Introducing the 1863 Emerge Tech Summer Cohort
As we transition into the summer, it’s a sober reminder that the year is 50% done. The journey so far has been filled with opportunities to connect and work with great founders from all walks of life. This midpoint also marks the completion of a rigorous 5 week program for pre-seed tech enabled startups.
Part 1: Rise of the New Majority
A Little History about 1863 Ventures
We started off the year fresh off a renewed commitment (and new name) to help high potential companies reach high growth. As a firm, we see entrepreneurship as a medium to build wealth and economic resiliency in communities who have been historically and systematically excluded from the resources needed to flourish.
As the country prepares to become “Majority Minority,” it’s important to us to change the narrative and shift the perception that people of color are less than their peers. This meant embracing a new lexicon that elevates, embraces and empowers those who have been historically marginalized and exploited. Through our words, we claim our future and the fruits of our labor to rebuild our communities… Hence the phrase New Majority.
The data is clear that entrepreneurship helps to bridge the wealth gap and is a clear counter to help combat the dystopian zero wealth scenario facing people of color in the United States.
To us, inclusion is an economic imperative that requires the institutionalization of resources and support to help New Majority founders thrive.
This work takes individuals, builders and communities to push against systems that have kept the New Majority from realizing their full potential. We continue to be inspired by the commitment that our DC village has to ensure our folks have what they need to build resilient businesses.
Part 2: Our Work to Move the Needle
Historically, we have been agnostic in the types / stages of companies we support. Given that our team is comprised of investors and operators of companies at all stages, we are comfortable with working with companies across the spectrum from early to growth-stage.
We do however believe in contextual technical assistance; programing that meets the specific needs of a founder / company based on their stage, company type and business model. The only caveat is that participants in our program must 1) have to have some kind of traction and or market validation and 2) have to be committed to scale their companies. Scale for us isn’t a buzzword, for us it means growth as a means to:
- Build great teams
- Continuesly optimize produce / service delivery
- Create incrimental value along each stage of growth.
In the pathway to generate $100bn in new wealth in 10 years minimizing friction along the journey is key.
The traditional founder journey is dependent upon having the skills, tools and confidence to align their product with a loyal customer base while acquiring those customers in an increasingly efficient manner.
Capital Market Inefficiencies
An efficient capital market would allocate capital widely (demographically and geographically) in order to diversify risk and maximize the potential for outsized returns. This is not the case because according to CB Insights, less than one percent of venture capital dollars were invested in startups founded by entrepreneurs of color and 77% of this capital is concentrated in three states (New York, California and Massachusetts).
The Project Diane report revealed that 88 investment ready women-led black owned businesses raised an average of $36,000; less than three percent of the $1.3 million raised by white firms. It is important to note that of the US universe of venture backed firms, 75% of them fail.
On the other end are the facts and figures illustrating an increasingly diverse market of entrepreneurs and consumers:
- Minority groups have a combined buying power of $3.9 trillion (source).
- Minority owned-businesses collectively employ over nearly 7 million people (source).
- The fastest segment of new entrepreneurs are black women (source).
- The number of Latinx entrepreneurs as increased by 3x over the past 20 years (source).
- $400 billion in annual revenue is generated by firms lead by people of color (source).
Through these asymmetries, we see opportunity to identify, invest in, and support high potential companies founded by the New Majority.
“Business ownership is a route to wealth creation, a particularly important and valued route in a capitalist economy. As such, it is important to understand the role that it plays in wealth creation for people of color and to identify and pursue strategies for addressing the challenges facing entrepreneurs of color.”
— Aspen Institute
Part 3: Building Better Founders and Resilient Businesses
There are nearly 200 accelerators nationally. Despite their increased popularity there are massive asymmetries between the supply and demand. In other words, you are in many cases more likely to get into an Ivy League university than a top tier program. This doesn’t mean that that the 99% that don’t get in aren’t good companies, they just may not fit the exact type of company the programs look for at that particular time.
From this, we saw an arbitrage opportunity in helping provide pre-seed companies with the skills, clarity and processes needed to “graduate” into upstream opportunities to raise capital, grow revenue and qualify for the Techstars and the YC’s of the world.
For tech-enabled companies in particular, the pathway is a little less defined as immediate opportunities for massive monetization are not clear and market dynamics are opaque (especially for new product categories). Capital is often a function of time giving founders the opportunity to “figure it out” and find a vein to the elusive product market fit.
For many entrepreneurs of color, the wealth and opportunity gap create variances in risk tolerance. For many founders, they have poured their entire net worth (and sometimes their families) into an idea with no alternatives or parachutes. As admirable as this is, it creates a need to build resilient companies that can weather the seas and resist the bumps an bruises.
Therefore, we don’t have the luxury of time and we must be incredibly thorough to reduce the risk of failure. So our program was designed around four distinct outcomes all mapped to our ultimate goal of creating $100bn in wealth:
- Increase survival rate of companies founded by entrepreneurs of color.
