Note: This is Part 1 of a two-part series on the economic and social impact of democratizing capital and opportunities for minority entrepreneurs. Read Part 2 here.]
“Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”
-President Barack Obama
On January 27, President Trump signed an executive order barring the citizens of seven Muslim-majority countries from entering the United States for 90 days and declining all refugee entrance for 120 days. The countries were Libya, Sudan, Yemen, Somalia, Iran, Iraq, and Syria. In response to the ban, numerous protests erupted across the U.S. and in other parts of the world. These individuals believe the travel ban has more to do with discrimination than the safety of America. The federal courts agreed. On March 6, The President signed a revised executive order, banning the same countries with the exception of Iraq. The issue of immigration bans and “extreme vetting” are far from over.
These developments, and the ones that preceded them, have unfortunately led a large portion of Americans scattered about the country, fearful, confused, politically and emotionally charged, and ready to take action.
In this article, we dive into the historical context of ethnicity in America and look at the data on institutional prejudices today. As you can imagine, this is not a simple subject to tackle, nor is this an attempt to do so in a definitive and comprehensive way. The purpose of this two-part article is to drive further discussion on the direction of the future, and why there is hope that the change we seek is still very possible.
Historical Glimpse of the United States of Immigrants
The United States is home to the American Dream, our national ethos, focused on a set of egalitarian ideals that every US citizen should have an equal opportunity to achieve success and prosperity through hard work, determination, and initiative. Life, liberty, and the pursuit of happiness, right? Maybe. The timeline below paints a picture of how this great country, built by immigrants, gained such an ethnically diverse population. One might look at this and surmise that acquiring ethnic diversity seems to be deeply rooted in our nation’s history.
Note that white people weren’t the first to settle North America over 22,000 years ago, but rather native Siberians. Leif Eriksson arrived in 1,000 AD, but didn’t settle on the land. Nearly 500 years later came the Italian explorer Christopher Columbus, who was contracted under King Ferdinand and Queen Isabella of Spain to reach the East Indies, but accidentally found North America instead. Hence the now derogatory word “Indians” used when referring to Native Americans.
English immigrants successfully established Jamestown in 1607, becoming the second ethnic group to settle in North America. A decade after colonizing Jamestown, African slaves are imported to “aid” in the production of profitable tobacco crops. The US continued to procure territory from other countries while benevolently granting citizenship to the inhabitants of a majority of these newly acquired territories. If the U.S. mentality over 240 years ago was about inclusion, why is discrimination against skin color still very much alive in 2017?
Institutionalized Discrimination Still Prevalent Today
Despite being built by generations of immigrants, racial discrimination is sown into the institutions running our country today. The chart below displays median income across ethnicity. Notice “Hispanic (any race)“…this chart is from the United States Census Bureau. Generally speaking, the darker you are, the less you make.
The National Urban League released a report last year entitled, The State of Black America, which examined economic data for 70 metro areas for Blacks and 73 for Hispanics. The report found that in 2015, nationwide unemployment rates were 4.6% for whites, 6.6% for Hispanics, and 9.6% for blacks. This is nationwide…and the gaps only get bigger as we pick the data apart and move further south. The National Venture Capital Association Human Capital Survey displays the racial composition of U.S. VC institutions:
- White – 79%
- Asian/Pacific Islander – 14%
- Hispanic or Latino – 4%
- Black or African American – 3%
Not only are VC firms composed of primarily white males, but a CB Insights report found similar ratios when examining which founder races received VC investments:
- White – 87%
- Asian/Pacific Islander – 12%
- Black or African American – 1%
This would seem normal considering people tend to subconsciously make decisions based off of what is most familiar to them. Most VCs are run by white partners, which seems to strongly correlate with white founders receiving a disproportionate amount of VC capital. What about hiring? This is a problem because institutional decisions are affecting the masses and their ability to afford a quality life. The story is similar when we take a look at gender, only 5.4% of Fortune 500 CEOs are female. As time passes, more diversity-focused VC funds emerge to shift this trend like Intel Capital’s $125 million diversity fund and Comcast Ventures’ $20 million Catalyst Fund.
With the bulk of startup investment capital controlled primarily by a such a small group of VCs whose diversity makeup does not reflect that of the broader population, consciously or not, the end result is a disconnect in access and opportunities for minority entrepreneurs. This dynamic has major economic and social implications for the country, and exacerbates the economic inequity for generations to come.
Democratizing access to capital is one of the fundamental tenets of crowdfunding. By allowing entrepreneurs the ability to seek capital directly from the broader population—be it donation, rewards or equity—and bypassing the VC gatekeepers, the hope is that more diverse startups will get their fair chances to achieve their American Dream. Crowdfunding is the ultimate tool to truly boost the diversity of employers and employees in America. Rich or poor, black or white, male or female, gay or straight – you have an opportunity to obtain the capital necessary to reach your dreams.
Be sure to check out Part 2 as I dive into crowdfunding regulations and how minority leaders are using this tool to increase entrepreneurial diversity in America.