Fixing the Economic Divide that Plagues America: Part 2

Fixing the Economic Divide that Plagues America: Part 2

In my last post, I discussed one of the biggest barriers to success for low-income entrepreneurs and entrepreneurs of color: a lack of a supportive entrepreneurial ecosystem. This lack of support leads to extreme inequalities and what I call “the economic divide that plagues America.” In this post, I want to provide some ideas on how to fix that problem.

In my work at Impact America Fund, I have worked with mission-oriented family offices and foundations to leverage capital for traditionally disenfranchised entrepreneurs. Based on my experiences, I have found there are a few action items that mission-oriented family offices and foundations can take to support this goal, and ultimately foster a more inclusive economic system.

Move beyond the “diversity quota” hiring mentality. Do the work required to transform your organizational structures so that diverse perspectives are inherent in the way your organization thinks, operates, identifies talent and makes investment decisions. Learn from the foundations and family offices who have already started creating diverse cultures throughout their operational structures, breaking down organizational silos and collaborating across teams. Two organizations I’ve learned from at Impact America Fund are the San Francisco Foundation and the Surdna Foundation.

  • Create an environment that welcomes discussions about race, class and gender and implement structured training and educational programs. Each first Friday of the month, the San Francisco Foundation (SFF) closes down the Foundation for Fred’s First Friday, a two-hour, all-staff forum led by Fred Blackwell, the CEO of SFF, to discuss a specific aspect of equity and equality. My team and I participated in the December first Friday conversation that delved into the intersections of racial equity, economic equity and impact investing. We were inspired by the staff’s enthusiasm to have an honest discussion that included varying opinions, and their collective thoughtfulness around solutions.
  • Invite your grant-making team colleagues to the table when discussing your impact investing initiatives and deals. Their cultural competence allows them to lend unique insights that are rooted in community needs and behaviors. Surdna Foundation is intentional about including their program team leads in their impact investing discussions and decision making processes. Before Surdna invested in the first fund we raised, our team spent a considerable amount of time speaking with and being challenged by Shawn Escoffery, Director of Surdna’s Strong Local Economies Program. Not only was the time spent important for Surdna’s investment due diligence process, the time also provided opportunity to think creatively about how we can collaborate to support the development of a diverse mission-driven entrepreneurial eco-system.

Don’t be afraid to re-define your investment criteria as you allocate dollars to invest in diverse mission aligned fund managers and entrepreneurs. If Silicon Valley can fund countless ride sharing and social media apps with the expectation that at least ⅓ will fail, mission-driven investors should be funding more diverse early stage ideas and models for change, with the understanding that failure will happen.

  • Don’t be so quick to frown at untraditional fund models. Many will prove to be a competitive advantage for their investment approach. Many of the black and brown led venture capital funds are first time funds or have creative fund structures to help cover the operational costs of managing a small fund. Instead of dinging emerging fund managers for not fitting into a nicely packaged box and not looking like traditional players, develop metrics that value their lived experiences, grit, determination, unique investment lens, and the creativity to establish their organizations and get a foot through extremely hard to access doors. The skills I used to escape poverty were the same skills I used, with virtually no budget, to attract a scrappy team of talented MBA Fellows and a part-time employee to assist me with executing a number of hot deals, while raising a fund for a mission-driven portfolio that is continuing to perform well.
  • Develop a diverse deal pipeline by supporting diverse accelerators and alternative seed stage capital funds. Due to the racial wealth gap, the types of entrepreneurs who understand the social and economic issues from their lived experiences, often must rely on accelerators and alternative seed capital sources in lieu of friends and family who are able to invest. Alternative funds and accelerators like Invested Impact, the Runway Project, New Media Ventures, and BIG all have a unique niche and a culture that embraces diverse entrepreneurs and are able to help these entrepreneurs get their ideas off the ground. These organizations need grants, patient capital and low-interest capital to operate—and years of time to prove these models out.

Think long-term and invest in the future. According to the PEW Research Center, in 2015 there were 10.2M disengaged youth in America, ages 16-29. Twenty-two percent of young black people and 20% of young Hispanics are neither employed nor receiving education or training. Ensuring that young people are developing skills for the current and future job market by channeling their street smarts into coveted leadership skills will keep them from entering the American prison pipeline, and is absolutely key for reducing poverty in American communities. Organizations like All Star Code, Green City Force, and Urban Alliance are all examples of organizations doing fantastic work that are ripe for national scale. These organizations are grooming our future entrepreneurs, corporate executives, academics and politicians. Fund them now to ensure a more diverse future of leaders.

In light of everything our country is experiencing, I am heartened that there is a sincere desire to have these conversations and address the issues facing our communities. Our responsibility as a 2016 “Top 10” Best for the World Fund is to help build the eco-system that will support diverse entrepreneurs and the communities they come from. We are excited about the future opportunities that will arise from the partnerships we make today. You can learn more about our work in this B Magazine feature article and also take a listen to our a16z Investing in Communities podcast.

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