Back in August, the EcoMap team began our Ecosystem Gaps Analysis, where we looked at our data about all of the resources for entrepreneurs in Baltimore and identified where we, as an ecosystem, fell short. In our first analysis, we looked at the Dearth of Pre-Seed Funding in the city, and how that leads to disparate impact on certain types of founders. Then, we turned our attention to The State of Acceleration in Baltimore, where we examined the various accelerator programs in our city to see if they met the needs of Baltimore's entrepreneurs. Now, we bring you our final Gaps analysis: Resources for Underserved Founders*
When we scraped information about Baltimore's resources, we tagged each resource based on whether or not it explicitly targeted underrepresented founders. The results were striking:
Only 13% of all resources in Baltimore target either women, veterans, low-income founders, or founders of color. Baltimore is home to 29,000 veterans, is about 70% non-white (63% African American specifically), is approximately 50% female, and has 24% of families living below the poverty line. Yet only 8.6% of resources focus on founders of color, 6.6% focus on female founders, 4.6% focus on low-income founders, and only 1.7% focus on veterans. You can take a look at all of these resources in our various portals for underserved founders
The dearth of resources means that fewer people from these populations have the tools that they need to build successful startups, small businesses, and nonprofits that contribute to the social and economic fabric of our city. If we want to turn Baltimore's economy around, we need to build an entrepreneurial ecosystem that is equitable and accessible for all populations. One of the major steps towards that goal is ensuring that we have resources that are targeted towards, and structured for, founders from historically underserved populations.
At the end of this article, you'll know why it is so fundamentally important to have resources dedicated to underserved populations, you'll get a glimpse of what Baltimore's current resource ecosystem looks like, and you'll understand why it is vital that our local resource providers publicly declare their commitment to supporting historically underserved founders.
Here's an outline of our analysis:
- Why Resources for Underserved Founders Matter
- The Resources for Underserved Founders in Baltimore
- The Not-So-Simple Process of Identifying Resources for Underserved Founders
*A Note on Language
When we started this analysis, we struggled with how to label resources for historically underrepresented populations. Originally, we used "Minority-focused" to indicate resources for African Americans, Latinx, and other non-white groups. But "Minority" doesn't seem the right word when we are in a city that is majority African American. So we have changed our language to Founders of Color, which while still imperfect, reflects a more accurate grouping. When we say Female-Focused resources, we mean female-identifying, to be inclusive of all non-binary populations. Female founders and founders of color were the original two populations of focus in our analysis, but we quickly realized that there were two other populations who are also underserved in our ecosystem: veteran and low-income founders. Collectively, this is what we mean by underrepresented founders. But even "Underrepresented" didn't feel perfect, because often this underrepresentation is due to exclusion, not choice. After much feedback from Baltimore's innovation ecosystem, we settled on the term Underserved.
As a company committed to Equitable and Accessible Entrepreneurial Ecosystems, we are trying to improve our verbiage to remove terms such as Minority-focused from our site. However, some of that language was hard-coded into our dataset, so it will take some time to fix. In the meantime, this is the sentence we use to describe Underserved Founders: female, veteran, low-income, and founders of color. Is it wholly grammatically correct? We don't think so. But it does captures what we mean. Suggestions & recommendations are, as always, welcome.
Why Resources for Underserved Founders Matter
Pava here, EcoMap's Founder. I want to break the forth wall for a moment to recount a conversation I had with a well-know investor and philanthropist in Baltimore. I was talking to him about the lack of resources for founders of color and female founders in the city. He looked at me and deadpans: "We have a ton of resources in the city, and women and minorities can use them. What's the difference?" Oh boy. In one way, he is correct: there are no resources in Baltimore that say you must have low melanin and high testosterone to apply. Indeed, I'd venture to say there are no resources in the US that explicitly prohibit females, founders of color, or any specific underrepresented group from applying. But with that in mind, let me remind you of the current state of Venture Capital:
- Only 2.2% of all venture capital deals go to female-founded companies
- 15% of all VC deals went to startups with a female-male cofounding pair
- 1% of all VC deals go to African American founders
- Between .0006-.002% of all VC deals go to African American, female founders
Meanwhile, 83% of all VC deals go to male founders, and 77% of deals go to all-white founders. It’s not necessarily that females and founders of color can’t get in the door, it’s that they leave empty-handed.
