English — in this case, American English — is a peculiar language. Not only because it is a brash, idiosyncratic, ever-evolving creole of at least five parent tongues, with numerous other linguistic contributors. But also, and perhaps more importantly, because as the official language of a nation still struggling to grow into its birthing ideals of human equality, it signals so many sharp-elbowed shadings of social standing.
For example, lately I’ve been thinking about the unsubtle distinctions between startups and upstarts.
Startups are good
Though it’s nearly ubiquitous in contemporary parlance, the word startup only acquired its various current meanings and connotations in 1976, and has yet to converge on a single definition. In the present moment, startups are generally viewed positively, aspirationally, and — in what I argue is very often misplaced admiration — borderline reverently.
Even as socioeconomic strains sparked in San Francisco and elsewhere have tarnished and dented the halo, and founders-turned-billionaires extract ever greater wealth from a hemorrhaging economy, startup founders who grow large companies that achieve significant valuations are routinely lionized as heroes, geniuses and icons in American culture.
But only *some* startups
But there’s a catch: that label and attendant regard only seem to apply if the founders fit a pretty narrow mold.
When you think of startup founders, do you picture anyone who isn’t a white man? If you do, you’re ahead of most people.
When I speak to large audiences, I often ask everyone in the room to close their eyes and picture a successful startup founder. Then I ask if anyone thought of Robin Chase (Zipcar), Leila Janah (Samasource, Samaschool, and LXMI), Robert and Sheila Johnson (BET), or any of several other founders who not only found financial success but dramatically reshaped their sectors. In a room of a few hundred people, I might see as many as 10 hands go up. We are all so accustomed to seeing the same half dozen figures over and over again that we forget that there are lots of other hugely successful founders, and that they and their companies don’t all look alike. Some of us don’t even know that there are other examples beyond the canonical pantheon. Even when we know those other examples exist, we don’t immediately think of them. We carry around a deeply impoverished set of narratives.
As a result, we also forget that BIPOC entrepreneurs— like Ronald Steptoe, for example, Founder and CEO of Warrior Centric Health — and womxn founders of all identities alike overcome significantly greater obstacles than their white male peers, to create high-value businesses commercializing solutions to the problems and opportunities that they see and their peers don’t.
So if investors truly care about finding the young growing companies that are most likely to deliver financial returns — not to mention innovation, economic value, social and/or environmental impact, and other virtuous outcomes — venture firms and their LPs alike should actively prioritize seeking out founder teams from widely different demographics and identities.
Upstarts are not welcome
But the pathologically stubborn state of affairs in the US and elsewhere is that irrespective of abundant excellent examples of BIPOC (Black, Indigenous, and other people of color) and female-identifying / womxn founders, and in spite of a large and growing body of evidence from multiple reputable sources indicating that BIPOC and womxn founders consistently outperform homogeneous white male teams [see a small sampling we’ve collected here], both the venture capital sector at large and the LPs (limited partners) who invest in venture funds continue to perceive BIPOC and womxn founders as lower potential, higher risk, and less credible than their white male peers. In short, BIPOC and womxn startup founders are seen as unqualified pretenders — upstarts undeserving of either regard or investment — or even more condescendingly, as needy recipients of charity rather than creators of value.
You want better outcomes? Forget performative gesture theater. Invest in upstarts.
Thus it is no surprise that we see a growing number of organizations making public announcements that they are allocating philanthropic donations to organizations serving Black, brown, and/or womxn founders, or they are committing to sponsor / offer free mentoring, or that they are setting aside a tiny percentage of their investment capital to specially invest in undervalued founders. Far too often these announcements garner polite and even enthusiastic applause, despite — or perhaps more cynically, because — rather than prioritizing overlooked founders, they actually serve to double down on the status quo.
If venture partners and institutional investors truly recognized the investment opportunity represented by BIPOC and womxn founders, they wouldn’t make charitable donations or set aside 1% or less of their funds to back them. They would actively compete to source and invest in them as a competitive necessity and strategic priority.
So if you are an LP, or if you want to invest for better financial returns, you should invest in upstarts.
Or if you value innovation or economic stability as necessary conditions for financial success and human well-being, you should invest in upstarts.
And if you recognize either the urgent materiality or moral imperative of sustainability or racial / social / gender justice, you should definitely invest in upstarts.
We do not have a pipeline problem. We have a network problem that has created a capital problem (and an economic problem, and a social problem, and an environmental problem, and …)
For our part, Reinventure invests exclusively in US-based companies led and controlled by BIPOC and/or womxn founders, at or about breakeven, and poised to grow profitably — high-value talent that the overwhelming majority of our conventional vc peers persistently fail to recognize.
Contrary to oft-repeated pernicious myth, there is no shortage of investable talent, and it is not at all difficult to find high-value companies led by BIPOC or womxn founders. Moreover, we know both from prodigious third party evidence and from firsthand experience that investing in upstarts drives advantageous returns to LPs, advances social / racial / gender justice, and creates expanding ripples of positive economic, environmental, and other positive impacts.*
If you’re ready to invest in upstarts to improve your investing outcomes, please contact us. We will be delighted to welcome you. And if you are already actively investing in upstarts, please share so others can join you!
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Video / still credit: Ronald Steptoe
*While there’s no such thing as a guarantee in investing and no one can reliably predict the future, Ed’s prior track record delivering 32%IRR to investors provides direct evidence that it is indeed possible to consistently invest for both financial returns and social value creation. If you are an accredited investor and would like to learn more about investments that can advance social, racial, and gender equity by supporting high-value companies led by women and/or people of color, please contact us to start that conversation.
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