Tech Startups: An Opportunity to Close the Wealth Gap Between Black and White Families

Black Americans have a major generational wealth problem. The Institute for Policy Studies conducted a recent study on the wealth gap in this country and the results are alarming. This study found that over the past 30 years the average wealth of white families has grown by 84% — three times the rate of growth for the Black population. If this trend continues, in three decades, the average wealth of white households will have increased by more than $18,000 per year. During that same period, the wealth of Black households will have increased by only $750 per year. At this pace, it would take Black families 228 years to amass the same amount of wealth White families have today! This wealth gap is just one of the outcomes of the longstanding practices of systemic racism, segregation, and discrimination against Black Americans in education, housing, and employment.1

As a Black professional, tech startups were new to me. My exposure to this unique industry began in 2016. I can still recall my first TechStars Demo Day in Boulder, Colorado. It was quite fascinating and inspiring. At this annual event, new TechStars companies present the business they hope will change the world. At the end of each presentation, there was a PowerPoint slide revealing the teams behind the respective companies. I realized that I had not seen one person in any of those pictures that looked like me.

The absence of Black professionals in the photos of these young startups alarmed me because I quickly realized that we were missing out on another opportunity to generate wealth. It is customary to grant stock options to employees at startups. Offering such options serves as an incentive and directly ties employees to the success of their companies. If these companies are among the lucky few that go public, then the employees with early buy-in will have the opportunity to make hundreds of thousands of dollars. The employees who were fortunate enough to join companies like Google, Amazon, and Facebook before their Initial Public Offering (IPO) can attest to this.

In 2015, a CBInsights study on Venture Capitalist funded startups found that only 1% of funded startup founders were Black. More research is needed to better understand the correlation between the number of Black startup founders and the average amount of Black employees at startups. Does the exposure, networks, and experience gained at a startup lead to increased entrepreneurship among former employees? If more startups had Black founders would Black representation in startups increase? Though beyond the scope of this brief essay, these are the kinds of questions that should be explored further.

I believe founding, or at least early involvement in tech startups, is a great vehicle for Black families to close the wealth gap. However, we must all quickly find a way to greatly increase the presence of Black professionals in this industry, from top to bottom. If startups are going to do their part by changing their recruiting strategies and creating an inclusive work environment, they must address the biases that may be hindering their efforts. For instance, The Equal Employment Opportunity Commission’s 2013 report on Diversity in High Tech notes that “ stereotyping and bias, often implicit and unconscious, has led to underutilization of the available workforce. The result is an overwhelming dominance of white men and scant participation of African Americans and other racial minorities, Hispanics, and women in STEM and high tech related occupations. ” This study suggests that bias on behalf of those in positions to hire in tech companies is a large factor in the lack of diversity in this industry. This barrier to entry must be addressed if startups are going to reap the benefits of having a more diverse workforce.

There are some startups taking great steps to address this issue. Pinterest , for example, “added a checkpoint during performance reviews so managers could pause and identify any common biases they may have been making.” They have also “made unconscious bias training a priority for employees and managers so they can be aware of any hidden preferences they may hold.” In addition, Pinterest instituted their version of the NFL’s Rooney rule. Pinterest has committed to ensure that at least one person from an underrepresented background and one female is interviewed whenever a leadership position is ready to be filled. Pinterest has also supported / dev/color , a non-profit organization that helps Black software engineers grow into industry leaders. Lastly, they set ambitious hiring goals from underrepresented groups for their engineering and non-engineering teams. These efforts show that Pinterest is taking diversity seriously and may be a model for other startups.

The employee demographics in larger tech companies should reflect the demographics of the country, and smaller tech companies should at least reflect the demographics of the city or state in which they are located. Tech companies, large and small, should commit to this goal and be willing to commit the time, people, and financial resources to achieving this goal. If startups commit to this goal early in their development they would build diversity into the fabric of their companies, and their recruiters would already have developed the skills, strategies, and networks required to create a diverse workforce. This would require less of a fire drill to diversify your workforce once your company has greatly grown in size.

Startups are filled with young, progressive minds. This environment may be the perfect incubator for social change. Increasing the opportunities for Black professionals in startups is a great way to help close the wealth gap between Black and White families. This gap was created by the generational effects of colonialism, slavery, and systemic racism. Closing it would create a more egalitarian and just society for all of America’s citizens.

References

1 Thomas Shapiro, Tatjana Meschede, Sam Osoro The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide, Institute of Assets and Social Policy, 2013

James O. Tabron III is an experienced cyber security professional who specializes in Governance, Risk, and Compliance. He is passionate about creating awareness about the issues that marginalized groups face in society as well as finding solutions to the diversity and inclusion issues facing the technology sector.