It is not enough to have "demographically neutral" resources in an entrepreneurial ecosystem. There are a few reasons why, most coming from the annals of sociological and economic research into the demographic gaps in entrepreneurship. It's clear that at each stage in the entrepreneurial process, underserved founders face higher barriers than "traditional" founders (white, male, mid-upper income, etc). Each of these problems is incredibly nuanced, so we are only going to scratch the surface here, but links and academic citations are included for those who wish to dive more in-depth to these topics.
1. Knowledge About Resources is Distributed Through Exclusionary Networks
Let's start with the easy one: Oftentimes, information about resources (like who good angel investors are) is distributed through corporate, institutional, and educational networks, which for many reasons (that we do not have the time to address here) historically exclude women, people of color, and low-income populations. Additionally, personal connections and endorsements to these resources (like a mentor telling an investor that a founder is a good bet) are distributed through these same personal networks, again excluding underrepresented groups from even getting their foot in the door to many of these resources, especially when it comes to venture funding (Fairlee & Robb, 2008).
So there are fewer underrepresented founders even finding out about these programs in the first place, and they often lack the social capital needed to get those necessary personal endorsements from people within the nexus of power. But let's assume an underrepresented founder finds out about a certain resource program. There is still the fact that...
2. Underrepresented Founders Are Less Likely to Apply
Imagine if there was a program that you had a less than .05% chance of getting into. Would you even bother applying? Probably not. What if you had a 2% chance? Well, it would probably depend on how great the program was, but you probably wouldn't get your hopes up or apply to too many of those programs. If it is so unlikely for you to get in, why would you waste your time?
Well, that's the dilemma that females and founders of colors face everyday when it comes to applying for resources for their ventures. Studies shows that African Americans are less likely to apply for either debt or equity financing; no wonder, because even if they have equal assets and cash flow as a white-male led company, they are much more likely to get rejected to any funding program they apply to. White females are less likely to apply for debt financing, even though they actually have an equal chance at getting a loan (assuming equal assets, net worth, and credit history, however), but they are also less likely to seek out equity financing sources, where they face markedly worse odds than men. While there is less data about trends in applications to accelerators, these patterns appears to repeat itself.
Some people say that this is a chicken-and-egg problem, where there are fewer females and founders of color included, simply because they don't apply to those programs in the first place. While that reasoning is hard to dispute (fewer applicants does means fewer chances for underrepresented founders to get in), the bias against applying to these programs is very real, and it cannot be ignored as a driver of inequality within entrepreneurial ecosystems.
But, let's assume that an underrepresented founder applies anyways. Then they face...
3. Discrimination in The Decision Making Process
There are two core drivers of discrimination in the decision making process for incubators, accelerators, and funding programs: the first is the makeup of people who are making the acceptance decisions, and the second is the ingrained notion of what a successful entrepreneur looks like.
Most resources (here to mean incubators, accelerators, funding programs) use a panel of judges to decide who progresses to the next round, and ultimately to the final round of a yes/no, in/out decision. Oftentimes, these panels are made up of relatively homogenous leaders in tech and entrepreneurship, which skews white-male. Susan Marlow's famous "People Like Us" study showed that these decision makers are more likely to select founders who look and act like themselves (Marlow, 2013). Simplified: if white men are making the decisions, they tend to choose white men.
Relatedly, there is the ingrained cultural notion of what successful entrepreneurs look and act like. What do people tend to think of when they think of the most successful entrepreneurs? The Zuckerbergs, the Musks, the Jobs, the Gates, and perhaps even the Blakeys. Even if we eliminate celebrity bias, the vast majority of successful companies coming out of these resources are led by white men. This means that when decision makers are trying to decide whether or not a certain founder will be successful, they are (mostly subconsciously) comparing that founder to the successful founders they have known before.
The unsurprising result is that very few companies led by underrepresented founders make it from the applicant pool to the cohort. But even if they do...
4. Programs Are Not Structured for the Success of Non-Traditional Founders
Here we are going to focus mostly on incubators, accelerator programs, and funding programs that come with a heavy programatic component (but don't meet the other requirements to be an accelerator). Many of these programs are not structured with the underrepresented founder in mind, meaning their likelihood of success is still reduced despite beating the odds to get to the cohort in the first place.
Here are a few examples:
- Programs that have a full-time requirement but cater towards early-stage ventures: Ventures participating in these programs are often pre-revenue and haven't raised substantial capital, so a full-time requirement essentially guarantees that the only people who can participate are those with enough savings to support themselves without pay for however many months. Such programs are not well-structured for low-income founders.
