When Jessica O. Matthews, the founder and CEO of Uncharted Play, an energy tech startup, closed a $7 million investments last week she became just the 13th black female founder in history to raise more than $1 million in outside investment. She followed Morgan DeBaun of Blavity, considered to be the Buzzfeed for Millennials of color, and who became the 12th female founder to surpass $1 million raised only days before.
The numbers are stark. The Diana Project out of Babson College was the first to report that less than three percent of venture capital investments made go to companies with a woman CEO. CB Insights reports that fewer than one percent have an African American founder.
So why does this matter anyway? While it’s true there is a fairness issue at work here that should concern us all, it’s also true that the potential to bring new innovations and new economic activity to segments of the population that may need it most is a significant opportunity we should seize. But what will it take to level the playing field for all entrepreneurs—particularly women and entrepreneurs of color—but also those from less obvious places, geographically and economically diverse entrepreneurs from the nation’s heartland to Southern Africa to the West Bank?
A recent report by the Initiative for a Competitive Inner City (ICIC) offers a compelling framework through which to view and potentially tip the inclusive entrepreneurship movement. ICIC laid out a four-part framework to increase participation of women entrepreneurs and entrepreneurs of color through more inclusive hubs that provide mentoring, training, networking and sometimes capital for entrepreneurs in their network. These hubs are known as incubators or accelerators. When looking at barriers to access and how to create effective on-ramps for diverse entrepreneurs, this framework is promising in both the accelerator space and the broader inclusive entrepreneurship ecosystem.
Improving access to social capital through mentoring and networking with others who have found success will be key to accelerating the movement. Many successful accelerators or incubators rely on a competitive application process from applicants that find them. This often means that those living in underserved communities or outside of “power networks” don’t necessarily know about these pathways to opportunity. Adopting a strategy of intentional outreach to women and to people of color could change the ratio and ensure a more diverse pool of applicants. Kathryn Finney knows this firsthand. As the founder and Managing Director of digitalundivided, Kathryn invests in the success of Black and Latina women tech founders by providing them with the network, coaching and funding to build, scale and exit their high growth companies.
The ICIC report rightly points out that biases perpetuate the stereotype of what successful entrepreneurs look like which often impacts access to capital for women and entrepreneurs of color. This is often called “unconscious bias” which simply means that there is a pre-existing idea of what a successful entrepreneur looks like or where they come from. We’ve seen this in our own work with pitch competitions—where there is a more diverse judging panel we see a more diverse selection of winners, and it makes sense as these panels bring a broader perspective to the potential of underserved segments. And a more diverse selection panel can bring the benefit of putting the applicants more at ease and allowing them to be the best they can be when pitching their ideas. This point is one we can all understand—imagine how a young entrepreneur feels with a great idea if he/she is presenting to a panel of judges or an audience comprised entirely of a different gender or race/ethnicity. Of course, many young entrepreneurs have risen to the challenge for years since the data makes clear that most selection panels have been, and still are, comprised of white males, but it is common sense that if we want to grow the population of successful inclusive entrepreneurs, we might want to start by thinking about who is doing the selection.
On this point, Tristan Walker, CEO and co-founder of Walker and Co Brands, a company that designs and develops products and services specifically for people of color, demonstrated the power of building a company from personal experience when his company raised a $24 million Series B round in September 2015. But his experiences with white venture capitalists who doubted there was a market need for the new kind of razor he was creating for black men, taught him that context and perspective really matter when assessing great ideas for the market. In an interview with TIME Magazine, he commented: “I’m like, I get it but I don’t. All you had to do was get on the phone with 10 black men, and nine of them would have said, ‘I’ve had to deal with this my entire life.’ This is why I think folks talk about the need for more partners, the need for more folks in the industry because those folks come with the context.”
Philanthropy is also in a unique position to bring significant support to ecosystem builders to ensure that the support services needed for entrepreneurs (both social capital and financial capital) exist. By building up networks and geographic hubs outside of Silicon Valley and across economic, gender and color lines, we can expand the opportunity for all entrepreneurs to bring their ideas to market—ideas like Jehiel Oliver’s Hello Tractor, an award winning ag-tech company focused on improving food and income security in several countries throughout Africa. We should also look to partnerships and programs that aim to reduce common barriers that diverse entrepreneurs face, and scale local pilots into national programs serving women and entrepreneurs of color, who have figured out the “secret sauce” to the kind of program design that builds success for inclusive entrepreneurs.
“The macho, exclusive, hyper-competitive culture of some high-tech accelerators is the image marketed and shared by media, creating perhaps the biggest deterrent to women and minority entrepreneurs,” says Janis Bowdler in TechCrunch. We absolutely must challenge the stereotypes and change the narrative on how our culture represents entrepreneurs across sectors. There are many remarkable stories of successful women and people of color who have built successful businesses, and we somehow need to build these stories more broadly into the narrative of the American entrepreneurship story. CEOs like Tristan Walker (mentioned above), or Kristin Groos Richmond and Kirsten Saenz Tobey, a pair of power moms who co-founded Revolution Foods*—a company on a mission to ignite a healthy food revolution for all children, whose business has now delivered more than 200 million healthy meals to our nation’s schoolchildren. Or Shazi Visram of Happy Family, a healthy baby food company acquired by Danone. With the acquisition, Shazi’s earliest investors realized a 30x return. Lifting up founders of diverse backgrounds will be key to ensuring that any individual with a great idea can see him or herself as the next great entrepreneur.
We need all individuals with breakthrough business ideas to have a seat at the table so that we can move more swiftly in tackling intractable global challenges, transforming communities, creating jobs, spurring economic growth and closing the opportunity gap. Maybe this framework is what’s needed to get all ecosystem builders—from accelerators, investors and incubators to founders and champions—to get much more intentional about leveling the playing field for all entrepreneurs in all places in order to create stronger communities. The U.S. has become the leader of the global economy because of great companies built by great entrepreneurs, but we’ve done it with half of the team left on the sidelines. We have an amazing opportunity to seize by getting everyone in the game.
*Disclosure: Steve Case is an investor in Revolution Growth II LP and Revolution Growth III LP, each of which is an investor in Revolution Foods. He is also on the Revolution Foods Board of Directors.