On February 24th, Startup Policy Lab hosted a delegation from the Small Business Association (SBA). The delegation was led by Darryl DePriest the Chief Counsel for Advocacy. As part of the visit, SPL and Engine Advocacy organized a Roundtable. Participants included community leaders leading efforts to improve diversity in the Valley. This post shares the three key takeaways from that Roundtable.

Some background: the SBA's Economic Research Bureau (Bureau) launched a series of studies on entrepreneurs. The aim is to better understand founders from under presented populations in STEM. Other groups being examined include women founders and immigrant entrepreneurs.

One step in the study required the Bureau to get a better idea of the founder experience. SPL and Engine Advocacy put together an expert panel with deep community ties. Some of the groups that participated include Black Founders and the Latino Startup Alliance. The goal was to help the Bureau understand the challenges faced by minority entrepreneurs. 

TL;DR

1. Minority entrepreneurs often lack the networks to get seed stage funding. As a result, they are not counted as entrepreneurs.

2. The Bureau has an opportunity to erect industry standards to collect data about founders.

3. Community organizations in the Valley can provide the Bureau with missing data about entrepreneurs.

The breakdown

1.  Minority founders are overlooked as entrepreneurs.

Traditional metrics to examine tech entrepreneurship can exclude under-represented populations. The Bureau, for example, uses a common metric to define entrepreneurs - has the founder raised funding? But many minority entrepreneurs lack access to capital. This makes raising the first round of funding very difficult. Alternative metrics to include these founders must expand the criteria.

Example: 

Use surveys to count the number of companies incorporated by minority founders. Another approach is to ask the Valley for data it might already be collecting. Accelerators, for example, can collect and share the number of minority applicants. A practice that is common for in applications for jobs or college.

Second, measuring the pipeline of technically skilled minorities provides only half the picture. The numbers provide insight  within the context of access to jobs. As one attendee noted, hiring recruiters rely on their networks. If those networks do not include minority developers, those developers don’t have access. A more informed understanding of the pipeline must take into account many factors.

Example:

Collect specific information from companies about HR recruiters. Information to collect might include college, geographic location of their college, degree, age, etc. This information would shed light on how job networks develop. Or how the networks are not developing, as the case may be.  

2. The SBA should develop industry standards to inform how to collect data.

The Bureau generates data internally and culls data from third party sources. Third party data, for example, might include investor reports produced by venture capital firms. But there are limitations: some data does not exist and the data that does exist is often unstructured and fragmented. Going forward, the Bureau has an opportunity to develop industry standards. By setting industry standards, the Bureau can unearth new types of data. It can also reduce data fragmentation. 

This approach is not unprecedented. Transparency reports published by tech companies were successful at surfacing insights. Insights that have been useful to companies, government agencies, and the community. 

Example:

The SBA can provide standards for companies to disclose diversity data. Companies currently release data in a variety of formats. Companies release data in blog posts and CSV files; they also use a range of categories. This makes comparisons difficult. Establishing a more consistent structure would speed up research and insights. 

3. The Bureau must forge stronger ties with community organizations to learn about minority entrepreneurs.

The Bureau was looking for new sources of data. Attendees pointed out that many organizations with pools of minority tech entrepreneurs exist. Forging ties between the Bureau and these groups provided an untapped resource. The purpose is to drive more data back to the Bureau to better inform policymakers. 

Example:

The SBA should develop engagement strategies with local community groups. It's unlikely the SBA would be able to fund a national series of events. But the SBA is well positioned to convene local corporate partners that can. This approach would (i) embed the SBA within the STEM communities, (ii) increase access to information, and (iii) benefit community groups.

Questions? Contact Charles Belle, CEO and Founder, Startup Policy Lab Contact: charles@startuppolicylab.org