What is wrong with SV networks?

Last week Sam Altman tweeted the numbers YC published on their demographics and how they are doing with accepting minorities into their program.

Only 3.7% Latinos in 2014 and 3% for Latinos and Blacks in 2015 I have to say I’m totally disappointed. Its insulting for someone that is latino.

There are 54M of Latinos en US. Its not only the largest minority in the US but its 16.75% of the total population.

There are 38M people in California, from which 14.7M are Hispanic and 13M are White. What? Yes, there are more Hispanics (Latinos) in California than white people. They are 38% of the population of the state.

Knowing that only 3% of YC batch is latino makes it feel like something is wrong. The issue is to understand why is this happening? How many latinos teams apply to YC? How many makes it through? Is there a problem with YC filter or are latinos not interested in tech?

I’m going to try to explain one of the reasons I think this happens.

People keeps insisting that Silicon Valley is all about the network. Where did you work and where did you study. Who do you know? The problem with networks (especially strong ones) is that you limit yourself from looking outside of them. Each of our networks are only as strong as the members in it.

If you are well connected in SF and the Bay Area you probably don’t need to look further away to be able to find lots of entrepreneurs and new startups. Silicon Valley is like a strong magnet that pulls people from everywhere in the world to come here to start their company.

The problem with the magnet is that its uses an strategy of PULLING people close to it. People come to the Valley (the Valley doesn’t come to them). The magnet is the network and its predominantly white.

What do you think happens when you combine the actual network with new people coming being pull by the magnet? Very few actually get into the network.

The Valley doesn’t push out or reach out for entrepreneurs that are not first well connected to the already establish network. This creates a recurrent inflow of people that know the same people. It’s known that people from the same race tend to stay together. Thats why immigrants from other countries have actually created communities around them (China Town, Little Italy). What happens when entrepreneurs come to the Valley without connections? They can’t get plugged into the ecosystem.

So let’s work on two concepts in networking that are important to the Valley: the referral system and “pay it forward”.

Instead of taking the typical approach of saying how important they are and how they make the Valley the nirvana of startups lets start by saying that both concepts are full of hypocrisy.

So let’s start with referral system. When your network is based on a referral system you limit the reach of it to the most open members and you start getting an incircle effect of the same kind of people. The system is a closed loop where only people with connections gets plugged in. If 97% of the people inside the circle are non-Latinos and we know they hang out most of the time between them, what do you think their new connections will look like?

“Pay it forward” is probably the most ironic and hypocritical of all the behaviors I have experienced in the Valley since I’ve been here. The concept is that people in Silicon Valley help each other even if they are competitors and that they will even help strangers. This is something great and I love it. The problem is that “pay it forward” is done in a closed circle that benefits only the people that are already in the network.

To reach someone you need a referral (that how this ecosystem works). If you don’t have a referral how is that person going to “pay it forward” to you. You see the problem.

So how this is connected with YC having only 3% of their batch being Latinos. Because they based their system on this two concepts. If you actually wanted to change the demographic numbers you will need to open your networks to people that don’t have a referral and actually “pay it forward” to them without expecting something in return.

What surprises me is that even Steve Blank defines “pay it forward” as a culture limited by their networks:

These networks can be around any area of interest (technology, ethnic groups, etc.)

Everything mentioned before applies also to females. I found myself even more irritated with this due to the fact that females are half of the population of every race. They are only 11.8% of the total batch. What do you think the chances are if you are female and latino?

I hope this helps latinos understand how the network works in the Valley so when they come they would at least be prepared for this. It is possible to get plugged into the network and into startups but it takes a lot of persistence.

PS: If you want to connect with me @JDcarlu or jdcarluccio@gmail.com

PPS: To leave you with a happy story, here is how Ruben Harris (african american) did it.