《麦肯锡:被低估的创业者-未开发的机会(2023)(英文版)(25页).pdf》由会员分享,可在线阅读,更多相关《麦肯锡:被低估的创业者-未开发的机会(2023)(英文版)(25页).pdf(25页珍藏版)》请在三个皮匠报告上搜索。
1、ReportUnderestimated start-up founders:The untapped opportunity This report is a collaborative effort by Vasanth Ganesan,Ramya Mahalingam,Anil Nathan,Audrey Ware,and Allen Weinberg,representing views from Leap by McKinsey.June 2023Unlocking more funding for underrepresented start-up founders present
2、s a profound opportunity for accelerating innovation and stimulating economic growth in the United States.Despite prevailing societal inequities in the US start-up ecosystem,there is tremendous potential to turn the tide.In 2022,only 1 percent,1.5 percent,and 1.9 percent of total venture-capital fun
3、ding went to Black,Latino,and Women founders respectively.This discrepancy persists throughout various stages of start-up growth.Undervalued and underestimated,these founderswhen given a level playing fielddemonstrate the capacity to outperform their peers.Our research suggests that achieving parity
4、 could yield trillions more dollars in revenue for Black-and Latino-owned businesses,creating jobs and stimulating the economy.Additionally,founders with diverse gender and ethnic backgrounds deliver 30 percent higher returns for investors upon exit than their peers.What is holding underrepresented
5、founders back?Our research indicates that there are four key challenges that disproportionately affect them(see sidebar“Methodology”):Systemic limited access to start-up networks,community support,and resources The need to overcome biases related to founder perception A limited established blueprint
6、 for success A greater need for mental health resilienceAddressing these hurdles is both a necessity for social equity and a valuable economic opportunity.All stakeholders,from individual investors to government entities,stand to gain from the outperformance of diverse portfolios and the untapped po
7、tential of underserved markets.We thus propose the following four actions that could help level the playing field:1.Intentionally hire and promote women and BIPOC individuals as investors2.Increase the flow of cash and capital investments that go to women and BIPOC checkwriters and founders3.Leverag
8、e non-monetary strengths to level the playing field for women and BIPOC founders and investors4.Develop and implement standardized metrics to drive accountability and transparency across these three solutionsActing now could result in immense strides toward social equity,increased innovation,and eco
9、nomic gains.As has been demonstrated by initiatives such as McKinseys“Next 1B”,“InNYC”,and“InLA”programs,when the right resources are directed toward these underserved communities,the rewards can be enormous.Theres a massive untapped potential waiting to be unleashed,and every step toward breaking t
10、hese barriers is a stride toward a more innovative,equitable,and prosperous economy.Executive summary MethodologyFor this report we conducted more than 50 in-depth interviews with underrepresented founders and players in the start-up ecosystem,including venture capitalists,limited partners(LPs),and
11、accelerators.We supplemented these interviews with a survey of more than 160 founders,including 80 women and 88 BIPOC,and quantitative analyses based on Chrunchbases comprehensive datasets on start-ups in the United States.Pervasive societal inequity in the United States is strikingly evident in the
12、 start-up world.In 2022,Black and Latino founders received only 1 percent and 1.5 percent respectively of total US venture-capital(VC)funding.Women-founded teams received 1.9 percent of VC funds,and only 0.1 percent of VC funds went to Black and Latino women founders.The recent decline in US venture
13、-capital(VC)funding has exacerbated the gap.From 2021 to 2022,funding to underrepresented founders has significantly decreasedby a startling 36 percent for Black founders and 21 percent for women founders.Its a gap that persists through each stage of growth.An analysis of funding available for the h
14、ighest-funded start-ups at the time of exit reveals that the average White male founder received over$210 million,while the average underrepresented founder received a mere 43 percent of that$91.1 million(Exhibit 1).The gap starts at the beginning of the journey;most venture-backed start-up team mem
15、bers identify as male,and most 1 Throughout this report,the authors generally use Latino to refer to populations from Latin America.Hispanic is used where founders identify as Hispanic or where research specifically refers to Hispanic people.2 Figures for the representative portion of allocated VC f
16、unding for Latino founders and Black and Latino women founders in 2022 are reflective of CrunchBase data for the months January through the end of October 2022;Dominic-Madori Davis,“Latin American founders see VC funding drop as investors retreat from underrepresented cohorts,”TechCrunch+,October 28
17、,2022;Dominic-Madori Davis,“Black founders still raised just 1%of all VC funds in 2022,”TechCrunch+,January 6,2023.3 Dominic-Madori Davis,“The highs and lows of Q3 venture capital data for women startup founders,”TechCrunch+,October 14,2022;Dominic-Madori Davis,“Women-founded startups raised 1.9%of
18、all VC funds in 2022,a drop from 2021,”TechCrunch+,January 18,2022.4 Dominic-Madori Davis,“Black founders still raised just 1%of all VC funds in 2022,”TechCrunch+,January 6,2023;Dominic-Madori Davis,“Women-founded startups raised 1.9%of all VC funds in 2022,a drop from 2021,”TechCrunch+,January 18,2
