Recognizing Racial Inequity in Entrepreneurship
At Moonshots Capital our thesis has always been that “We invest in extraordinary leadership,” and we are known as military veteran investors who frequently back founders from the military community. This focus has opened our aperture beyond typical pools of startup talent. We are proud that 35% of our 14 Fund 1 companies have military veterans on the founding team, 36% have a Latinx founder, and 21% have at least one founder who is a woman. But we have only funded one Black founder.
The typical response to these kinds of numbers in this industry is to either ignore them, or to assert that in a competitive landscape talent naturally rises to the top. Unfortunately, it requires no small amount of indifference and delusion to believe that we are part of a truly meritocratic system.
It is hard to imagine a field of endeavor where the effects of systemic racism are more apparent. Founding a successful company requires great leadership, but it also requires an immense amount of social and financial capital. Founders who come from secure financial positions (often with the aid of family) are more apt to take the financial risks that startup life requires. [1] Similarly, the social capital that derives from attending elite schools plays a key role in almost every aspect of the startup journey, from finding mentors and angels to partnering with co-founders and advisers. Yet we are barely a generation away from the overt exclusion of minorities from elite schools and we continue to live in a system where a parent’s wealth and legacy can offer white children key advantages in attending elite institutions.[2]
In this respect the military has made great strides in leveling the playing field, but even it has often fallen short. Our grandparent’s generation benefited greatly from the post-World War II GI Bill and established strong financial bases from which to empower their children to go even further. Unfortunately, Black veterans were often denied these benefits, leaving them and their children at a disadvantage.[3] Similarly, as graduates of West Point, we naturally associate with other graduates of the military academies. And while we are immensely proud of the diversity and vibrance of our alma mater, we know that the subset of graduates from these institutions that gravitates to entrepreneurship is still overwhelmingly white.
Over the past couple of weeks, we have been assessing how we can improve our own leadership and actions with respect to diversity and inclusion. We plan to do so by working more closely with accelerators focused on diversity, like Divinc and Backstage Capital. We will double down on the pledges we signed in 2019 — The Startup Diversity and Inclusion Pledge in Austin and PledgeLA in Los Angeles. We will be more active in mentoring Black founders 1–1 and through events in our cities, like the Black in Tech Summit hosted by the Capital Factory in Austin.
Please help us along the way with your own feedback. We invest in “coachable” founders so we try to be equally “coachable” in areas where we can improve. Please send us early-stage companies led by Black founders that you think we should see. We stand in solidarity with the Black community and will endeavor to listen, educate ourselves, and amplify Black voices in our community. There are many opportunities for us to be more supportive of Black founders and we will make these efforts a core part of our mission.
We wanted to post these thoughts today, Juneteenth, to honor the day — June 19, 1865 — that signaled the end of the first chapter in America’s relationship with race. While a major event, it was only one step in the long and ongoing struggle for Black equality. This struggle, like the holiday, has too often been ignored by those of us in positions of privilege and wealth. So while we know we are just one fund, we also know we have a role to play in building a more inclusive, and therefore better, America.
By Dr. Craig Cummings, Co-Founder and General Partner of Moonshots Capital, and Dr. Jason Dempsey, Chief of Military Veteran Research for Moonshots Capital
[1] The net worth of white families is nearly ten times that of Black families, an outgrowth of discriminatory policies that have reinforced inequality across generations.https://www.brookings.edu/blog/upfront/2020/02/27/examining-the-black-white-wealth-gap/
[2] As an example, of the 43% of white students who attend Harvard as a legacy, athlete, or child of a major donor, 75% of those would not otherwise qualify for admission. In other words, one out of three white students received preferential treatment in the admissions process. https://www.nbcnews.com/news/us-news/study-harvard-finds-43-percent-white-students-are-legacy-athletes-n1060361
[3] See Ira Katznelson, When Affirmative Action Was White: An Untold History of Racial Inequality in Twentieth-Century America. W.W. Norton & Company, New York. 2005.
