on generating positive social
impact and financial returns.