The shifting demographics in the U.S. provide Black and brown leaders with a unique opportunity to leapfrog the rest of the decision-making class in business.
According to Brookings, less than half of U.S. children are white. This means that — by some projections — the U.S. will be a majority-minority population by as soon as 2035. The new makeup of the consumer-base in North America is inevitable, but understanding how to create products and services that resonate will require new leadership in business. Much has been written about the incremental shifts toward a more diverse corporate landscape, but fast-tracking this process relies on the emergence of a more diverse cohort of investors in business.
At the tail-end of a turbulent year, there’s no shortage of efforts to support Black and brown businesses in America. The clear and present need for financial and social support systems is largely being met through social impact investing, philanthropic initiatives, and government-backed programs. These types of efforts help to bring visibility to the egregious gap in economic opportunity within North America for people of color, but the most effective solutions require a more comprehensive, personalized approach.
My own unlikely trajectory into venture capital left me with an important question; how can we create a decision-making class in the startup ecosystem that looks like the future and not the past? After meeting with dozens of the leading Black and brown Fund Managers, General Partners and angels across North America, I arrived at my answer: the existing pool of startup investors needs to be expanded to include more investors who look and think differently.
I founded Future Capital to develop a cohort of diverse and underrepresented investors who are positioned to permanently change the way we think about business. By breaking the norms in the venture funding ecosystems, I believe we can inject different perspectives, new capital, and powerful networks into the startup ecosystem and produce outsized returns for everybody who wants to get on board.
Thinking differently about startup investing
There’s a mounting pile of evidence that diversity in VC funds, angel groups and board-level leadership is good for business. According to a report created by Catalyst, when corporations establish inclusive business cultures and policies they are 60 percent more likely to increase creativity, innovation and openness and 40 percent more likely to have a better assessment of consumer interest and demand. Understanding this means understanding that a range of perspectives is a winning formula in business.
By and large, corporations have seen a long-term trend towards more diverse workforces, but VC and angel investing have fallen short.
The fact still remains that at the C-suite, board member and founder levels, diversity is significantly lacking. Creating a more diverse group of investors means a pool of decision-makers who share common ground with the most underrepresented groups in society. If we take the same approach in private equity and venture capital as we’ve seen in corporate America, the demographic shift could have a ripple effect across industries.
Untapped pools of capital
Understanding the role that early-stage capital plays in economic growth is extremely useful in developing a scalable solution to the lack of diversity in business. Seed capital, start-up funding and early-growth funding are fundamental to the success or failure of any startup. The small group of individuals who decide whether or not a startup gets funded effectively serve as gatekeepers of meaningful, scalable innovation in business.
Beyond the power and influence that comes with early-stage investment, the potential to generate meaningful returns and create wealth is also held by the VCs, angel investors and private equity groups of the past. To contextualize the opportunity that startup investing can create you can use the early-investors in Slack as a prime example.
In an analysis of Slack’s public listing, Forbes Magazine asserts that “at an anticipated market cap of $16 billion, Slack (during its recent IPO) would give LinkedIn CEO Jeff Weiner, Twitter co-founder Biz Stone, Path co-founder Dave Morin and other early investors returns of 1600 times their initial capital. Each $25,000 they invested would now be worth about $40 million.”
How Early-Investors in Slack Earned Multi-Million Dollar Payouts
The untapped potential of underrepresented investors is hard to estimate because the metrics around diversity are infinitesimal. Unlocking this capital means unlocking a potentially massive wave in Black and brown leadership across public and private sectors for generations to come.
Beating the “Closed Network Effect”
The current structures that are in place to fuel innovation in business (and reap the rewards while doing it) can feel like a black box. This is not an accident. The status quo in venture capital is inherently motivated to block off the in-roads for new investors. As a result, there is a severe lack of opportunity to break into the space.
At this stage, it’s clear that there are limited seats at the decision-making tables for Black and brown investors. That’s why we need to create our own tables.
New networks (i.e. Somewhere Good, BLCK VC, and Future Capital) will all play a role in raising the collective profile, soft-power and influence that we need to create a fairer more representative landscape in business.
At Future Capital, we believe that with the right information, network and access, everyone has the potential to contribute to and benefit from the current structures in place for fuelling innovation through venture capital and making money in the process.
Marlon Thompson is an angel investor, startup founder and spent the past five years creating pathways to success for underrepresented leaders in the startup ecosystem. He founded Future Capital to support ambitious, driven diverse leaders who are ready to play a bigger role in their industry.
Want to learn more about startup investing? Visit https://www.myfuturecapital.com and check out opportunities on our online learning platform.