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These Entrepreneurs Are Done Waiting For Silicon Valley To Close The Racial Wealth Gap

With Silicon Valley embroiled in the culture wars, some are looking beyond it for new–and faster–means of narrowing the racial wealth disparity.

These Entrepreneurs Are Done Waiting For Silicon Valley To Close The Racial Wealth Gap
[Photo: Shannon Fagan/Getty Images]

The tech industry has sunk the equivalent of a unicorn’s valuation into diversity and inclusion initiatives over the last five years, according to a recent Intel and Dalberg estimate. But as Code2040, a nonprofit working to widen opportunities for black and Hispanic professionals, knows all too well, most companies have made sluggish progress. “I think so much of the $1.2 billion that tech has spent on tech diversity has been spent on PR or recruiting, when that’s not actually the issue,” says Karla Monterroso, Code2040’s VP of programs.

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The reason Code2040 focuses on what it calls the “innovation economy,” shorthand for the tech sector proper and the constellation of industries and organizations being reshaped by it, is that it’s uniquely positioned to disrupt the racial wealth gap in the U.S. The average salary for a tech worker in software engineering, product management, or data science is well over $100,000—more than the median annual household incomes of a black family (less than $37,000) and a Hispanic family ($45,000) combined.

But as the Google memo fiasco made clear just weeks ago, Silicon Valley is still struggling just to build consensus around diversity’s value and means of execution. The worry is that by the time 2040 rolls around, the year demographers estimate the U.S. is will be a majority minority country, the tech sector will be nowhere near reflecting that, with potentially disastrous consequences for the next generation of black and Hispanic Americans. With the clock ticking, some are now buckling down on alternatives outside the Valley.

Building The New Economy Now

Since 2012, Code2040’s Fellows Program has paired top black and Hispanic students with tech companies that are serious about diversifying, including Intel, Slack, Twitter, LinkedIn, and Airbnb. This week the nonprofit announced it’s expanding that program to New York City next year, in an effort to bring tech opportunities in finance and media into the fold. Code2040 has already lined up partners in Goldman Sachs, Jane Street, Squarespace, Spotify, and the New York Times.

Cofounder and CEO Laura Weidman Powers tells Fast Company that to grow, Code2040 has had to be selective. “We vet the companies that we work with, so we don’t work with every company that would like to work with Code2040. There are some companies that want to work with us as a way to check a PR box, and we’re not interested in that.”

A few years back the organization dropped a “big-name company” that wouldn’t comply with the manager training required to participate in Code2040’s Fellows Program. (Two years later, that company had a change of heart and reapproached Code2040 about starting over.) “Holding companies accountable . . . is a pivotal part of this, because you create an incentive structure,” Monterroso said. “I’ve got really talented people. You want them, and you don’t get to have them without doing some of the work.”

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But Code2040 knows that “retrofitting” tech companies with heavily skewed demographics can only do so much, which is why it wants to create a stronger ecosystem of the fellows, mentors, and entrepreneurs it’s worked with over the years. As Powers explains, that head count will number 40,000 strong by 2020, so making sure they all have a chance to connect with each other on- and offline is crucial to extending Code2040’s impact into the future.

Some of that is already happening organically. Chazz Sims, one of Code2040’s first group of fellows, launched his own company three years ago, a route-optimization software startup called Wise Systems. Recently, Sims hired another Code2040 fellow. “I really felt like I kind of came full circle, from being in the [Fellows] program to being able to start my own company and bring someone else on,” Sims told me. “We are a diverse team with a diverse network, and so we just continue to feed off that.”

Another Code2040 alum from the nonprofit’s first year, Amy Quispe, insisted on creating a “temp-to-perm” path for Code2040 Fellows at her company. “And out of that, students got hired full-time for those jobs at a unicorn company,” Monterroso said.

This is how it’s supposed to work everywhere, Powers and Monterroso believe, with a community of well-connected black and Hispanic tech innovators brokering connections and spawning new companies–without having to first get hired by the Googles and Facebooks of the world in order to gain a foothold, or pause to defend themselves from the biases of the James Damores who work alongside them. This way, says Powers, tomorrow’s startups will be “built from the ground up in a way that’s equitable.”

