William Gibson said that the future is here — it’s just not evenly distributed. That certainly seems true for entrepreneurs and venture capitalists. While there is plenty of breathless reporting about the latest startups to come out of Silicon Valley, the truth is that startup growth is relatively stagnant in many parts of the country and for large segments of the population.
It’s no secret that startup founders in the U.S. are overwhelmingly white and male, and many have family wealth to fall back on. If you live in the wrong place, didn’t go to the right school or just don’t fit the traditional model of what successful founders “look like,” accessing venture capital can be a huge challenge.
Samsung NEXT executives met with a diverse group of entrepreneurs, policy experts, nonprofit leaders and financial lenders to discuss what can be done to level the playing field and democratize entrepreneurship.
Redefine what an entrepreneur looks like
Many VCs may have a preformed notion about what a successful entrepreneur looks like — and if you’re a woman, or a minority, or both, “You are not the model of success they’ve seen,” says Siggi Hindrichs, principal investor at Samsung NEXT.
What’s more, many potentially talented entrepreneurs who aren’t white or male don’t see themselves as someone who might potentially start a company: they don’t have an internal “model of success” either. “Unless you’ve seen someone that looks like you do that, you’re not going to think to do that,” Hindrichs says. “In many cases, unless you’ve been exposed to an option, you won’t consider it an option.”
Democratize entrepreneurship education
Leadership consultant Lisa Pearl suggests that early education might be a key to building such an internal model of success for women and minorities. “This is something you can start really early in school,” she says. “Teaching kids how to be entrepreneurs — how to come up with ideas, and get them from idea to execution.” Giving kids access to VC concepts early on might give them the confidence to navigate that world when they are older.
Steve Hollingworth, President of the Grameen Foundation, agrees change is needed to promote entrepreneurship through public education. “Otherwise we’re just perpetuating our inequalities for future generations.”
Charlie Germano, senior director, IT security and operations at Save the Children in Washington, D.C., agrees. In areas where his organization serves young women, he says, “You can draw a straight line from education to opportunity.”
Social entrepreneur Paul Harrison notes that community colleges could also help prepare students to start companies and access VC by helping them meet venture capitalists. Today, if you don’t come from a big-name business school, he said, “You have to both have a great idea, and catch up with 10 to 15 years of networking before you get started.”
Diversify venture capital portfolios
Because prejudice can be subconscious, it’s important for VC firms to track how many startups led by women or minorities they back — and to proactively reach out to underrepresented groups, says Gus Warren, managing director of Samsung NEXT Ventures. It’s a practice his group has just begun. “We’re looking, and we’re tracking it,” he says.
This kind of active self-auditing will pay off, Warren adds. “Your earnings will be better, your ideas will be better” with more diverse teams, he says. “There will be more collisions of people from different backgrounds to come up with different solutions.”
Reinvent venture capital
Entrepreneur Jessica Stuart bootstrapped her business, Long Story Short Media, and was able to grow it into a success. Now, she says, she wants to apply for funds to take her business to the next step — but VCs aren’t interested because these types of businesses don’t typically generate the type of returns venture capitalists expect or require.
Venture capital needs to expand their scope to include opportunities for people like Stuart, Warren says. “There’s an opportunity for a different kind of VC that funds small, profitable companies to expand, rather than bet on vaporware that may or may not win big.”
Add mentorship to VC
“Sometimes someone has a dynamo idea, but they might not ‘speak the language’ of VC,” says Hindrichs. Samsung NEXT offers funding to startups but will also mentor them to shape their ideas and show them the ropes — something more VCs need to do, Hindrichs adds.
“Money isn’t everything,” adds Arti Patel Varanasi, president and CEO of Advancing Synergy. “You need the money, but are there other components that can make [an entrepreneur] a better, stronger individual and more conversant on venture capital? If you write that person a check, you should also mentor them.”