-Financing that requires personal assets or credit histories: many debt financing sources require that the founder put up personal assets as collateral to secure business loans, or the lending decision is based off of their personal credit history. Obviously, these two requirements reduce risk for the lender, and in many situations are understandable. But these restrictions box-out low income founders, as well as disparately impact founders of color who tend to have less wealth and accumulated savings than whites
- Programs that don't account for professional or familial obligations: There are programs who host sessions in the evening, which is great in that they don't overlap with the workday, but bad for parents who don't have the financial resources that they need to pay for childcare. On the opposite side, there are programs that are held during the workday, which often preclude people who need to work another job from participating.
We know - it sound's like you can't win. But if you want to structure programs to be more accessible to underrepresented, and especially low-income founders, you need to be providing some type of capital (or in-kind services) that help entrepreneurs cover living expenses while they are participating.
What this all means
The above points underscore the need for programs that are targeted towards and built for underserved founders. If you structure a program with the needs of these groups in mind and you make it explicit that these programs are built to serve them, then you increase the likelihood that more diverse founders will seek out & participate in the programs needed to help them build successful ventures. There is an obvious moral argument for doing this, but there is also an economic one: the US loses out on $300B in income and 9 million jobs from the 1.1 million businesses that do not exist because the rates of entrepreneurship are not equal between whites and minorities (Austin 2016).
It warrants a whole other article to talk about the characteristics of resources that are well-structured for underrepresented founders, but a few key points come to mind:
- Personal wealth cannot be a determinant of whether or not someone can participate fully
- Programs need to be offered in locations that are easily accessible by public transportation
- Programs need to be offered at times that permit for founders to fulfill work, family, or other personal obligations
- Decision makers, leaders, and mentors of the program should share experiences with the founders in the cohort (IE, female mentors in an accelerator for female entrepreneurs, etc)
- There should be strong follow-on support after the program ends
Unless is just as easy for underrepresented groups to start successful companies as it is for anyone else, we will never see the level of ground-up economic growth needed to turn our cities around, which is why the general lack of resources for Underserved Founders in Baltimore is a giant problem. With that being said, let's take a look at what we do have.
Resources for Underserved Founders in Baltimore
It should be said that when it comes to resources for underserved founders in Baltimore, the problem is in quantity, not quality: the programs that we do have are generally well-structured for underrepresented entrepreneurs. We simply don't have enough of them.
In our current dataset, there are 58* resources that are targeted towards female, veteran, low-income, or founders of color. You can check them all out on our Portals for Underserved Founders. Currently, there are about 450 total resources for startup and small business entrepreneurs (not including non-profit resources) in the city, meaning that resources for underserved founders come out to about 13% of all Baltimore resources.
*When this article launches, we fully expect more resources to opt-in, so this number will likely - hopefully - increase. If you are a Resource Provider in Baltimore, be sure to read the final section (The Not-So-Simple Process...) to understand our methodology around which resources were and were not included here. If you offer a resources that you think should be included, or you want to modify the tagging of your resource, get in touch with us.
Here are some specific insights by Resource Type:
- 5 of Baltimore's Accelerator programs target underserved founders. Big win!
- There are 22 Funding sources focused on underrepresented populations
- 10 local Incubators focus on creating inclusive environments for underserved populations
- 11 Events/Meetings focus on underserved innovators
- There are 7 Mentorship programs for female, veteran, and founders of color
- There are no Makerspaces and only 1 Coworking space that explicitly target underserved groups
For a small city, those don't seem like overly tiny numbers, but again you have to take into account the demographic breakdown of Baltimore: we're 70% non-white, ~50% female, and have 24% of families living below the poverty line. So having only 13% of all resources target these underserved populations is pretty insufficient.
The good news is that we have been talking about this problem more and more. Stephen Babcock wrote an awesome article on closing the funding gap for founders of color, and Lolita Taub recently published a Medium article about where Black Female Founders can find more resources for their ventures. We need more awareness around increasing the number of local resources available to underrepresented groups, and articles like these are a great start.
But in order to truly build an Equitable and Accessible entrepreneurial ecosystem, we not only need more resources focused on these groups, but we need our existing Resources and Resource Providers make their dedication to underserved founders, if it exists, explicit. To understand why this is important, we need to take a step back and talk about the surprising challenges surrounding identifying resources that serve underserved populations.
The Not-So-Simple Process of Identifying Resources for Underserved Founders
When we began our data collection, we figured it would be easy to identify the resources that targeted underserved populations, just like it was easy to identify resources that target specific industries or types of ventures. We could not have been more wrong. When it came to identifying resources for underserved founders, there was one key challenge that made this process more difficult than expected.
Many resources which we know focus on underserved populations do not explicitly state that they do.
