On Race and Technology Entrepreneurship

I will have to be honest, I wanted to write this kind of post a while ago, but needed the appropriate time. This is an issue that is very near and dear to me, and exactly the impetus for the 21st Century Youth Project. By no means is this an attempt to answer this dilemma for all minorities, these are just my opinions based on my background and future goals. The answer is much more complicated than my writing ability can convey. Many of these issues can also be stratified along socio-economic layers instead of by race alone. I wanted to qualify an unique perspective my efforts are aiming to reach. The 21st Century Youth Project isn’t only for minorities, or low-income, but an attempt to give anyone and everyone an opportunity to learn. 

Race discussions are one of those polarizing issues that still causes a great deal of controversy. For anyone who thinks we are in a post-racial society, think again. Inflammatory discussions are taking place across discussion boards, blogs, and tweets. It’s front and center in “old media” as well, as demonstrated by the latest Black in America documentary series latest installment The New Promised Land: Silicon Valley. In the documentary, CNN follows several entrepreneurs on their journey to launch start-ups (all me-too concepts). Prior to airing the documentary, they built up a significant buzz by sharing sound bites of Mike Arrington, founder of Techcrunch, making some remarks that were obviously taken out of context (or lacked proper context).

And this brings me back to my trepidation in writing a blog post on race and high-growth entrepreneurship. There will be those that will take your comments out of context, edit for soundbites, some will say you’re whining and are asking for handouts. Others will cry reverse-racism, and the rest will fall somewhere in between. It’s appears to be a zero-sum game.

So what’s the point? As my mom would say, sometimes you “can’t win for losing”.

As the founder of the 21st Century Youth Project and the Chicago Film Group, I have some skin in the game, attempting to try and do a small part in leveling the playing field. I am highly biased, but I do feel my perspective is important in adding to the conversation. We were filmed by CNN in their Technology Education segment (at the 1:00 mark). We were hoping to make the final cut for the Black in America segment, by adding context to their documentary as programs that are educating young folks to become future Mark Zuckerbergs. As with Waiting for Superman, I came away unimpressed with the documentary. It’s easy to highlight the problems. It’s front and center. The responsibility of any discussion, in my opinion,  is to highlight the solutions, as much as you do the problems. It only enriches the learning experience, and provides much needed context to the conversation. This aspect should have been a follow-up segment, immediately following the documentary.

From my anecdotal (yet highly small sample size) experience from the tweets and Facebook status updates of the impression of those watching the show, here were some misnomers on the Black in America documentary.

  • The incubator model. What wasn’t discussed in the documentary was the explosion of start-up incubators all around the world that provide office space, mentorship, and introductions to venture capitalists. The NewMe accelerator isn’t the first one, and although they focus on minority start-ups, the participants weren’t given any extra handouts any other young entrepreneurs receive. Most incubators provide up to $50,000 in startup funds, as well as up to $150,000 in convertible debt (in exchange for 4-6% equity) for those accepted to the incubator. NewMe didn’t give the founders any funding in exchange for 4% equity.
  • Start-Ups for high-growth entrepreneurship is hard for everyone! It takes an extraordinary amount of work, and even with the most ideal of circumstances, there are more ups and downs than the average person can handle. Think you’re ready for a VC pitch? You’re never 100% ready. It’s easy to poke holes in the best of plans. For the best entrepreners, their startup becomes a nine-to-five job. 9am until 5am. Having a sense of entitlement and entrepreneurship do not go hand in hand.
  • Funding is not the only barometer (and certainly not a predictor) of entrepreneurial success. Very few companies require venture capital and even less are good enough opportunities for venture capitalists to take a chance. For example, Jim Breyer, venture partner at Accel says “We see 10,000 media business plans a year, and we invest in about ten.” 

Last week, I was interviewed by Crains for an article coming out tomorrow continuing on this trend of why we don’t see more minority technology entrepreneurs. Although I’m sure my response will be abridged for tomorrow’s issue, I thought it was pertinent to expound more on those critical issues.

