Technology accelerators provide entrepreneurs with access to seed capital, business relationships, guidance and office space. Over the last 18 months, three accelerators have opened in Newark with great fanfare. The investors and corporations that have funded these accelerators have been praised for being committed to Newark’s revitalization.
The individuals behind the accelerators have expressed their understanding of the importance of racial and gender diversity among the entrepreneurs with whom they’ll be teaming. Tom Wisniewski, who is the managing director of venture capital fund Newark Venture Partners, said that his firm will “look to support a diverse set” of entrepreneurs, “including women and minorities.”
While there’s talk of diversity, the truth is that less than 5 percent of the teams that are admitted into Newark’s accelerator programs are led by a Black or Latino owner. Many have approached the accelerators with tech venture ideas, but they’ve often been denied or deferred for a variety of reasons.
I’ve been contacted by well-educated and talented minority startup owners whose businesses offer valuable solutions for the ed tech, defense, and other large national markets. Unfortunately, their growth and revenue potential are severely constricted because of their inability to attain seed capital and early stage support from investors.
I believe that part of the reason why Black and Latino teams haven’t been given a proper shot is due to unconscious bias in the accelerators’ and investors’ selection process. To remedy this challenge, here are four suggestions that would help accelerators in Newark (and beyond) to offers opportunities to Black and Latino entrepreneurs who are seeking to build promising technology companies:
Black and Latino men and women should be hired by backers and accelerators in roles where selection and admission decisions are made — not just as administrators, marketers or community relations directors. Is such a goal possible? Absolutely. In the Baltimore office of accelerator Tumml, 65 percent of the people who manage the selection process are women and minorities. Tumml recognizes that there’s value in having diverse selection committee members who can recognize untapped market niches and business opportunities, as well as foster innovation that less diverse accelerators might otherwise disregard.
To avoid missing out on profitable market opportunities that they may not understand or be aware of, backers and accelerators with limited executive diversity should cultivate successful Black and Latino entrepreneurs, corporate executives, sales professionals, academics, bankers, doctors and lawyers as investors and limited partners. If making this move would require the accelerator’s minimum investment to be reduced, the potential for high ROI that these individuals could make possible would be well worth the alteration because of the valuable perspectives, insights and solutions that they could deliver.
Accelerators should sponsor and engage in more local meetups, pitch competitions, demo days and capacity building programs that target the participation of Black and Latino engineers, scientists, inventors and entrepreneurs. By filling the room with energetic Black and Latino men and women, one or more of whom may have the golden seeds of a hugely profitable idea, backers would conveniently be able to make the connections that would ramp up the diversity of their portfolio of venture and/or accelerator investments.
Accelerators and venture capital firms are on the lookout for high-growth companies that will provide big returns to investors via IPOs and multibillion dollar valuations. However, a Newark accelerator that aims to nurture one or more minority led companies with the potential to reach $50 million in revenues would yield positive gains and, more importantly, help to revitalize the Newark community. Such traditional middle market businesses can be valuable job engines for Newark minority residents (based on research from the Gazelle index, which found that two out of every three workers hired by black business owners were black).
Most talented Black and Latino entrepreneurs don’t have access to the “friends and family” seed money that more privileged business owners can tap into to launch and develop their ideas. The Newark accelerators, backers, and investors that recognize and strategically nurture the profit potential of more Black and Latino startup owners would not only realize financial gains for themselves and their investors, they’d also achieve the rewards of true diversity that they claim to seek.
Lyneir Richardson is the Executive Director of of The Center for Urban Entrepreneurship and Economic Development (CUEED), a research and practitioner-oriented center at Rutgers Business School in Newark.