To understand why this troublesome, some background on how EcoMap works: As we gather resource information, we look for keywords and phrases in the scraped data such as "for female founders", "for African-American entrepreneurs", etc. When those are present, the process of tagging the resources is straightforward. Some sites use language like 'underrepresented', or 'historically excluded', and while terms like this are much harder for a Natural Language Processing algorithms to understand, that problem can be solved by having more human eyes on our data as it is collected.
But what happens when there is a resource that we know serves mostly underserved populations, but they don't publicly state that focus?
Two examples come to mind in Baltimore: Impact Hub and the Social Innovation Lab. During our initial scrape, these resources did not come out with Tags, even though our team personally knew that these two resources are heavily utilized by underrepresented founders. On Impact Hub's site, they use language such as "Inclusive" and "Diverse", but don't explicitly state a focus on underserved founders despite them being one of the most inclusive coworking/incubator spaces in the city. The Social Innovation Lab is likewise one of the most inclusive accelerator programs, a fact you can easily see looking at the demographic breakdown of their portfolio. But nowhere on the SIL website does it state that SIL has an explicit focus on underserved populations.
This led us to a challenging question: Is it our right as a company to add labels to these resources, if the resources themselves do not self-identify as focusing on underserved founders?
We don't have a great answer to that. On one hand, EcoMap's job is to bring entrepreneurs the most accurate and helpful information about resources that might be applicable to them. But on the other hand, how heavy-handed should we be with adding labels to resources based on personal knowledge? For Baltimore, here's the solution we settled on: unless the resource used specific language in their website stating their focus on underrepresented founders, they would not be tagged as such unless that Resource Provider got in touch with our team and asked to have those tags added. (We want to thank Michelle Geiss of Impact Hub and Alex Riehm of Social Innovation Lab for helping us think through this nuanced issue and arrive at this decision).
Some Baltimore Resources Providers got in touch immediately after we launched EcoMap 1.0, asking for those tags to be added. Others mentioned it to our team members during various events in Baltimore. Even so, there are a number of resources on the Baltimore EcoMap which our team thinks should be tagged, but the Resource Provider hasn't asked us to yet. While this solution works decently for Baltimore, where we know the ecosystem intimately, as we scale to other ecosystems, we won't have level of insider knowledge to know whether or not those resources simply don't exist, or if they just don't use explicit language to describe themselves.
We don't think that Resource Providers should publicly declare their commitment to underserved founders just because it makes life easier for our algorithms. Rather, it's important that resources that serve underserved founders identify themselves so that founders can identify those resources.
When we talked about Why Resources for Underserved Founders Matter, we mentioned that big part of creating inclusive ecosystems is letting founders know that yes, there are resource is for you. Made for you. Used by people like you. If we truly want support historically underserved founders, we need to let them know that there are local resources that are meant to serve them.
This doesn't mean that you can only use explicit language if your resource exclusively serves underrepresented populations. Here is a great example of language used by the Loyola Baltipreneur's Accelerator, a program that is open to all entrepreneurs, but has a specific focus on underserved founders. From their website:
Preference to founders who identify as underrepresented entrepreneurs, including but not limited to women entrepreneurs, entrepreneurs of color, entrepreneurs with disabilities, or veteran entrepreneurs
This statement does not preclude traditional entrepreneurs from applying, but it makes it clear that Loyola's program is actively inclusive of underserved populations.
Call to Action
The way we describe the resources that we provide matters. So if we have one call to action that results from this entire article, it's simple: If you are a Resource Provider in Baltimore and you have a genuine commitment to underserved founders, state that publicly. Put it on your website. Let these founders know that your programs are meant for them.
Once we do that, we are one step closer to building an equitable and accessible entrepreneurial ecosystem in Baltimore.
Concluding the Gaps Series
With this article, we conclude our Ecosystem Gaps Analysis Series. The process of taking an honest look at Baltimore's ecosystem has been challenging. On one hand, there is probably no company who loves Baltimore's entrepreneurial ecosystem more than EcoMap, so it was hard airing out the dirty laundry of our small but growing entrepreneurial community. Yet on the other hand, our team felt that if we want to build a thriving innovation ecosystem that is inclusive of everyone, we needed to highlight the areas that our city needs to improve. While part of us wants nothing more than to be done with this series, the other part recognizes the importance of honest analysis. We will likely revisit this gaps analysis in the future, especially as new resources are added to Baltimore's innovation ecosystem.
The EcoMap team is always looking for feedback on our platform, analyses, and reporting practices. Think we did a great job? Think we're totally off base? Let us know!