- Increase opportunity set of high potential companies for debt and equity funders.
- Increase wealth and income potential of high performing program participants.
- Increased job growth in communities with historically high unemployment.
Tech and the New Majority
The narrative about the New Majority in tech has evolved rapidly over the past 5 years. As more VC’s hop in the drivers seat to cut checks to New Majority founders, there is a broader dataset to validate that black and brown founders have something to say… Also, thanks to the dope work of the brothers over Harlem Capital Partners, we have the Rosetta Stone for analyzing the trajectory of venture backed New Majority founders.
Although many tech-enabled companies came to us, we never had a formal program for them. We essentially wanted to ensure we were filling in a gap as to not duplicate work already done in the ecosystem. We had to answer why we should have a program to then figure out how to bring one to market.
This started a 6 month process to review our curriculum taxonomy, understand the needs of pre-seed tech-enabled founders and assess where and how we could support.
It was also important to us to ensure that our efforts weren’t bespoke so we could use our R&D in other areas to improve the quality of our programming firm-wide.
After interviewing founders, pouring over a decade or research and surveys from our previous programming, we found an 85% overlap in the needs of early stage founders (independent of company type). It wasn’t necessarily surprising but it was illuminating in the sense that tech has always been seen as this magical outlier with very unique needs.
First we found commonalities in what early-stage founders struggled with.
- Founders struggle to prioritize their activities leading to diluted impact of activities.
- Founders struggle to make data-driven decisions leading to increased execution risk.
As a result of the previous 2 items, they lack confidence and clarity in being a top tier operator. Armed with this information, we settled on program to support pre-seed founders of tech-enabled companies.
Then we found that (again) despite the company type, they lacked the skills in key areas.
- Customer Discovery — Understand the customers need for, use, and opinions of your product or service to set a roadmap to product / market fit.
- Customer Acquisition — Understand your customer base and develop a tailored strategy to generate leads and revenue.
- B2B and B2C Sales — Develop a repeatable sales process to maximize opportunity identification and closure.
- Financial Modeling — Project the performance of your business using historical financial data & research-based assumptions.
- Fundraising — Understand what types of capital best fit your needs and communicate effectively to the investment community to raise capital.
- Performance Management — Align your team and activities around achieving transparent & high-impact objectives.
One major difference in tech-enabled companies was the need for support in product management as it was a core discipline to ensure alignment between the customer need and the product.
Breaking Down Barriers
Another output from our research is that the cost of doing business is higher for New Majority Founders when compared to their peers… The costs aren’t as clear as you think:
- Business Debt — Many founders of color lack access to insights and strategies to help them build more resilient companies. This results in them accumulating business debt in areas such as their product, business model, pricing etc… Essentially, the poor or lack of guidance they receive leads to bad business decisions they then must unravel to get on the right path.
- High Input Costs — Lack of access to free startup resources, predatory financial products, and rapid urbanization lead to high input costs for many undercapitalized founders of color. Those free perks that come from selective programs save costs and those draconian investment and loan terms sap precious capital from founders of color and increase input costs.
Part 4: The Pathway to Seed Stage
Finally, we mapped the sequence of events that occur between the early stage and the seed stage. This helped us align the risks, needs, revenue expectations and sources of capital required to make it to the next level. That way, we could reverse engineer what our folks needed to gain from our program to meet the expectations of downstream investors or programs.
We mapped a hypothetical sequence for a typical pre-seed company and priorities where we could / should help de-risk the business.
Visualizing the Journey
Taking cues from UX design, we imagined a journey that would account for the core disciplines they needed to master in order to de-risk their businesses. In doing so, we were able to create a time-bound curriculum with distinct deliverables, milestones and outcomes.
We felt that being process driven helped reduce the gap between what participants learn and how they apply it within their businesses. Mastering key processes also helped seed the eventual automation of key functions that then positioned them to scale when the timing was right and the resources were available.
The time to Knowledge Paradox
Our programs are free of cost to participants as we believe in minimizing barriers to access and opportunities. In doing this, we realize there is a certain opportunity cost for founders who trust us over a 2 to 5 week period. During this time, they are out of the business so the pressure is on us to deliver insight that helps them progress where it counts (customers, revenue, profit). So we created a “time to knowledge index” that helped us measure the degree to which founders internalize what they learn in order to apply to their business.
What we found was that if we had participants complete certain pre-work, that would reduce the time needed for instruction. We also combined this with an process and execution focused delivery model to bridge the gap between the theoretical and contextual. In other words, folks worked on what they learned in real time so they could get critical feedback and insight.
5 Week Program Model
Going back to the Founder Deficiencies, we implemented an additional discipline to the core curriculum; OKR’s. Used by firms like Google and popularized by the book “Measure What Matters,” OKR’s instill a discipline and process whereby startups set a longterm goal and reverse engineer the key things that need to happen and what role each business function plays. As a result, founders focus on the big things helping them evolve beyond the mindset that activity means progress.
