Street Investors Exchange: How to Change the Face of Venture Capital

Updated: Sep 18, 2019

She couldn’t get the funding. As a single, black mother getting her MBA at a top-tier program, she created a “play-date on demand” company to solve a problem that plagues most parents: finding affordable, reliable child care.



Childcare is unaffordable for 7 in 10 families, and 51% of families find hiring a babysitter too stressful.


She had piloted the platform. She had traction. And yet she couldn’t find enough funding and had to shut her company down. For whatever reason, between her identity, investors’ inability to relate to the problem she was solving, because her company didn’t fit venture capitalists (VCs) overfitted idea of what they should fund, or because of her limited network she wasn’t funded. And our society, and particularly parents, lost out.


And that’s BULLSHIT.


She more than anyone else made me realize that we’ll be hard-pressed to solve the deep, systemic problems impacting the working majority of people until we can create a truly inclusive funding ecosystem. Since then, I’ve met and recruited a lot of other brilliant people to help me hone & enact our solution to this problem, each of whom has their own stories, reasons, and strengths that they bring to the table.


Together, we are Street Investors Exchange. We believe we’ve found a way to really move the needle on improving diversity in investment and we want your support to implement it.


THE PROBLEM:

The people who get funded by venture capital look like the decision-makers:




Not coincidentally, this is almost identical to the breakdown of the richest people in the US.

The top 1% of income earners in the United States are 96.1% white. Only 1.4% are black, and 0.9% are Latinx.One in seven white households in the U.S. have more than $1M in net worth, while only one in 50 black households do.


Why is that? When you ask most VCs how they decide which companies to fund, they say things like, “I really gotta like a guy” or “I really have to get excited about a product” or “I go with my gut.” If you know anything about bias, you know that those are some of the quintessentially biased ways to make a decision.


I have met so many phenomenally talented, unfunded female founders & founders of color, running quantitatively better companies, solving problems that I know are much bigger problems for society, most of which have been missed opportunities for decades. Or in business terms, much bigger target markets with more acute pain points, and quite frankly, a ton of arbitrage.


The numbers show it’s a good investment. Overall, startups founded by women are 20% more likely to be revenue generating, and investors make 35% higher ROI when they finance female founders. Yet still, only 2.2% of VC funding goes to female founders. As one venture-backed female founder running a multi-million dollar company explained:


I spent twice as long fundraising with four times the traction, compared to male founders with half the experience and traction. The system is broken.


Too often, instead of investing in solving problems like climate change or sizeism in the fashion industry that excludes 67% of women, titans of industry invest millions and billions in solutions to problems like “My shirt doesn’t look good untucked” or “My boat can’t navigate itself,” or “My wifi’s too slow for my car to fly.”


Many opportunities are just sitting there. These days, Wall Street trades algorithmically, with software out-betting other software on incremental changes to existing large companies’ stock price by milliseconds. Yet there were 137 years between when the breast pump was patented and when it became widely commercially available to women in 1991. Most breast pumps are still a pain to use, and yet the companies trying to innovate in that space struggle to get funding or connect with the right strategic partners.


There are a lot of talented people working on closing the gender gap in investment, which is a hugely important fight. Period. But the problem is that the system they’re aiming to reform is based on preexisting wealth and relationships, and until they figure out a way to change *that*, they will only be able to increase representation among rich, white (and some Asian) women. And that’s not enough.


Training rich white men to ignore their implicit bias and invest in people who aren’t white or male doesn’t solve the problem either. It doesn’t change the fact that they aren’t excited about solving problems that don’t directly impact them. It doesn’t solve the fact that entering VC usually requires a warm intro and networks are often homogenous. And it doesn’t solve the thousand other justifications and systemic barriers that keep the vast majority of VCs white and male.


The parts of our economy that are the most ripe for disruption aren’t B2B software or on-demand widgets. The most disruptive companies are companies like Thinx, Fenty Cosmetics, Rent The Runway or Willow. They operate in the parts of the economy that the vast majority of current decision-makers don’t understand, let alone get excited about, because these companies aren’t solving problems that affect decision-makers’ demographic.


That’s why it’s so important to get people who look like the population of our world, at scale, into the roles deciding which solutions to invest in. Because until we do, everyone loses out.


So why aren’t they being funded, and how do we fix that? There are a lot of interconnected, systemic reasons, but our solution addresses the three we think are the foundation of why:


  1. People tend to like (and more importantly to fund) people who look like themselves

  2. You currently have to be rich already to get into venture capital

  3. Wealth is disproportionately concentrated in certain communities and more importantly, certain entities (pensions & other large institutional investors)


THE SOLUTION:


We don’t just need to get more rich white women into VC, we need more people of color. We need more fund managers from the LGBTQIA+ community. We need people from outside of California and from rural areas. We need differently-abled people, and we need people from different socioeconomic backgrounds. We need to leave ourselves the option of expanding the types of underserved communities we aim to bring in. And we need to make sure that the opportunities we create are ones they can actually afford to take.


We aim to create:

  • A world where the decision-makers in finance and the leaders of the companies they fund look like the rest of the world.

  • Where anyone with grit and a great idea to solve problems they see in their community can get the resources they need to create a scalable business to do so.

  • Where your ability to do great things in life isn’t determined by the family or community you were born into, or by your preexisting wealth, but rather by your own talent, your own brilliance, your own tenacity.

We’re building a system to find and fund talented, diverse fund managers the system currently excludes. We’re building an online “who wants to be a venture capitalist” competition where the winners would get jobs running multimillion-dollar funds at Street Investors Exchange and other companies. These new VCs will be able to invest in solutions they believe in to problems they care about. The tool we’re building will help us create and aggregate opportunities at scale, enabling bigger investors like pensions and foundations to do early-stage investment.


Our team is full of serial entrepreneurs. We have deep relationships with pensions, foundations, and impact investors. We know how to build technology and movements like this. Most importantly, we are hellbent and determined to make this happen. This is our hill to die on because if we’re successful, this will be a societal earthquake that will permanently reshape the landscape of social mobility.


Join us.


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