February 27, 2023
New Report from Launch NY Identifies Support Needed by Underrepresented Founders For More Diverse and Equitable Startup Ecosystem
Celebrating Black History Month and Women’s History Month:
New Report from Launch NY
Identifies Support Needed by Underrepresented Founders
For More Diverse and Equitable Startup Ecosystem
Lessons Learned from Launch NY’s Founders Go Big Program
Buffalo, N.Y., February 27, 2023 – Black, Indigenous, People of Color (BIPOC), women and other underrepresented founders often need supplemental, tailored, culturally-relevant, and sustained assistance to turn innovative business ideas into high-growth, scalable startup companies, according to a new report issued by Launch NY. Intentional, long-term commitment to providing these services is key to reversing trends, such as Black and women-led startups receiving less than 3% of the venture capital deployed in the U.S. annually. Given that venture-backed, scalable businesses are the key contributor to job growth in this country, this report is a vital part of the nationwide effort to develop solutions to level the playing field for underrepresented founders.
Titled Lessons Learned and Voices from an Entrepreneurship Program for Underrepresented Founders, the report, which is posted for the public here, identifies numerous barriers faced by underrepresented founders who want to build a scalable business, and is both a case study and a guide for investors, philanthropic funders, Community Development Financial Institutions (CDFIs), venture development organizations, and other entrepreneurial support organizations that are committed to inspiring and empowering underserved founders. The report abounds with testimonials and reflections from program organizers, advisors, and mentors, as well as the participating founders, including Tee Forton-Barnes of Tee’s Organics, Anthony Boyd of Anaghe Atelier, Toby Butler of Dipit, Mayra Luz Colón of Healthy Rican, Carley Hill of CaHill Tech, and Kathy O’Connell of Radiant Abilities.
The report is based on the experiences, insights, discoveries, and lessons learned by Launch NY since establishing its Founders Go Big (FGB) program for underserved founders in 2020. Launch NY is the first and only nonprofit venture development organization to provide pro bono mentoring and seed capital access to early-stage startups in the 27 westernmost counties of New York State.
“Launch NY—which was established to support and grow a startup ecosystem to drive job and wealth creation in a region of declining traditional industry sectors, lower median income levels, and some of the highest poverty rates in the country —is well-positioned to be part of delivering and sharing the solution to the barriers faced by underrepresented founders who want to build a scalable business,” said Launch NY President and CEO, Marnie LaVigne, PhD, who is among fewer than 10% of venture capital funds in the country led by a woman.
Since its inception in 2012, Launch NY has attracted a high percentage of underrepresented founders seeking mentorship, investment, and other related services. Forty-three percent of Launch NY’s 300-350 client companies served annually are BIPOC- and/or women-led. As a U.S. Treasury Designated Community Development Financial Institution (CDFI) dedicated to financing in underserved, economically distressed communities, Launch NY has consistently funded a portfolio comprising more than 70% located in low-income neighborhoods. In fact, more than 50% of the investments and 60% of the funding distributed by Launch NY #InvestLocal programs goes to BIPOC and/or women-led companies.
“To achieve true diversity, equity, and inclusion in the entrepreneurial ecosystem—having a diverse team to shape and evolve efforts to level the playing field are critical, so we have been fortunate to receive support from funders who understand that solving this problem will take sustained effort and some experimentation to drive individual successes that build momentum,” said Crystal Wallace, Program Manager of Launch NY’s Founders Go Big Program.
In the United States, entrepreneurship is the major driver of job creation and an important economic health and wealth builder. In particular, venture-backed startup companies have been shown to be the greatest generator of new jobs in the country, as documented by the Kauffman Foundation starting in 2009. More recent analyses show that from 1990 to 2020, venture-backed businesses in the United States created eight times more jobs than those without venture capital.
“In the entrepreneurial world, as in many other parts of our society, some founders have greater access to the resources they need to be successful than others, particularly when it comes to venture capital backed businesses,” said Wallace. “The statistics bear out that women, BIPOC, and other marginalized populations with limited or no connection to capital and resource networks are left behind or left out entirely.”
The Founders Go Big report identifies key factors holding back underrepresented founders:
- The inverse and disparate correlation between those deploying venture capital and those receiving it—only a tiny percentage of venture capital goes to underrepresented and underserved entrepreneurs.
- Underrepresented founders generally lack access to early investments from friends and family that are necessary to attract venture capital.
- Other barriers that derive from socio-cultural disparities range from mistrust and/or misunderstanding of the equity investment model to lack of representative role models.
- Longstanding entrepreneurial support in most communities has created a pattern of steering founders from BIPOC and other underserved populations towards the “Main Street” or small business models versus the scalable, high-growth model.