19、022;State of Venture Report,CB Insights,January 11,2023.Note:The 2022 decline in VC funding is the culmination of a variety of factors including recent economic conditions(cost-cutting pressures)and 2021 VC historic funding highs(pent-up demand,low interest rates).5 For the purposes of our analysis,
20、we restricted our view to include BIPOC and women founders,for which data was more extensive.We identified this set of founders using the Diversity Spotlight data on Crunchbase.To sample the population of top US-based start-ups,we pulled two sets of up to 1,000 of the highest-funded start-ups in eac
21、h stage,one for capital-intensive industries and non-capital-intensive industries.Our view of capital-intensive industries are those that require higher average costs to enter,including,but not limited to:healthcare,manufacturing,sustainability,and energy.Non capital-intensive industries are those t
22、hat require lower entry costs,including,but not limited to:software,professional services,education,and sales and marketing.The Diversity Spotlight data identified any company that was reported to be founded by racial and ethnic minorities or women,but do not provide the ability to examine the inter
23、sections of these identities.All identifications in this data are self-reported by companies to Crunchbase.All statements about a specific affinity may have some overlap with separate groups.6 Diversity in U.S.startups 2020 edition,RateMyInvestor,2020.7 Throughout this report,the phrase“women and/or
24、 BIPOC founders”is not mutually exclusive in its meaning and includes BIPOC women founders.The authors also aim to be as specific as possible regarding the groups of people mentioned.Where a source explicitly refers to BIPOC or where a phenomenon or reality extends to all or most Black,Indigenous,Pe
25、ople of Color,the authors use BIPOC.8“Knight diversity of asset managers research series:Industry,”Knight Foundation,December 7,2021.9 The equity record:2022 edition,Diversity VC,2022.More access to funding for underrepresented start-up founders in the United States can unlock massive investment and
26、 innovation opportunities.This group is not just underrepresentedthey are underestimated in their ability to drive innovation and growth.founders who receive VC funding are White.(This dynamic extends to other forms of investing,as can be seen in McKinseys The state of diversity in global private ma
27、rkets:2022.)It then widens.At every stage of growth,there are fewer underrepresented founders who disproportionately receive less funding.The same analysis reveals that start-ups with at least one woman or BIPOC(Black,Indigenous,People of color)founder account for 20 percent of all start-ups in pre-
28、seed stage(receiving 18.4 percent of total funding),which reduces to 9 percent by exit(receiving less than 5 percent of the total funding).Black-and Latino-founded start-ups represent 6 percent of those in pre-seed,yet only account for 1 percent upon exit.Its also a gap on both sides of the tableonl
29、y 1.4 percent of the$82 trillion in US assets under management(AUM)is managed by women or BIPOC managers(as of 2021).In general,funds that flow from asset managers match their demographics;for example,in 2022,less than 2 percent of venture AUM were explicitly dedicated to underrepresented groups,inc
30、luding women and BIPOC founders,to help close this gap.9Underestimated start-up founders:The untapped opportunity3Underestimated start-up founders:The untapped opportunityAverage funding received across funding stages,$million1For information on the data set,see footnote 5.Here,share of funding rece
31、ived by underrepresented founders was taken as a percentage of the sum of total funding amounts across all companies in a given funding stage.Note that BIPOC founded companies were few in Series C+but were skewed by approximately six companies collecting over$1 billion in total funding,far and away
32、exceeding peers.less funding than their White male counterparts,particularly at exit.McKinsey&CompanyPre-seed1.71.612.438.5Average total funding receivedby White men foundersAverge total funding receivedby underrepresented founders89244.5250.2210.4$119.3million91.1diference inexit funding77.323.98.5
33、SeedSeries ASeries BSeries C+Exit(M&A,privateequity,or IPO)Total funding received across funding stages,%Pre-seedSeedSeries ASeries BSeries C+Exit(M&A,privateequity,or IPO)81.686.389.482.983.495.418.413.710.617.116.64.6White menWomenUnder-representeddemographicgroupsBlackLatinoAsian13.8%diference in
34、pre-seed vsexit fundingUnderrepresented founders from the top-funded start-ups typically receive less funding than their White male counterparts,particularly at exit.Exhibit 14Underestimated start-up founders:The untapped opportunityUnderestimated start-up founders:The untapped opportunityClosing th
35、is gap is not just the right thing to doit is also key to driving innovation and unlocking economic gains.Our research into the economic state of Latinos and Black Americans suggests that in a parity scenario,Black-and Latino-owned businesses would generate an additional$1.6 trillion and$2.3 trillio
36、n respectively,assuming Black-and Latino-owned business ownership matched their share of the population and their business revenues matched those of their peers.10 Our Black and Latino economic mobility research suggests that investors can tap into unmet Black and Latino consumer demand of$300 billi
