The Elephant in the Room

“Of the $206,740,005 used to fund startups last year, less than 1 percent was allocated to “minority” entrepreneurs of color.”

The topic has become more and more prevalent over the past decade. The issue with racism, discrimination and lack of diversity as it pertains to women and people of color in America. Spanning across many verticals, industries and demographics, lack of diversity especially in economics is a trending topic. We see it everyday from corporate law firms to multi-billion dollar advertising networks and beyond. It seems like the higher you climb up the ladder of success, the less people of color you see.

It’s just a guess, but there may be some valid, although not very good, reasons for this. There’s an old colloquial expression “keep it in the family” that comes to mind. People say this to remind each other to support one another whether financial or otherwise, usually amongst actual family members with the same last name. This also embodies the concept of brotherhood at some level. Brotherhood, as we all know, represents a strong bond between a group of people who share the same experiences. In this case, brotherhood includes people who are actually wealthy enough to support and empower the American economy by acquiring and funding businesses of all sizes. When we look at the numbers and the relationship between those who are at the bottom of the wealth scale vs the top, it’s obvious that those on the bottom are many degrees separated from those at the top. This directly impacts the varying levels of access business owners, especially startups, have to seed funding. Essentially, if anyone in your family or within close reach has access to someone with capital to invest, there’s a higher probability that you would be in a good position to raise millions. But for those on the bottom, outside of the brotherhood of wealth, the chances are much lower.

This is not an editorial rant on the state of wealth distribution in America, and it’s not really rocket science either. However there has to be some way to shine a proverbial spotlight on the real issue which is simply, those outside of the brotherhood of wealth have a harder time getting the attention of an accredited investor unless they meet certain criteria. This so called criteria, statistically increases the chances of investors yielding high returns on investment. Which makes sense in theory, except that it actually causes a cycle in which groups of investors, invest the same dollars into the same groups of entrepreneurs time and time again. While the intent is great that people of the same educational backgrounds, experiences, cultures, communities and financial status all manage to stick together — it doesn’t help diversify the economic startup playing field at all.

“Anyone can cook” is a famous quote from the Disney Pixar movie Ratatouille. A movie about a rat who actually became one of the most acclaimed chefs in France but only after cooking behind the scenes due to not being relatable to society. This is the epitome of how difficult it has become for entrepreneurs of color to penetrate the Venture Capital industry. Of the $206,740,005 Venture Capital dollars used to fund startups last year, less than 1 percent was allocated to “minority” entrepreneurs of color. Assuming that’s less than $200,000 toward business initiatives for people in the lower portion of the wealth scale, we don’t have to be finance gurus or geniuses to understand how little of an impact this has in the scheme of things.

Fortunately, there are firms, accelerator programs and angel investors aiming to change what has become the norm for underrepresented entrepreneurs in America. In this, we aim to level the playing field once and for all. Great products and ideas can come from anyone (“anyone can cook”), no matter their educational background, experience, culture, community or financial status. And with every great product comes great human experiences especially those that bring people together for a greater cause. How limiting is it to mankind to circulate the same ideas amongst the same people yielding the same outcomes? We need to think out of the box and see different perspectives from people that we may not even relate to. Maybe it’s time for VC criteria to be re-worked, or maybe we need to widen the funnel for educational paths to entrepreneurship. Whatever the case, we need to do more than just say “diversity”, we need to actually “be” diversity.