And as Silicon Valley finds itself the latest front in the culture wars, and the Trump administration aims to restrict affirmative action at universities, potentially throttling the pipeline for diverse talent, the need to make this progress elsewhere in the innovation economy is gaining new urgency.

New Roads To Funding

Of course, one of the highest barriers to entry for women and minority entrepreneurs is getting funding, but Powers sounds hopeful: “There’s going to be a huge amount of investing power in the Code2040 network, even in the next three years, as we grow this community. It’s one of the things that is most exciting when it comes to sort of shifting the balance of power and decision making,” she says, adding that “you could have a pretty average tech salary and [still] be an angel investor.”

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handful of VC firms now focus explicitly on funding female founders, and companies like Backstage Capital are doing the same for underrepresented minority entrepreneurs. But those groups are few and far between, and the funding numbers are still abysmal.

The Center for Urban Entrepreneurship and Economic Development (CUEED) at Rutgers University in New Jersey has been plugging away for years to help change that. This year, however, the organization launched two initiatives specifically designed to address the funding gap, after hearing from countless entrepreneurs who struggled to secure capital.

A three-month pre-accelerator called the Black and Latino Tech Initiative (BLT) offers founders of color mentorship and access to CUEED’s venture capital partners, including local accelerators at Newark Venture Partners and IDT Ventures. CUEED’s Pipeline to Inclusive Innovation (PII), on the other hand, aims to up the number of underrepresented scientists and inventors who take advantage of federally funded innovation and tech programs.

There are already about 20 to 25 companies between the two new programs, from a service that CUEED executive director Lyneir Richardson describes as “Yelp for reviewing landlords and property owners,” to a diabetes test that uses a human teardrop.

“These folks have interesting ideas,” CUEED’s academic director Jeffrey Robinson says. “Certainly there are comparable ideas out there in the marketplace, and they get greenlit. It makes me wonder, why didn’t these folks get greenlit? We’re of the mind that we can better prepare entrepreneurs, no matter who they are, for entering accelerators, or getting that first level of funding, or supporting them as they go after these grants.”

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Micah Brown, the CEO of a sentiment-analysis startup called Centiment, told me that despite going through another program–the Sprint Accelerator–prior to joining BLT, he still couldn’t score enough funding. “It was great from an exposure perspective . . . but I still struggled to raise money,” Brown said, noting that he’d come from a corporate background and has been fundraising for almost a year.

In his experience, VCs were willing to meet with him, but it often ended there. “I think the doors are open, if you’re a black entrepreneur, to the VC world,” Brown said. “So we get in the door, but does that really matter if we’re not respected [once inside]?”

BLT gave him access to venture partners, investors, and media attention that Brown says he wouldn’t have received otherwise. (“I’m a founder focused on trying to pay my employees and keep them in place,” he quipped.) Still, he said, the program could be even better sourced–like, say, Y Combinator or 500 Startups accelerator–if only BLT’s limited partners and larger investors “put their money where their mouth is.”

Virtuous Circles

As Richardson points out, entrepreneurs who don’t receive funding from VC firms may turn to their personal networks of family and friends. For white, affluent founders, that’s a viable path, but entrepreneurs who don’t have the same support systems are left with fewer options. “It’s that first $200,000 of capital–not having that ‘friends and family’ round,” Richardson says. “Those are impediments to minority entrepreneurs specifically.”

If the innovation economy can build wealth among communities that historically haven’t had as much of it, then those communities will have more resources for building innovative companies to serve them–and the rest of the world for that matter. Monterroso told me about one of Code2040’s mentors, a black engineer who scored a job at Yammer through a friend. When Yammer was acquired by Microsoft, he made a good chunk of cash–enough to buy a home in San Francisco. But there was still money left to help his wife, an entrepreneur-in-residence with Code2040, get her fashion tech startup off the ground.

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“That is a picture of how wealth is now getting created in the U.S., versus how it used to get created,” Monterroso said.

Until lately, this model of wealth creation has largely benefitted white men. (Just look at Forbes‘s list of billionaires for proof.) The time is nigh for change. As white nationalists spill onto the streets, poisoning public debate and in some cases claiming lives, building more of these virtuous circles for people of color has never seemed so critical–not just to the future of Silicon Valley, but to the entire country.

About the author

Pavithra Mohan is an assistant editor for Fast Company Digital. Her writing has previously been featured in Gizmodo and Popular Science magazine.

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