How Tech Business Models Come From Marginalized Communities, But Startups Are Still Mostly White

During the past ten years, “startup” has become a buzzword in the world of business and technology. On one end of the spectrum sits the the promise of massive returns for initial investors and small core teams, and at the other end is the can’t-look-away-as-the-crash-is-happening horror stories of those who entered the startup game and failed. This public fascination has pushed into the limelight the founders and CEOs who run million-dollar tech corporations. Unlike the business leaders of earlier generations, these folks are made to seem just like the average joe. I mean, if you don’t take into the account the billion-dollar bank account, isn’t Mark Zuckerberg, in his t-shirt and jeans, just like you?

The answer, of course, is no, and journalists, tech leaders, teachers, and many others continue to point to this reality. In a January 2016 article, PRX Co-Founder and CEO Ricky Yean highlights poverty as a primary factor in access to startup success. He writes:

“Being poor makes you suck at using money as a resource. My time was always cheaper growing up, so I’d rather spend time than spend money. I had to fix this when we raised our first seed round, but it took quite some time. A simple decision to hire, for example, took a very long time to the point that it cost us growth.”

Yean’s argument centers on his concept of “mindset inequality”: the internalized effects of systemic inequality that appear, for him, in the inability to ‘properly’ manage money, confidently pitch your startup, or compete in the highly competitive startup arena. While Yean makes an important intervention, his analysis reproduces particularly classist ideas about what it is to experience poverty in America, and struggles to interpret these experiences from an intersectional perspective. When, in particular, black women must navigate the ramifications of the stereotype of their loud, angry, and opinionated presence in White-dominated business spaces, then Yean’s explanation seems to miss the mark.

What follows is not an argument against the reality of systemic inequality in America. It is not a disavowal of the multiple ways that people living in poverty do experience real disadvantages when it comes to accessing resources, education, jobs, and more. This is an effort to consider how representing startups as inherently incompatible with the experiences of marginalized peoples requires a purposeful omission. This silencing refuses the various ways these communities have actually built the economic models that are popularized by startups today, and serves to solidify a divide between economic success and the emotional/physical/intellectual labor of these groups.

If the labor of these seemingly incompatible communities — mostly communities of color, and women of color, particularly black women — rests at the foundation of the startup ecosystem, how does that require us to rethink startup spaces and what it means to promote diversity within them?

Racial Capitalism 

Photo CC – BY Juan ignacio Tapia 

The history of 20th century entrepreneurship cannot be told without the history of racist exclusion from big business. The rise of industrialization and big business in the late 19th century continued the consolidation of power in businesses. Women of color were excluded, in many cases by law, from employment at the largest, wealthiest firms and industries in the country. As Mansel G. Blackford has argued, by the early 1900s, big businesses were run with few exceptions by white, educated, middle- and upper-class men. Women and people of color, excluded from opportunities at these firms, became entrepreneurs, often serving their communities in businesses and industries that white workers found undesirable. Even today, small business are still disproportionately owned by immigrants, and entrepreneurship was borne out of a need for economic survival.  

The distinction drawn between small business owners and startup founders is, at best, tenuous. The enduring distinction ensures that we think of startups as separate from the contributions to entrepreneurship by women, people of color, and other intersecting identities. It simply isn’t accurate to say that marginalized communities have not developed and excelled in the world of profitable high growth and quickly scalable business. Instead, the social value of these businesses has been negated by the social value of the people who are connected to these ventures. Put another way: marginalized folks cannot be understood as producers of things of value and, instead, the experiences, culture, and often bodies of marginalized people circulate as objects of value.

A useful term to unpack this is “racial capitalism”. Introduced by Nancy Leong, racial capitalism “is the process of an individual or group deriving value from the racial identity of another person.” This illustrates why many in tech are focused on “diversity initiatives” that improve their PR image, while erasing the present and current contributions of marginalized groups to tech and entrepreneurship. This erasure can take many forms – from the refusal to invest in startups led by black women, to a marked inattention to how they innovated startup business models in the first place.

