Being a recovering policy wonk and a serial entrepreneur, I am trained to not only notice trends, but also see the opportunities to capitalize on as a result of those trends. As such, as we're on the threshold 2013, I believe there are some parallels that may be drawn between 2012’s election and the opportunities that lay ahead in 2013 for business, investors and the greater economy to adapt to our changing times, demographics, and a new era of entrepreneurs.
The 2012 election highlighted some significant changes in the values and identity of our nation. A post-election Denver Post article captured the essence of this past election cycle with a GOP strategist’s statement about the Republican party, “We’re a Mad Men party in a Modern Family world.” Obama was re-elected by predominantly women and minority, or multicultural, communities. The Republicans predominantly captured the vote of older, white, males, which was neither “reflective nor representative of the nation as a whole.”
The election was a wake-up call demonstrating that Americans really are changing and the national identity is evolving demographically and socially. The election was a call to action, asking politicians if they are ready to adapt and grow with these changing values as well. After the election, the Republican party, and really all politicians, had an opportunity to hear a clear message from voters about their changing values.
As we move forward in 2013, the same remains to be seen for the greater business and investor communities – whether they will adapt to and take advantage of the changing demographics and identity of our country, entrepreneurs and businesses, and our increasingly interconnected, multicultural and globalized economy. Women and minorities continue to lag behind their white male counterparts in compensation and representation in both large corporations, in start-ups, and in investment and venture capital funding. Yet, more reports are demonstrating their increasing presence and success, further indicating that they are a force to be recognized for doing business differently, creating equal or better returns, and for positively impacting social and planetary outcomes.
Women and Minority Entrepreneurs
An October 2012 Fast Company article reported on a July 2012 Credit Suisse study that tracked the performance of businesses worldwide since 2005 and found that companies with at least one woman on the board outperform companies with all-male boards by 26 percent. A Catalyst report found that the organizations most inclusive of women in top management achieved 35 percent higher returns on investment and 34 percent better total return to shareholders, versus their peers.
Yet despite these successes, in the startup world, women make up only 35% of startup business owners and approximately 5% of technology startups (Women 2.0, April 2012). Financing for women in startups, particularly in technology continues to lag with less than 11% angel financing and 6% of venture funding going to women owned and founded startups, notwithstanding their demonstrated successes. Even when starting with less capital, women-owned startup companies tend to build high tech companies that are more capital-efficient than the norm, perhaps because they are used to bootstrapping with less capital.
A September 2012 TechCrunch article report indicated that the tides are beginning to turn as more women-owned ventures are seeking capital (12%) with 20.5% of women entrepreneurs receiving angel investments in 2011.
An October 2011 Women 2.0 article had some theories on what holds women back, including that women don’t ask, networking in a traditional good ol’ boys venture capital club is hard for women to permeate, women work better one-on-one in pitches than in traditional male pitch settings, and men invest in what they know (traditional male run, male-modeled businesses with a specific language and culture to go with it). Perhaps, however, the result is not only in missed funding for women entrepreneurs but also in missed opportunities for investors to capitalize on new marketplaces, perspectives, and populations.
The outlook is not much different for minority entrepreneurs. An older (2007) Minority Business Development Agency (MBDA) report found that less than 1% of venture capital dollars invested annually are directed to minority business owners who represented over 29% of businesses in America. A 2010 CB Insights Venture Capital Human Capital report stated that only 1% of minority tech startup founders were founded by African-Americans, as compared with 87% of founders who were white and 12% of startup founders who are Asian. The report also found that other minority entrepreneurs – women and Latinos – were also underrepresented.
A September 2012 TechCrunch article indicated that the landscape was beginning to change. A report from The Center for Venture Research found that minorities accounted for 4 percent of the angel population, minority-owned firms represented 7% of the entrepreneurs who pitch to angel investors, yielding 14.7% for their companies.
What continues to lag behind is the number of women and minorities who are seeking angel and venture capital. Leading to the question, or the opportunity, how can we not only provide the tools for these entrepreneurs to get more comfortable with the traditional angel and VC pitch language, strategies and standards, but how too can we change the dialogue, criteria and understanding of traditional angel, VC and other investors to better value and capitalize on these entrepreneurs and opportunities even if cloaked in different language, gender or cultural norms? How too can we make it safer and more mutually beneficial to both create more jobs and positive economic opportunities and impact for all?
Imagine the Possibilities
Like the election cycle, perhaps there is an opportunity at hand for venture capitalists and angel investors to capitalize on the changing demographics of entrepreneurs and our increasingly global economy. The economy has been struggling with fits and starts for over a decade now. What if doing the same thing over and over again with the same types of entrepreneurs and the same types of businesses is creating the same average results? What if there is an opportunity to take advantage of and capitalize on the successes of women, multicultural and global entrepreneurs by creating new investment criteria, seeking new pools of entrepreneurs, and setting up new models to find, groom and invest in this new generation of entrepreneurs. Here are a few models and entities to explore, replicate and build on that are investing in and doing business differently:
Start Up America Partnership is an initiative launched out of the White House in 2011 to stimulate economic growth and job creation for startup companies, particularly for minority entrepreneurs. Through a mix of public, private and foundation support, more than $1B will be invested over 5 years in the resources, training, tools and capital to help startup entrepreneurs and companies to thrive and grow.
Women 2.0 is a media company that offers content, community and conferences to increase the number of female founders of technology companies. The platform provides predominantly information and education, yet ties to pitch conferences and competitions to support women entrepreneurs with additional resources to succeed.
NewME Accelerator is a residential startup accelerator to educate, accelerate and empower under-represented minority technology entrepreneurs and startups with mentorship, training and some funding to have a better chance at success.
The HUB originated in London in 2006 as a for-profit social enterprise to connect, empower and resource entrepreneurs and startups to create positive change in the world. Today, the HUB expands across 30 different locations around the globe from London to Los Angeles, Johannesburg to Boulder, Sao Paolo to Milan. Each HUB has its own business model to support entrepreneurs with co-work spaces, mentorship, resources, and more to ensure that the rapidly growing network, or hub, of diverse, globally-minded citizens and socially-minded entrepreneurs and startups can succeed.
The B Team is working to enable business leaders around the world to transform how business is being done. Innovated by Sir Richard Branson, Virgin Unite, Jochen Zeitz the Puma Chairman who led Puma to create the first environmental profit and loss (EP&L) process ever, and entrepreneur Derek Handley as CEO, to inspire and work with entrepreneurs, business leaders and activists around the globe to screw business as usual and do business differently to create economic as well as social and environmental returns.
The Branson Centre of Entrepreneurship was created to support a diverse group of young entrepreneurs in the Caribbean and South Africa to provide practical business skills, access to mentors and coaches, professional services, resources and other financial opportunities to grow strong and sustainable businesses with innovative and different solutions to create jobs and stimulate the economy.
Much like the opportunities to learn from the political lessons of 2012, imagine the sea of possibilities for our world economy, when investors begin to truly value and capitalize on the changing demographics of our world and entrepreneurs by investing in more women, minority and globally-minded entrepreneurs. The win-win solutions are endless: more job creation, increased returns for investors and entrepreneurs, global economic shift, and social and environmental impacts that could steer the planet in more positive directions. The political election cycle could have been an indicator of the changing landscape and new era predicted by many cultures. What if the same remains to be seen in the business, startup and investor world? As more visionary investors jump on a new freight train, they may create not only greater returns, but may also become the leaders heralded as those with the vision and forethought to shift the planet economically, as well as socially and environmentally.
