A Call for Inclusive Entrepreneurship

Over the course of the past year, I’ve interviewed dozens of top-performing social entrepreneurs to try to crack the code on their success. In writing up their stories, I realized how many started the same way: “So and so graduated from Yale and started her organization,” or “So and so graduated from Harvard and founded his nonprofit.” While we should commend these accomplished leaders for their impact, I couldn’t help but wonder: If smart solutions can come from anywhere, why are the scales tipped in favor of social entrepreneurs coming out of top universities?

A recent study from Echoing Green, the largest seed-funder of social entrepreneurs in the world, provides some insights into the funding disparities many entrepreneurs face from the start. Data of its fellowship applicants over the past five years shows that black applicants from the United States receive half as much funding after 1-2 years than their white counterparts.

Why is this happening? It is no secret that the philanthropy sector lacks diversity. Three-quarters of foundations’ full-time staff are white and 85 percent of foundation board members are white, while just 7 percent are African American and 4 percent are Hispanic. Given that people naturally gravitate toward (and fund) people similar to them, entrepreneurs of color clearly are at a strong disadvantage.

In his 2010 book, Invisible Capital: How Unseen Forces Shape Entrepreneurial Opportunity, Chris Rabb calls these forces “invisible capital.” According to Rabb, success in entrepreneurship isn’t just about a good attitude, a great idea, and hard work. You also have to understand the rules of the game, and those rules aren’t written anywhere.

For social entrepreneurs, invisible capital includes knowing which foundations might help you get your idea off the ground and who to call to get a meeting with those donors. It also includes knowing how to craft your pitch using language donors want to hear (such as “theory of change,” “sustainable revenue models,” “impact measurement,” and “return on investment”) and how to navigate the sector’s many biased terms. For example, many people traditionally associate “social entrepreneurship” with white leaders, while associating “community activists” or “social justice advocates” with people of color. This also leads to implicit bias when so much funding is skewed toward sexier nonprofit models packaged in the form of “innovation.”

And yes, invisible capital is also about what university you attend. Going to a good college gives emerging leaders a huge advantage to establish credibility and make the connections they need to get their idea funded. Community-based leaders of color who do not have fancy degrees are thus at a double disadvantage when it comes to raising money.

As a lecturer at Stanford University, I do not mean to downplay the incredible talent coming from top universities. I am constantly inspired by my students and so excited to watch them make this world a better place. But we cannot support these rising leaders at the expense of so many others, especially those who have actually lived the social problems we are trying to solve. Funders must do more to support emerging social entrepreneurs of all backgrounds. In the nonprofit world, this is sometimes referred to as “inclusive entrepreneurship.” In Silicon Valley, venture capitalists are now calling entrepreneurs who have great ideas but aren’t fluent in startup language “off-the-grid entrepreneurs.”

Some foundations are already taking the lead to promote funding of off-the-grid social entrepreneurs. Support starts with promoting equity in the search for grantees. Echoing Green, for example, works with partners that can help them recruit underrepresented applicants to their prestigious seed-funding fellowship, and has implemented a blind reading without names or photos in its first round of evaluation to help reduce unconscious bias. It also pairs applicants with past fellows for interview prep in the final round of selection, allowing less well-networked candidates gain confidence and skills from others who have been successful in the process.

Meanwhile, the Rosenberg Foundation, in partnership with the Hellman Foundation, started the Leading Edge Fund in 2016, awarding fellowships to community leaders of color who are tackling deep barriers to opportunity in low-income communities. The fund identifies these leaders via nominations by a highly diverse group of people, most of whom work within the communities themselves. Fellows receive $225,000 of unrestricted funding over three years. During that time, Rosenberg tailors its support to each fellow’s individual needs. This includes regular retreats, as well as trainings in areas such as communications, strategic planning, and fundraising—all co-created with the fellows. Rosenberg also plans to make foundation connections for their fellows, helping fellows get their foot in the door.

Over the past few years, Emerson Collective, founded by Laurene Powell Jobs to help remove barriers to opportunity and strengthen the social justice sector, has focused specifically on building capacity within the nonprofit sector by providing fundraising and governance trainings to organizations in its portfolio. Under the lead of Anne Marie Burgoyne, it has also provided individual coaches to dozens of leaders, allowing them to customize their professional development based on their specific needs.

In sum, many philanthropists are aware of the extreme funding disparities for leaders of color and the need for more inclusive entrepreneurship. Recent articles have highlighted implicit bias in the context of grantee inclusion and developing diversity internally in foundations. But realizing that there is a problem is just the first step. More philanthropists must follow the lead of foundations such as Echoing Green, Rosenberg, and Emerson Collective to promote inclusion in the selection and training of community-based leaders. We cannot afford to miss out on the potential of so many rising stars, especially the ones who don’t have the Ivy League advantage.

Read more stories by Kathleen Kelly Janus.