Case In Point: Crowdfunding

Crowdfunding leverages the excitement and support of online donors to finance the development of a project. It’s one of the most popular models for today’s startup ventures to prove the viability of their product, and sites like Kickstarter, Indiegogo, and GoFundMe have popularized this method of securing startup capital. The term “online” seems to date the model to our contemporary period, but crowdfunding is anything but new.

Consider the Rent Parties that took place in Harlem, New York throughout the 40s and 50s. In response to limited housing options and rent prices that were raised as a form of racial discrimination, Harlem inhabitants threw parties for their community. Charging a fee at the door, guests enjoyed food, music, and dancing, and the proceeds of the party went towards the host’s rent. Powerfully, these parties were often spaces that allowed black women to escape some of the financial and social constraints that hemmed in their daily lives. Put another way: these parties were not only a useful way to ensure the economic survival of black communities in New York, but, more specifically, opened up ways for black women to navigate the complex network of systemic constraints that required the parties themselves.

Photo CC-BY Gabriel Gurrola

Is it possible to call these Harlemites startup founders? That’s debatable, but is this model of securing capital markedly similar to what has led to the success of products like Pebble Time, Axent Wear Cat Headphones, or Oculus Rift? Yes, absolutely. As with any successful crowdfunding campaign, Rent Party hosts had to ensure frequent and targeted communication, community interest, and motivating rewards (band, food, dancing) for their supporters.

Thinking about the implications of this similarity points to an interesting discrepancy. How have we come to understand startups as places that are particularly exclusionary to particular types of people, when it is these same people who’ve deployed one of the most popular startup investment models long before the word “startup” was even invented?

Case In Point: Lean Startup

Eric Ries proposed lean startup methodology in 2008. The practice centers around the idea that a successful startup will present their product to potential consumers early in the development process, incorporate customer feedback, and go to market with something that already has a base of customers and serves a very specific and data-verified customer need.

Critical to the success of this idea is that the set of practices encourages an organization to go to market quickly and cheaply, and use the opportunity to learn what the customer wants in order to make a product that will be profitable.

Turning to the archive of black entrepreneurship in the antebellum United States, I’m struck by the way this model echoes survival strategies of enslaved black people – particularly when it comes to the marked absence of capital on the path to business success. Writing on slave entrepreneurship, Dr. Juliet E. K. Walker asserts:

“With few exceptions, most antebellum slave entrepreneurs, bondsmen who hired their own time had to rely on human capital resources in the initial development of their businesses. Their investment costs were ingenuity, energy, industriousness, resourcefulness, and formidable business acumen, particularly for those who established the more successful business enterprises.”

In the same way, today’s lean startup methodology works to transition the primary investment from capital to the contributions of customers. For the entrepreneur who was enslaved, the reality of racial violence required a new model that could survive the lack of initial capital investment. This ‘lean’ venture was a practice of survival and business success.

Given the lack of investment in businesses ventures that are led by people of color, these techniques are often required due to a lack of initial capital. Organizations that aren’t bolstered by financial support simply cannot afford to bring their product through multiple rounds of iteration before turning to their customers to confirm their value proposition. Outside of what might be called credible startup spaces, small neighborhood and community ventures rely on a lean startup methodology to support their businesses and were early adopters of this practice long before it became mainstream.

Conclusion

This exploration of the rich history of entrepreneurship in marginalized communities is not designed to further notions of value through the language of profit and market worth (these have been used before). Instead, this discussion is designed to rework an exclusionary distinction and highlight the value of this frequently forgotten labor.

It’s likely that the social value of the word startup will continue to grow, and we should pay close attention to which businesses receive the sought-after title. The word “startup” has surreptitiously begun to signify a particular brand of business success, and, not only this, a particular type of business person. There are, of course, exceptions to this trend, but the uncritical celebration of these success does not do away with the complicated reality.

Somehow — despite the rich history of thrift, lean innovation, and financial pivoting that are everyday tactics of those who experience poverty, racialization, and the intersections of both — the narratives that circulate about startup businesses present these people as fundamentally incapable of success. Yet, it’s not that experiences of poverty or racialization make a person inherently unsuitable for success in startup environments. Instead, it’s how we come to value particular peoples and their experiences in hierarchical ways, that present some traits as singularly suitable for the startup space.