4 essential ways to expose the myth of meritocracy and build inclusive ecosystems for all

Five years ago, focusing on diversity and inclusion in entrepreneurial ecosystem building was still a new idea for many. Today, with a global spotlight on the systemic racism that Black people face on a daily basis in the United States, during a global health pandemic that has negatively impacted communities of color at a much higher rate, this idea’s importance is considered vital to building an equitable and sustainable society going forward.

Now is the time for ecosystem builders to gather resources and take deep, sustained action. It’s not enough to have a diverse and inclusive entrepreneurship ecosystem without also investing in equity.

Ecosystem builders must understand the historic barriers that have created inequalities in our society in order to address:

• The historical gap in access to funding and support for underrepresented entrepreneurs.
• Talent pipelines that exist in the community and the external factors that may have led founders to look elsewhere when building their teams.
• The needs of the people on the ground, and work to connect them with the resources that they already know they need most.

When these factors are taken into consideration and inclusive entrepreneurship ecosystems are developed, people of all races, ethnicities, genders, geographies, sexual orientations, and abilities are able to drive world-changing innovation.

Myth busting

Underrepresented entrepreneurs work to overcome the same challenges all entrepreneurs do, including access to funding, customers, mentors, and key talent. However, they are often trying to build businesses with even less access to capital, with smaller and less influential networks, while working against biases in investing (often used to justify investors’ risk-aversion). From Native communities to Black and Latinx communities, across the country, many entrepreneurs also face the obstacles of little to no broadband access, greater unemployment and poverty rates; less access to banking services or wealthy friends and family and receive proportionally far less investment capital.

Just like in the workplace, there has been a myth of meritocracy in entrepreneurship: that founders and companies rise to the top purely as a result of hard work and good ideas. But this isn’t true, due to many inequitable barriers and biases throughout the entrepreneurship ecosystem, from education, to accelerators, to customer acquisition, to angel investing, and in venture capital. Talent is universal. Opportunity is not.

“You might be familiar with the phrase ‘pattern matching’ and, in general, the pattern has been homogenous,” says Christie Pitts, Backstage Capital. “We say we like the pattern match for ‘grit.’ And I think that goes to the underestimated founders to not give up. The tenacity, entrepreneurship, desire to learn, is all there. It is just making sure we are providing a path founders can build and be successful.”

Vanessa Roanhorse, Roanhorse Consulting LLC, believes capital is key – access to equitable, inclusive, affordable capital. “We just need to be moving more money to get them where they’ve got to go.”

Where 36% of businesses are founded by women in the U.S., just 2% of venture capital flows to women globally. Only .2% of VC goes to women of color, despite them being the fastest-growing demographic in entrepreneurship. And, there is little data yet for other historically marginalized populations.

With investors tending to invest in people from similar backgrounds, it’s important to improve diversity and inclusion in angel and VC investing as well. June 2020 has brought us to a water-shed moment in which we are seeing a new spotlight on funds investing in Black founders but, as Felecia Hatcher said in a recent Kauffman ESHIP virtual community gathering, “The difference between a moment and a movement is sacrifice.”

Established companies and investors who have benefitted from their privilege must now do the work required to ensure future entrepreneurial systems counter inequality, rather than exacerbate it. That means looking internally at their people, processes, and power structures.

What makes an ecosystem inclusive?

At Tech Inclusion 2019, Heroikka Co-founder Maica Gil asked the panel focused on building inclusive ecosystems what an inclusive entrepreneurship ecosystem is, and what specific things they should look for. It’s an ever-evolving question we have been asking at Tech Inclusion since 2015. Here are four of the top themes that we have heard and experienced during the years:

1. Don’t replicate Silicon Valley – build an ecosystem that works uniquely for your community. The ecosystem should be led by diverse leaders who represent the communities they serve. This is the only way to truly understand the needs of the community and build the resources and services that their people need most.
2. Equitable access to resources, like funding, are key to stimulating every ecosystem. In order to provide any sort of equitable access, the investors and the financial institutions must do their part to understand the systematic barriers to the success of underrepresented and, often, underbanked people. And we absolutely, positively, cannot forget that access to education, childcare, transportation, and basic human services are the factors that, when overlooked and undervalued, can stop innovation before it ever starts.
3. The diverse community members who lead the ecosystem should give back through mentorship programs. Young entrepreneurs, aspiring founders, and the next wave of tech talent are all looking to see themselves in the success stories of those who are currently affecting change.
4. An inclusive ecosystem has defined core values. The ecosystem should be proud of the values and principles that it was founded on and should therefore be 100% transparent about what those core tenets are. In addition, their philosophies should be modeled at every organizational level – not just from the top down, or even the bottom up.

Read more about the impact that Change Catalyst has had during the past five years in our Impact Report. Watch video from the 2018 & 2019 Building Inclusive Ecosystems panels, sponsored by the Kauffman Foundation, on our YouTube channel.

Uncommon Voices columns bring new perspectives and opinions on topics related to the Kauffman Foundation’s work. If you have an idea for a column, please read the guidelines for contributors.

As Diversity & Inclusion Specialist at Change Catalyst, Antonia Ford works to build inclusive tech ecosystems through consulting and advising, forging strong corporate partnerships with leaders in the tech industry and curating content for both Tech Inclusion and Icon Project. She also manages the Change Catalyst and Tech Inclusion brand image and social presence to maintain our well-established reputation for thought leadership in the diversity and inclusion space.

Prior to joining Change Catalyst, Ford wrote and published original content on diversity and inclusion, developed social media and marketing strategies, and assisted with the building of an online course centered around executive leadership skills for women. She has also worked with student groups across the US and traveled to the Middle East as an advocate for constructive dialogue and equitable solutions to religious and ethnic conflict in the region.