Henri Pierre-Jacques: How I Founded Harlem Capital; Our $134M Fund | 20VC #901

Founding & Origins

• Harlem Capital was founded in 2018 by Henri (a former Bank of America investment banker) and Jared (their former Black-owned private equity roommate) in Jared's Harlem living room.
• The firm formally launched Fund I in July 2018 between the founders' first and second years at Harvard Business School.
• Fund I: Raised $12 million during the fundraising phase and closed at $40 million in November 2019.
• Fund II: Raised $134 million (average check size $2M; investment range $1.34M–$2.5M for 10–15% ownership).
• Investment Thesis: Explicitly focused on backing women and diverse founders at the early stage, addressing the lack of racial representation in venture capital.

Portfolio Construction & Strategy

• Three Investment Camps: Henri categorizes funds into concentrated (<20 deals), diverse (20–45 deals), or "spray and pray" (45+ deals).
• Harlem Capital's Model: Aims for the "diverse camp" (30–45 companies) to balance the law of outliers with sufficient ownership stakes.
• Ownership Math: Henri argues that ownership targets are strictly mathematical and dependent on fund size; sub-$50M funds require less ownership percentage to return, whereas >$100M funds require 10–20% ownership to achieve multi-bagger returns.
• Reserve Discipline: The firm leads 80–90% of deals to maintain board seats and avoids SPVs to reduce operational distraction and focus on long-term institutionalization.
• Investment Criteria: Requires at least two of four key boxes (Founder, Market, Business, Ownership) to be "great" to proceed with an investment.

Fundraising Dynamics

• Fundraising Process: The first fundraise lasted 18 months (with 12 months spent in business school), involving 55 Limited Partners (LPs) and approximately 400–500 meetings.
• Anchor Investment: TPG served as the anchor investor in Fund I, introducing Harlem Capital to six other institutional LPs and supporting roadshows in Boston and other cities.
• Overcoming Skepticism: Faced significant pushback regarding the "diversity" thesis, with skeptics arguing the market was too small or that diversity funds lacked sector specialization.
• Success Factors for Institutions: Convincing institutions required demonstrating a "diversity multiplier effect" (diverse managers investing in diverse founders who hire diverse teams) rather than just a single diverse manager.

Operational & Financial Mechanics

• GP Commitment Strategy:
  • Set a personal GP commitment cap at the fund target ($400k cap on a $25M target, actually committed $250k).
  • Secured a GP credit line from Silicon Valley Bank for Fund II, funding 60% of the GP stake to mitigate cash flow stacking.
• LP Selection: Adopted a "human-first" approach, rejecting LPs who did not acknowledge the founders' personal sacrifices (e.g., student debt, lack of liquid cash).
• Intern Program: Launched a remote, part-time intern program (three classes/year, 6–15 hours/week).
  • Over four years: 76 interns hired from 1,250+ applications in the final class.
  • Impact: 24 former interns now work at other VC funds, creating a network effect to advance the diversity mission beyond Harlem Capital's capacity.
• Deal Documentation: Uses 50–60 page investment memos (PowerPoint format) to streamline diligence, validate processes to LPs, and share due diligence insights with founders and subsequent investors.

Leadership & Psychology

• Scaling Skills: Henri emphasizes the critical distinction between being a "deal picker" (Angel/Private Equity skills) and a "fund manager" (institutional skills); the latter is required to build a billion-dollar asset management firm.
• Decision Making: Implements a hierarchy in investment committees where junior team members speak first to prevent senior bias, followed by General Partners at the end.
• Insecurities: Henri identifies his primary fear as not scaling fast enough to achieve the mission of backing 1,000 diverse founders over 20 years.
• Personal Evolution: Recently moved from New York to Miami, noting a shift in productivity philosophy from "hustle" to "efficiency" and work-life balance.

Market Outlook & Advice

• Market Correction: Believes the market has corrected from the "new" bubble, returning to normalization where ownership and math matter more than outsized, low-ownership outcomes.
• Advice to First-Time Managers:
  • Do not take rejection personally; view early LPs as potential future mentors even if they do not invest.
  • Take more risks on GPs: LPs should not rely solely on historical check-box data but should back first-time managers with unique theses.
  • Own your confidence: Stop asking for advice during pitch meetings and instead ask for capital commitments directly.
• Most Recent Investment: A high-end NFT marketplace called "Mushi," led by female founder Ariana Black, selected for its founder's gallery connections and personal alignment with the firm's human-centric approach.