For a fairly low-cost investment, the region could achieve a significant upside return: more Black founders and employees who have a clear path to the middle class and related societal benefits.
Despite having the competitive assets for building an inclusive and equitable tech economy, Greater Boston has not done so. What’s worse, we don’t even have a plan to get there. In more than 50 debates leading up to Boston’s recent mayoral election, increasing the number of Black-founded tech companies never came up as a topic. Those who had an interest couldn’t even get the question on the agenda.
Unlike New York, Chicago, Detroit, Atlanta, San Francisco, Los Angeles, Oakland, Greater Boston is one of the few large metro areas without a Black tech conference. This might help to explain why Massachusetts ranks 20th for the percentage of venture capital going to Black founders, and why at 0.4%, the state is underperforming the nation as a whole, which is at a little over 1%.
But why is Massachusetts underperforming when, according to legendary co-founder and former America Online CEO Steve Case, who is currently CEO of a large venture and growth capital firm, 75% of the nation’s venture capital money goes to just three states—California, New York, and … Massachusetts?
It’s simple, we have no plan and no champion.
No plan, no champion
Many agree that increasing the number of Black tech entrepreneurs in the region is a good idea, but neither elected leaders nor someone from the private sector seems to see the limited number of such founders, or of local Black tech titans generally, as a problem. Our civic leaders aren’t connecting the dots between increasing the number of Black owners and employees in the tech sector with priorities such as reducing the racial wealth gap and growing the middle class, which help solve other problems such as affordable housing and health care disparities. Therefore, unlike in other cities and states, no one has stepped up to champion the cause.
The lack of a plan is problematic because large venture capital funds are opening branches and starting funds in places such as Raleigh/Durham and Atlanta in the hopes they will gain access to new opportunities with Black entrepreneurs. These venture capitalists wrongly assume that their Boston offices will source opportunities from Black entrepreneurs. But Jeff Bussgang, a venture capital investor explains that this assumption might be wrong, given human bias. In Jeff’s article,Are VCs Racist? Explaining The Capital Jeff explains research from the book Blindspots: Hidden Biases of Good People by Anthony Greenwald of the University of Washington and Mahzarin Banaji of Harvard as a possible explanation for the capital gap. The unconscious personal bias of otherwise good people might be inhibiting them from making investments in Black-founded startups.
Given the potential for greater societal good, the public and/or the private sector should develop a plan to address the reasons for the market friction that exists between Black entrepreneurs and potential investors in Boston. We can’t leave the market to self-correct at its own pace when the wealth gap is increasing so rapidly.
Why aren’t they seeing the problem?
We are facing what Clayton Christensen called “The Innovator’s Dilemma.” The current ecosystem works well for its white stakeholders—startups, general and limited partners, and investors. But since the system works for them, they see nothing to fix. To them, the system at best needs a tweak. Those wanting to address the issue end up relegated to social impact, enterprise, or purpose funds.
Many in the venture community point to the increase in Black VC partners, funds explicitly focused on investing in Black founders, and the increasing number of Black tech entrepreneurs as proof the system is working. While that may be true elsewhere, it can’t be said for Greater Boston.
Is the solution really a segregated capital market like the old Negro Leagues for baseball? Should Black entrepreneurs relegate themselves to a separate ecosystem, hoping that whites will one day recognize the superior performance of some, like Jackie Robinson, and be motivated to invest in them as limited partners, funds, and entrepreneurs?
We need a plan
There are those who argue that no plan is needed because the market will self-correct for the under-investment in Black founders, just as it did after over-investing in bad dot.com ideas. When Black investors and entrepreneurs demonstrate superior returns, the argument goes, success will breed success and white investors will look for opportunities to invest in Black founders, because VCs and LPs see green rather than Black or white.
But there is another approach. Consider the entertainment industry. For decades, the call for increased diversity went largely unanswered in New York and California. But Atlanta did respond by developing a plan and creating Black Hollywood. In the tech industry, when Silicon Valley and Cambridge failed to increase diversity, cities such as Atlanta and Miami did. To succeed, we may have to create a new ecosystem for Black founders outside of—but complementary to—the current one in Massachusetts.
Our plan should address the pipeline problem. We need enhanced education in science, technology, engineering, mathematics, coding, and entrepreneurship. We need to provide job shadowing, summer jobs, and internships in tech companies for Black students. And when those young people are ready to launch their own businesses, they’ll need seed capital, angel funding, and investor networks to get started.