Launch NY established Founders Go Big to expand and enhance its engagement of underrepresented, underserved founders. Founders Go Big was envisioned as a program that would overlay Launch NY’s traditional model of mentorship, financing infrastructure, and programming—but with additional culturally-relevant resources, attention, and intention. It has provided increased engagement, servicing, and financing for more than 70 startups among the 300-350 client companies Launch NY assists each year. The next step is expansion supporting and inspiring even more traditionally underserved and disadvantaged people and populations, creating the long-term support that is required to make systemic change.
JPMorgan Chase provided the initial funding to support Launch NY’s introduction of the Founders Go Big initiative in 2020, and they recently provided a follow-on award to continue fueling the services and the dissemination of the white paper findings to others who are committed to addressing disparities for underrepresented founders. Founders Go Big is the only widely available program dedicated to supporting BIPOC- and women-led startups in the 27 westernmost counties served by Launch NY.
The Founders Go Big report also shares lessons learned:
- In order to better connect with underrepresented founders, Launch NY moved beyond its usual marketing strategy and tactics, and brought in BIPOC talent who were already embedded within the affected communities to find and engage prospective founders where they are.
- Timelines for everything from recruitment and engagement to product development and fundraising can be longer for underrepresented founders unfamiliar with the equity capital pathway than for their more highly represented counterparts. This was particularly exacerbated by the pandemic that especially impacted underrepresented founders’ ability to focus on their business.
- Underrepresented founders often expressed concern about giving up control of their big ideas, their businesses, and their future wealth. While expressing interest in ‘going big,’ they often lagged their highly represented counterparts in being ready to accept equity capital necessary to accelerate their business.
- Launch NY also discovered that frequent communication to touch base and share information and education was important every step of the way to be sure everyone was on the same page regarding how they would continue to work together.
- Founders Go Big companies responded much better to seeing than simply hearing. The most effective approach was to partner participants with role models, including successful BIPOC and women founders, mentors, experts, and staff members with founders, enabling them to share first-hand their experience and expertise.
“More diverse, tailored resources are needed to illustrate to underrepresented founders that their big ideas have real potential, to encourage them to overcome systemic and cultural pressures to pursue traditional careers, to support them in building a scalable business rather than pursuing a small Main Street business model, and to demonstrate the value and method of attracting equity investment,” said Wallace.
“Above all, it has been imperative to understand, acknowledge, and affirm each founder’s personal journey, and to be able to discuss their uniquely personal experiences with racism, sexism, or other bias that has negatively impacted them. Only then can trust be won, transparency achieved, candid feedback and constructive criticism given and received,” Wallace added.
“To achieve true diversity, equity, and inclusion in the entrepreneurial ecosystem—and in the overall economy—intentional, long-term effort is necessary to change the approach, and the outcome. When lessons such as those learned from Founders Go Big are built into entrepreneurial support and financing, a ‘virtuous cycle’ will replace the ‘vicious cycle,’ as successful founders begin to invest their newly created generational wealth and experience in those coming up behind them,” concluded LaVigne.
About Launch New York:
The mission of Launch New York, Inc. (Launch NY), the only U.S. Treasury-designated Community Development Financial Institution (CDFI) directly providing venture funding to businesses in New York State, is to identify, support and invest in high-growth, high-impact companies that can transform the local economy and catalyze the entrepreneurial culture in the 27 counties comprising the western half of Upstate New York. Launch NY is a 501(c)(3) nonprofit venture development organization that promotes economic development through best practices, including high-quality pro bono business mentoring, while operating the most active seed fund in New York State and one of the top 5 nonprofit seed funds in the country that provides access to seed capital as part of an array of #InvestLocal financing programs designed to facilitate funding for investment-ready companies which have the promise to drive significant economic impact and jobs for our region.
Launch NY is headquartered in Buffalo and has co-locations with partner organizations in Binghamton, Ithaca, Rochester, and Syracuse. Since 2012, it has served 1,458 companies, has more than 30 experienced local entrepreneurs-in-residence and its National Mentor Network of 2,000 industry, business, and investment experts. Launch NY has mentored companies, including 28% women-led and 29% minority-led startups, which have created 4,916 jobs, attracted over $1.28 billion in co-investment and follow-on capital after joining Launch NY and generated $228 million in annual revenues.
Launch NY’s #InvestLocal Financing Programs include a nonprofit fund, for-profit limited partner fund and Investor Network. To date, Launch NY has invested over $10 million in 87 startup companies that have created more than 500 jobs, attracted nearly $191 million in follow-on funding, and generated over $60 million in annual revenues.
Launch NY also leads the premier Emerging Cleantech Opportunity (ECO) Incubator, one of six designated clean energy incubators sponsored by the New York State Energy Research and Development Authority (NYSERDA), as well as the Founders Go Big program, an innovative diversity and inclusion initiative introduced in 2020.
For more information about Launch NY, its programs, and other entrepreneurial opportunities, visit www.launchny.org, and follow Launch NY on Facebook, Twitter and LinkedIn.