Why aren’t there more minority tech entrepreneurs:

Education. This isn’t to say there aren’t enough smart and talented minorities, but computer engineering is a skill that you can’t pick up (adeptly) while in college. Some can, but the outlier will not. If you read Outliers, by Malcolm Gladwell, those that are overwhelming successes require 10,000 hours. In the book, Malcom Gladwell highlights Bill Gates and the Bill Joy’s of the world that founded some of the most successful companies of all time. Each was raised at the perfect time, at the perfect place, with the perfect resources at their disposal. If you read the biography of Steve Jobs, Steve Jobs developed his love for electronics at an early age from his father (a mechanic and craftsman) and experimenting with various technologies by virtue of living in Mountain View. His neighbors were all doing something cool and interesting, and he was inspired by some of the platforms they were building. This phenomena isn’t something most minorities are privileged to. Steve Wozniak (Steve Jobs’ co-founder with Apple), had a father who graduated from Cal Tech, was an engineer at a large corporation. In Steve Jobs’ biography, he remarked how Steve Wozniak was the only person he had ever met who knew more about electronics than him. Most minorities aren’t given this educational environment to cultivate these sort of skills. Although these comparisons are similar along socio-economic lines, most research points to the fact that historically, “high-achieving”minorities disproportionally pursue careers in medicine and law, compared to engineering (especially computer engineering). How many of us have fathers, brother-in-law, neighbors, and friends who would have exposed us to those opportunities? And if anyone should have had those experiences, it would have been me. I attended The University of Chicago Lab Schools, which is far from representative of the educational and social experiences of most minorities in America. With the 21st Century Youth Project, our mission is to engage and expose these students to these avenues as early as possible, so they can potentially develop a love for programming, and unite them with like-minded individuals that created the lifelong bond shared by Steve Wozniak and Steve Jobs. Working with some school systems, it’s baffling to me how  schools are slow to adopt our program, something that’s free for students and school districts alike. With minorities adopting smartphones at the fastest rates, wouldn’t it only make sense to instruct us to create for the platforms we consume?

Funding. This is a real touchy subject. Mike Arrington said he doesn’t know any black entrepreneurs because he doesn’t come across many. Why would he? Techcrunch is a technology blog that covers high growth startups, and getting funding is a surefire way to get coverage. To attend any of his conferences, the pricetag can exceed $2,000, cost-prohibitive in many capacities. Typical attendees of those elite conferences are venture capitalists, portfolio companies of Venture Capital firms, Venture Capitalists, and those that are serial entrepreneurs. How many of those folks include minorities? You don’t need a Venn diagram to get the point. According to CB Insights, 1% of venture capital raised  in the first half of last year were from African-American and Latino tech leaders. Mitch Kapor, founder of the Lotus 1-2-3 software describes it as “pattern matching” where  investors look at data sets of where the successes come from (Computer Science grads from Stanford), and only invest in that trend. Obviously, you don’t need to know that the average compsci grad from Stanford isn’t black or latino. It’s the same reason why me-too start-ups get funded in droves such as the explosion in funding in video sharing startups during the day when YouTube was founded. VCs double-down on an industry or a class, and that sort of selective bias accounts for a portion of why minorities never get to the table to discuss term-sheets..

Kapor states:

“African-American candidates are much more likely not to match the pattern,” said Kapor. “To recognize the truth is to accept that the winners at the top did so through a rigged game.”

Another practice in the Venture Capital community is the need for a referred lead into a meeting with a venture capitalist. They rarely, if ever, accept cold-calls or solicitations, and they use their close network of professionals to source leads for them. As with any herd mentality, you hang with people that are like you, of the same class, from the same backgrounds and any investor will tell you that you tend to invest with your heart first, and then with your mind. I have yet to meet a black or latino venture capitalist, and I have yet to read about a female venture capitalist. I’ve had several venture capital meetings because I am fortunate enough to fit the mold just for a meeting, attended top-tier institutions, and referred by my MBA professor from Northwestern. Although those meetings weren’t successful, what if I didn’t attend University of Chicago or Northwestern University? Would I have had those meetings?

