Dear President Obama: Don’t Be a VC (At Least Not How Silicon Valley Defines It)
Dear President Obama,
According to the press, Silicon Valley is “salivating” at the prospect of you becoming a VC.
As you told Bloomberg News last week, “The conversations I have with Silicon Valley and with venture capital pull together my interests in science and organization in a way I find really satisfying.”
I’m sure you could do very well following in the footsteps of Al Gore and Condoleezza Rice, joining a Sand Hill Road Silicon Valley firm. But — and I say this as someone who runs a venture capital firm — you can do so much better than VC, at least the way we do things today.
As President, you’ve always promoted a message that everyone can relate to. It’s a reason why you’ve earned more votes than any other President in history; and a reason why your approval ratings are higher than any other outgoing President in recent history. When you speak and build coalitions, people feel like you are speaking to them. I think you’d be amazing at building a coalition of people who back entrepreneurs, but I’d encourage you to approach VC a little differently than many firms do today.
Silicon Valley is the best entrepreneurial ecosystem in the world — and I was at the Global Entrepreneurship Summit last week when hundreds of entrepreneurs from around the world cheered wildly as you spoke. But Silicon Valley-style venture capital doesn’t work for everyone. 78% of startup investment in the US goes to just three states; less than 5% goes to women; less than 1% goes to people of color. There are inherent and systematic biases, even if unconscious, in Silicon Valley against most of the rest of the country, not to mention the rest of the world. To provide a snapshot: at a conference last year, Paul Graham, founder of Y Combinator, offered a moment of sincere self-awareness (and self-criticism of Silicon Valley) when he said, “I can be tricked by anyone who looks like Mark Zuckerberg.”
We’ve seen the outcome of Silicon Valley-style venture capital: we’re investing in perks for the well off, rather than solving the big problems that plague society. As I’ve written before, in 2015 TechCrunch recognized the following companies as their “startups of the year”: an app that helps you book high-end hotels on-demand; a website that helps you buy high-end mattresses at a lower cost; an app that lets college students communicate with each other more effectively; and an Uber-for-marijuana-delivery. Collectively, these four startups have raised $225 million to fuel their growth. (Kim Kardashian won a fifth award, but we couldn’t find out how much had been invested in her app.)
If you do enter venture capital, Mr. President, I would encourage you to use as few other startups as your model — each of which you’ve expressed admiration for in the past. Student Loan Genius, a startup in Austin, Texas, is helping Americans pay down $1.2 trillion in student debt; you met their founder Tony Aguilar at the White House last year. Partpic, a company founded by Jewel Burks, is revolutionizing manufacturing and repair in the country; you oozed amazement over their good work. Kickboard, is enabling teachers in underperforming schools to close the achievement gap through better use of data; you called founder Jen Medbery a “Champion of Change” in 2011. M-Kopa, which has helped 500,000 families off-grid in East Africa to afford solar home energy systems cheaper than kerosene; you toured their site in Kenya last year.
Student Loan Genius is one of Texas’ fastest-growing startups; Kickboard has raised more money than any other Louisiana startup in the last 30 years; M-Kopa is the fastest-growing company in Kenya; and Partpic founder Jewel Burks is one of only 11 African-American female CEOs to raise more than $1 million. Yet the venture capital world doesn’t value these companies like you do. Collectively, these four companies have raised less than $40 million — one-fifth the resources of the first four (even if we don’t count Kim Kardashian).
If you enter VC, you should approach the task of encouraging innovators in the same way that you’ve approached so much of your presidency — by bringing new voices and new perspectives into the conversation. If you set up your own vehicle and strategy, I’d recommend you consider a few things:
1) Consider making sure the entrepreneurs you back are solving problems that matter in society. You shouldn’t be interested in perks for the well-off — we have enough capital in society going to that. I’m interested in things like health, education, and financial services that provide opportunities for wealth-building and better jobs for people who don’t have them. I’m also interested in science and technology that helps us make better use of the limited natural resources that we have in society, such as water, energy, and agriculture. I’d consider saying, “Don’t just pitch me an flashy solution looking for a problem — pitch me a real solution to a real problem that people face every day.”
2) Consider prioritizing support for who feel left out of the mainstream innovation economy. Returning veterans, people in “flyover country,” people of color, women, rural entrepreneurs, and re-entering members of society all operate within venture capital’s blindspot, causing Silicon Valley to overlook them. As you said at the 2015 Global Entrepreneurship Summit in Kenya, talking about the role of women in the economy, “it’s stupid” to leave half the economy off the playing field. This is not only unfortunate; it’s bad business. Fortunately, you’re already working with a range of investors who are thinking differently; last summer, for example, you highlighted the “Rise of the Rest” initiative launched by Steve Case, one of your Presidential Ambassadors for Global Entrepreneurship. As a VC, you should say to the overlooked entrepreneurs, “I’m here to back you — it will be good for you, good for society, and good for me as an investor who values the power of lived experience.”
3) I’d consider, if I were you, playing to your strengths and experience in government to help you partner with startups solving issues related to the public good — a process that is essential for a fairer and more prosperous society. The free market needs policy engagement as much as government needs the free market to thrive. If I were you, I’d consider something to the effect of “I’m not interested in inventing new cities — I’m interested in making cities better. I don’t want to “disrupt healthcare” — I want technologies that work well with ingrained systems that make everyday folks healthier.”
The good news, Mr. President: if you do want to pursue a career in venture capital, there are thousands of entrepreneurs out there who want to make society better, who are overlooked by mainstream VC, and who represent great investments for society (and good value-for-money as a pragmatic venture investor, too.) You’ve got an amazing opportunity to re-define what venture capital — and the 21st-century innovation economy — will look like. And just like any of your campaigns, there’s an army of folks out there eager to help.