The acronym OKR stands for Objectives and Key Results, a popular goal management framework that helps companies implement strategy. The benefits of the framework include improved focus, increased transparency, and better alignment.
OKR Example: SpaceX
Part 6: Introducing The Cohort [Pre-seed Tech]
We are incredibly humbled to introduce to you a cohort of 16 amazing companies who spent 5 weeks with our team. We picked these companies based on the team, product, passion for learning and market they sought to grow within. We had such an overwhelming batch of applicants that we split the cohorts into two groups with one focusing on product and the other focusing on scale. Cohort 2 begins next week so we will post a more detailed analysis after the program completion.
Introducing the Emerge Tech Cohort
- Akku — On demand portable battery rental for cellphones. The company has created a hardware and software suite that allows travelers and bar / restaurant patrons to ditch their portable batteries and rent from Akku at a fixed rate. They launch this month in Ecuador with 10 station beta.
- Bravoscore — Realizing that discovery for live shows was controlled by ticket sellers, they decided to uncouple the experience create a more meaningful connection between patrons and artists. The site helps users discover new live shows, share their experiences and connect directly with artists.
- CurlIQ — Haircare discovery and curation is now as simple as taking a photo. Using machine vision and a proprietary algorithm, the software measures the moisture and angularity of a user’s hair to curate hair products that match the hair type. This takes the guesswork out of product discovery and enriches the relationship between brands and buyers.
- DIA-Fund — For non-profits in Africa, raising capital from the US is a major challenge while knowing what strategies to use is even harder. DIA-Fund analyzes a non-profits’ operational and financial metrics to recommend the tools and strategies necessary to meet their fundraising goals and form authentic connections with funders.
- Digiteyez — Under the current model, visiting an optometrist can take up to an hour out of your day. This also creates bottlenecks for optometrists as their revenue is limited by the amount of people they can see in a day. Digiteyez reduces the time to generate a prescription from 30 to 3 minutes using a proprietary digital vision algorithm. This helps businesses see more people, improve the customer experience and reduce operating costs.
- DNA Health Map — While DNA information can be overwhelming and confusing, DNA Health Map distills data from thousands of genes and curates actionable insight for users to take control of their health to improve health outcomes. Instead of getting data, they get direction so they can take control of their health.
- Don’t Get Mad Get Paid — After working for over a decade helping women collect outstanding child support, she turned her service into an automated platform called Athena. With Athena, users can locate the non-payer, their assets and generate the legal forms required to collect. This significantly reduces the costs associated with making a claim and improves the changes that payments can be recuperated.
- Good Fynd — Food trucks often struggle to reach customers beyond a few blocks. When it rains, sales often fall to zero. With GoodFynd, food trucks can connect directly with their customers, process orders and reach a broader audience all through an mobile app.
- Happied — Traditional happy hours are limited to fixed times although restaurants and bars generate over 50% of their revenue from them. Happied rewards loyal patrons with extended happy hours in exchange for a monthly subscription. They curate new places to explore and allow bars and restaurants to reach new customers and know more about their existing customers.
- iChip’N — As the world gets more busy, communities feel less connected. By creating a marketplace of digital perks users can be rewarded by investing their time in their communities through volunteering.
- InovCares — African Americans have the worst health outcomes of any group on the United States. The founder saw this first hand as his sister died from complications from child birth. By putting critical heath data in the users hands, InovCares connects patients with trusted board-certified doctors and wellness coaches via video or text on a mobile application to increase access to comprehensive and affordable healthcare.
- IpGen — For lawyers, the initial claims process can be time consuming and marginally profitable. By marrying AI with the claims submission process, the platform can predict the likelihood of claims acceptance reducing time and costs for clients and firms.
- Meaningful Gigs — The risks of finding the right design and development talent through marketplaces is significantly high. This can increase the risk of failed projects and lost revenue. Meaningful Gigs uses AI to match companies with talent based on various data-points to ensure cultural and professional alignment.
- Politicking — Political tension is at its highest point yet political engagement amongst millennials is at historical lows. Politicking marries engaging content with insights into the political process to empower young people to be active at the local and national level.
- Smartbridge Health — For cancer survivors, the pathway from diagnosis to recovery can be overwhelming and complex. Due to inefficiencies in healthcare, the best specialists are often out of network and out of reach. Smartbridge Health is a digital community that connects top oncologists with patients to help them explore second opinions and new therapies.
- Snypt — Software developers often navigate through various code repositories to build software leading to increased development cycles and lost productivity. Snypt creates a simple and centralized workspace for code reuse to reduce time and complexity with the software development process.
We give thanks to the individuals and organizations who helped make this program a reality and have invested their social capital in our founders:
- Stefanie Thomas — Impact America Fund
- Jan Baker
- Vern Howard — Halothere
- Keenan Williams — REZI
- Obi Omile — The Cut
- Maude Okrah — Bonnti
- Kristian Bryant — Wistia
- Laura Fredericks
- Nick Sykes
- Capital One
- The Kauffman Foundation
- WeWork Labs
- M&T Bank