Mentorship. I have yet to meet an African American or Latino founder who has raised venture capital. I have heard of a couple, but haven’t initiated contact (something on my to-do list). There are many black and latino leaders that claim to mentor, but how many can prepare you, from experience, on how to effectively pitch your product for venture capital? How many have scaled a high-growth venture? It’s completely different to be a corporate manager than an entrepreneurial leader. A different set of skill sets and experiences, and a radically different ideology. It’s like having a basketball coach that never played basketball. It’s hard to buy in (in my opinion) and even tougher to get the critical insight and connections to effectively scale a company. If you look at GroupOn’s founder, Andrew Mason, you’ll see that he was obviously smart and talented, having attended Northwestern, but he was able to raise $3.5 million for ThePoint, a company that eventually pivoted to GroupOn. He had mentors who have scaled businesses before, and he was able to raise a considerable amount of money that enabled him to pivot to a sustainable business. Very few people are fortunate to have this sort of opportunity, and even less (unheard of) for minorities. Any entrepreneur or professor of entrepreneurship will tell you that your eventual business will be some sort of offshoot of what you originally envisioned. In my opinion, if he didn’t have those experienced mentors, GroupOn may have been founded somewhere else.

So where does that leave us?

Discussing the problems without taking note of solutions would be just as faulty as showing a documentary and not offering room for hope. Programs such as the 21st Century Youth Project are just the start. It doesn’t happen overnight, but it’s critical that more people support this initiative. We’ll be launching a grass-roots campaign soon to capitalize on this opportunity. Despite this, it will take 10-15 years for a measurable impact on the importance of what we’re doing. The second step is for the African American and Latino business leaders to create some sort of seed stage funding platform for high-growth opportunities as a proof of concept. If you look at the Alliance of Business & Entrepreneurship organization, there are an extensive list of highly successful minority entrepreneurs who have amassed significant wealth and influence in Chicago alone. Why not have a $10 million fund that tranches investment for minority start-ups, to get them from the seed stage to the Series A phase? How many times have you read the Black Enterprise Top 100 in just about every industry? Many of these minority leaders have access to pension dollars and other institutional forms of financing, so they wouldn’t have to contribute a significant amount of personal wealth. Can we tap into those folks? I see them on interviews and television all the time talking about what should happen to move the needle for minorities. What I haven’t heard is something as tangible as a sustainable investment fund specifically designed for high growth entrepreneurship.  You have the money and if  managed and operated well, can generate wealth (and opportunities) for a new generation of folks. Want to see more minorities pay more attention to math and science classes? Let them know there is a light at the end of the tunnel. When I was in undergrad, when learning that my teammates were making $75,000 with $20,000 signing bonuses, I quickly changed my major from Chemistry to Economics. I see a similar effect if we support technology and engineering, not just with our hearts, but with a holistic plan involving jobs, opportunities, mentorship, and funding. Additionally, with this installed base of mentors, we would have created a pipeline of inspiration for students of the 21st Century Youth Project.

Can this happen? I’m hopeful it will.

Update 12/3/2012: Thanks to everyone for the overwhelming support for this issue. Race is polarizing but I’m glad this post was taken for what it intended to be, a balance view of the challenges. I was asked to write an Op-Ed column, condensing this post for the Monday issue of Crains, and the 21st Century Youth Project was covered within this context here.

3 responses to “On Race and Technology Entrepreneurship

  1. Awesome. This was probably ur best blog ever

  2. Pingback: Minority Challenges in Technical Careers « TechCareers

  3. Pingback: Minority Challenges in Technical Careers |

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