Welcome to Behind the Buyouts, The Deal’s podcast where we sit down with venture capitalists, private equity pros and company executives to drill down into their capital raising transactions and acquisitions.

This week’s episode features Josh Fabian, co-founder and CEO of Metafy Inc., a Pittsburgh-based company that helps esports stars connect with regular players for coaching sessions.

Fabian earlier this year announced a $3 million oversubscribed seed round for Metafy. Forerunner Ventures LLC led the investment, with participation from Tekton Ventures, M25 Group LLC and others.

Fabian launched Metafy last year partly as a result of finding world-class Pokémon players to help his kids improve at the game.

Metafy started getting inquiries from venture capital firms after the company won a $100,000 investment from the Product Club business accelerator run by Jeff Morris Jr., former vice president of product, revenue at Tinder.

Metafy drew interest partly because of the jump in the video game business during the Covid-19 lockdown and also as institutional investors responded to rising concern around diversity issues in the wake of the Black Lives Matter protests in 2020, Fabian said.

While Black and Latino founders raised $15 billion from 2015 through mid-2020 in venture capital funding, the figure represents just 2.4% of the total venture capital raised over the period. But firms such as Metafy backer M25 have pledged to invest in more companies led and founded by people of color.

“Things are starting to change, but I think that change is slow,” Fabian said.

Fabian pointed out that more minority-led companies will get funded as companies hire more Black and Latino executives at the upper end of the management structure.

“A lot of companies talk about diversity, but when you look at diversity from the perspective of an organizational chart, there’s a lot of settling of color at the bottom,” Fabian said. “It’s not a result of white people not caring about minorities. … White people do care, but they haven’t lived it and they haven’t experienced it.”

He praised a decision by Reddit.com founder and former CEO Alexis Ohanian in early 2020 to give up his seat on the board of the company so it could be filled by an African American. The company in June named Michael Seibel, a partner at Y Combinator LLC, who is CEO of the YC startup accelerator, to its board.

While institutional investors may offer good intentions by investing in Black- or Latino-led companies, entrepreneurs also deserve validation of their business plans as well, Fabian said.

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