We need to make sure that Black professionals currently working in Massachusetts’ high-tech industry have the resources they need to start companies, should they be so inspired, and we need to make the region attractive to entice Black entrepreneurs to move their startups to Massachusetts. The seeds of an ecosystem to increase the number of Black-founded tech companies are emerging, but without a plan to nurture those seeds, they may never grow the strong roots needed to support a thriving, Black-led tech environment. The result will be a fragmented, sub optimized ecosystem.
There is no need to reinvent the wheel; we can learn from those who have studied the problem and adopt and adapt best practices from cities such as Miami, Atlanta, Los Angeles, or Baltimore that have developed plans.
The Kauffman Foundation, Knight Foundation, National Venture Capital Association, and Kapor Center have all studied the issue extensively. James Norman, a general partner at Black Operator Ventures and a partner at Transparent Collective, has written and spoken on the topic including the very direct instructional, A VC’s Guide to Investing in Black Founders, as have I in “We Must Increase the Number of Black-Founded Tech Companies in Mass. Here’s How.”
In Miami, Mayor Francis Suarez committed to building a tech mecca with a priority on equity. He’s now a fantastic ambassador for Miami’s tech and startup environment and actively recruits and welcomes new people and entities to the city, participating in building the ecosystem. With Black Tech Week, eMerge Americas, and the Knight Foundation, Miami is now home to some of the leading voices on diverse and inclusive ecosystem building.
In Atlanta, Mayor Kasim Reed worked hard to grow the tech/startup ecosystem and ensure the inclusion of people of color. His successor, Mayor Keisha Lance Bottoms, continued those efforts. As a result, Black entrepreneurs are increasingly moving to Atlanta to start their companies and major corporations are moving some operations there to take advantage of the diverse, tech-ready workforce. According to TechCrunch, the city is now known as “a haven for diverse founders and investors.”
Holly Beilin elaborates at Hypepotamus:
Though Atlanta’s startup and technology sector growth is the result of many factors, local government has certainly played a role. For example, Tech Square in Midtown, which currently houses over 20 corporate innovation offices, has been bolstered by supportive tax incentives. The city has made strides in implementing smart city technologies, many of which provide pilot projects and contracts for local startups. Mayor Reed was directly responsible for nurturing the idea, following a tour of Silicon Valley tech hotspots, that became the corporate-backed, state-supported $18 million Engage fund to accelerate early-stage companies. And he also formed and grew the Women’s Entrepreneurship Initiative (WEI), a city-funded 18-month incubator for 15 women entrepreneurs.
In Los Angeles, Mayor Eric Garcetti entered into innovative collaborations specifically aimed at increasing diversity within the tech/startup ecosystem. One coalition, PledgeLA, brought local VCs and tech leaders together with the Annenberg Foundation and the mayor’s office to promote and monitor diversity, equity, and inclusion among businesses in the city. In 2021, PledgeLA launched a task force devoted to addressing systemic pay inequities and raising funds to assist entrepreneurs of color.
And in Maryland, in 2018 the Baltimore Integration Partnership issued “Collectively We Rise: The Business Case for Economic Inclusion in Baltimore.” The report makes the case for economic inclusion and highlights successful strategies employed by local businesses, educational and health care institutions, faith-based organizations, and government toward that end.
Here in Greater Boston, we need a plan, a champion, and a coalition of stakeholders. A plan to increase the number of Black-founded tech businesses will help cities and towns across Massachusetts.
The commonwealth’s underperformance of investing in Black ventures is a statewide problem and therefore should have a statewide solution to help cities across the state. One way to do that would be for the governor to form a committee with the task of creating a solution. However, since the governor isn’t running for re-election, that’s not really an option.
With a Greater Boston focus, this would be the perfect research project for a philanthropy like the Boston Foundation, which has direct relationships with many of the key stakeholders and the resources to help implement recommendations. Perhaps Initiative for a Competitive Inner City( ICIC) could be a partner given their research and access to government officials and the entrepreneurial community in other cities.
We need a leading organization to commission such a study because those in the existing Massachusetts venture ecosystem don’t see it in their narrowly defined self-interest to do so. For a fairly low-cost investment, the region could achieve a significant upside return: more Black founders and employees who have a clear path to the middle class and related societal benefits.