Fixing startup diversity gap vital to California economy

150 150 Alexandra Bjerg

A panel at the 2014 Innovate!SoCal meeting discussed how to close diversity gap among startups. (Photo Credit: John Guenther)

What’s in Silicon Valley’s “secret sauce” for successful entrepreneurship? Hoping to replicate it, business leaders and policymakers around the world have worked to uncover the exact recipe. But attempts at cloning, both successful and failed, reveal that a single uniform formula for building a robust and vibrant innovative economy simply doesn’t exist. The recipe varies by region, aside from a few key ingredients.

Economists, business owners, educators, investors, and government leaders gathered in Long Beach yesterday, at Innovate!SoCal 2014, to discuss which ingredients will drive Southern California’s emergent entrepreneurial ecosystem. With tourists already flocking to the region’s beautiful beaches, local leaders now hope to attract more talent and funding to “Silicon Beach” and the surrounding areas.

Portions of the arid region are proving to be quite fertile grounds for entrepreneurs. In fact, according to one attendee, Santa Monica boasts having more incubators, accelerators and co-working spaces than Starbucks. Despite promising trends, the startup landscape locally, and nationally for that matter, lacks one characteristic vital to the sustainability of any ecosystem: diversity.

“The face of the entrepreneur is pretty white and male and the data backs it up,” said Jon Robinson, manager of entrepreneurship programs at the Ewing Marion Kauffman Foundation. Serving as moderator for a panel discussion on the lack of diversity, Robinson pointed out that women comprise a mere 8 percent of startup founders and only 18 percent of investors.

The problem extends beyond gender; minorities are also disproportionately underrepresented in the entrepreneurial community. “A lot of times when I go to events like these, if you look at color, it’s typically just me,” said Louis Stewart who is deputy director of Innovation and Entrepreneurship at state’s GO-Biz office and who is African American. 

“It’s incumbent upon all of us to cast their wider net, we need to work much harder to incentivize broader participation,” Robinson said.

Taken together, the gaps represent lost opportunities for potentially great startups. Despite agreeing on the need for greater diversity, the panel differed on who bears the burden of improving inclusion.

Diversifying and democratizing access to resources would significantly reduce barriers to entry, argued Elizabeth Stewart, co-founder and president of Hub Los Angeles. “You can’t underestimate the need to for capital that is specifically dedicated for women and people of color,” she said. The local entrepreneur called specifically on governments and foundations to jumpstart this type of lending.

Louis Stewart disagreed that governments should play a larger role in providing capital. What government can provide access to, he said, is 700 miles of hubs and labs, from Redding to San Diego, through the iHub program. 

The burden of eliminating barriers to entry should not be shouldered by a single entity, Louis Stewart argued, it should be shared by the whole community. By contrast, a veteran headhunter believes it’s up to the individual.

“These companies are colorblind. They don’t look at gender. They only care about skills” said Jim Jonassen, CEO of Jim Jonassen & Associates Venture Search. It’s an individual’s responsibility to acquire the necessary skills and experience, according to Jonassen. The makeup of the community will change over generations, as a broader range of people attain these skills.

Diversity is vital to the health and sustainability of any entrepreneurial ecosystem. Given that minorities and women make up such a small share of the entrepreneurial community, any improvement in representation will fuel economic growth. The hard part is identifying how to accelerate broader participation.

Events like Innovate!SoCal and the California Economic Summit are important not just for passing out business cards but for pinpointing ways to help small businesses startup and thrive with the help of a diverse network of schools, officials, fellow entrepreneurs, funders and more contributing to the ecosystem around them.


Alexandra Bjerg

All stories by: Alexandra Bjerg