The startup ecosystem should be accessible to everyone, but for the entrepreneurs who don’t look like the average founder — white, heterosexual, male — joining the startup ecosystem has always had its challenges. And a recent court ruling — blocking a venture fund from operating a grant program for Black women business owners — stands to make life even harder for underrepresented founders. U.S. policy should make it easier for all founders to access the resources and support they need. That starts with opportunities to access capital like the grant program, but, as Engine explores in a new report, it includes so much more.
Innovative ideas and an entrepreneurial spirit are not confined to a specific region or demographic. Yet, while the potential to launch a startup exists for anyone with an idea and determination, the accessibility of resources to foster startup growth remains unequal. At Engine, a nonprofit dedicated to startup advocacy, we emphasize this reality by spotlighting founders from diverse backgrounds across the nation. Our Innovation for All report, supported by the Ewing Marion Kauffman Foundation, seeks to delve deeper into these disparities within the startup ecosystem.
The hundreds of founders we talked to repeatedly told us how hard it is — from capital access barriers, to limited networks, to hiring challenges — reminding us, “[i]f we can’t get access to the capital, the people who are deploying the capital, or the networks that they have…then we’re starting from behind.” That being an underrepresented founder, whether you’re a mother, a person of color, an immigrant, or located far from a traditional tech hub, often means more doors are closed than open. With attacks on the few remaining sources of funding that exist to lift their communities, the already narrow path to progress risks being cut off entirely.
We know it’s not because underrepresented founders aren’t successful — women founders outperform their male counterparts in terms of average revenue, job growth, and return on investment. They do that while raising less than 1.9% of venture capital, often while raising families — a responsibility that they still predominantly shoulder. Black women, despite navigating limited access to bank loans and the highest average student loan burden, are the fastest-growing demographic of entrepreneurs. LGBTQ+ founders, despite receiving just a small fraction of startup funding, create more jobs and have more successful exits on average than their non-LGBTQ+ counterparts.
This failure to ensure that diverse groups have equitable opportunities to innovate is shortchanging us all. When we exclude these groups, we miss out on a wealth of untapped potential. Diverse teams are known to produce more, and often better, innovation that addresses a broader range of needs, reaching more markets. Ensuring equitable opportunities for these groups is a strategic advantage that can propel us all forward, and policymakers have a crucial role to play.
To start, we need better data about what the startup ecosystem looks like — who and where are startup founders, what capital are they accessing, what roadblocks are they hitting, what government programs exist and are they working?
We need diversity among all decision-makers involved in the startup ecosystem — from the SBA officers in charge of awarding grants, to venture capitalists, and angel investors. And existing government resources and funds should be directed to underserved founders who need it most. This includes easing application barriers for federal loans and grants and providing feedback on unsuccessful applications, so founders who cannot hire grant writers have a better chance of success the next time around.
Critically, we need more diverse investors, because investors are more likely to fund founders who look like them. One way to start is by expanding the accredited investor definition so that more women and more people of color can invest in the startup ecosystem and build generational wealth. And policy can address broader systemic issues, such as a broken immigration system and a widespread lack of childcare support, which also create barriers for underrepresented founders.
To fully realize the potential of our startup ecosystem, we must dismantle the barriers that hinder underrepresented founders and ensure that entrepreneurship truly reflects the diversity of our society. Innovation can and should be accessible to all.