37、on and$660 billion respectivelya theme that permeates markets like the care economy,which totaled$648 billion in 2019 across underserved areas such as infant and child care,household management,aging-in-place and home-based care,and non-home long-term care.12 Beyond the larger macroeconomic gains,re
38、search also shows that founders with greater gender and ethnic diversity achieve 30 percent higher returns for investors upon exit than their White men founder counterparts.13 Underrepresented founders often create companies(such as Spanx,23andMe,and Fenty Beauty)that have the potential to outperfor
39、m their peers,and tap into underserved markets.One institutional investor interviewed for this research seeks out underrepresented founders because of this exact ability to outperform and deliver innovative solutions for underserved markets.Untapped innovation and investment opportunitiesThere is an
40、 additional economic boost to be gained by tapping into underserved markets;people who identify as Asian-American,Black,Hispanic,and Native American hold$3.9 trillion in buying power,representing over one-fourth of all US buying power.11 10 The methodology for calculating the parity scenario for Bla
41、ck-owned businesses assumes a revenue match to the average industry peer.The parity scenario for Latino-owned businesses assumes a revenue match to the average of non-Latino,White-owned businesses.11 The University of Georgia determined buying power as total income after taxes;Alexia Ridley“Minority
42、 markets have$3.9 trillion buying power,”University of Georgia,March 28,2019.12“Welcome to the$648 billion care economy,”The Holding Co.and Pivotal Ventures,2021.13“Deconstructing the pipeline myth and the case for more diverse fund managers,”Kauffman Fellows,February 4,2020.We invest in founders wi
43、th varying ethnic backgrounds and lived experiences.Theyve overcome unique challenges to get where they are.It makes the tech more relevant and resilient.and helps them outperformthey better understand their markets and that increases customer stickiness.Venture capitalist5Underestimated start-up fo
44、unders:The untapped opportunity 14 Our qualitative research has informed our perspective throughout this report,including in places where we do not include citations.Note:Phenomenological research is a qualitative research approach that seeks to understand and describe the universal essence of a phe
45、nomenon.The approach investigates the everyday experiences of human beings while suspending the researchers preconceived assumptions about the phenomenon.This research can take place via interviews where researchers draw conceptual connections between disparate experiences;John W.Creswell and Cheryl
46、 N.Poth,Qualitative inquiry and research design:Choosing among five approaches,Sage Publications,January 25,2017.We heard the stories behind the data,through interviews with over 50 founders and other stakeholders within the start-up ecosystem(including VC funds,limited partners(LPs),and accelerator
47、s).14 And to identify the highest priority areas,we complemented these interviews with a survey of start-up founders in March and April 2023,with 161 total respondentsincluding 80 women and 88 BIPOC.In this report,we unpack our findings through the lens of four major challenges that disproportionate
48、ly affect underrepresented founders.We reflect on how these challenges become significant headwinds at critical points along the start-up journey.And finally,we put forward four core actions that stakeholders across the start-up ecosystem can take to uplift inclusive innovation and unlock its full e
49、conomic potential.A final note:As we conducted the research,we started to think about this population as“underestimated,”rather than“underrepresented.”This simple change in language conveys the huge untapped opportunity that women and BIPOC start-up founders are focused on.It emphasizes that the soo
50、ner we take action the better,for all founders,stakeholders,and the economy at large.The numbers speak for themselves.In this research,we set out to highlight the stories behind themto dig into the particular challenges for underrepresented foundersthat have resulted in such a disproportionate gap i
51、n investment opportunities.Black woman founderStarting a company as a Black woman founder is literally like,“Youre working in a corporation in New York City and someone says,Hey you,you get$200,I want you to go start a business,develop a product,get customers,and market the product.Then they put you
52、r counterpart,who happens to be a White man,in the office next to you,ask him to do the same things and give him$10,000.Then after six months,your boss comes back and asks why you dont have enough traction.And it is like that literally every day.6Underestimated start-up founders:The untapped opportu
53、nityThe underrepresented founder experience is littered with challengesAll founders experience roadblocks when creating new,innovative businesses.Underrepresented founders however,through no fault of their own,experience greater hurdles.These challenges tend to fall into four“Big Rock”categories,tha
54、t compound over time and lead to the representation gap in the overall founder population(Exhibit 2).Underrepresented founders face systemic societal biases related to wealth,race and ethnic background,gender,and other visible and invisible characteristics(such as accents,disabilities,age,and diseas
55、es).15 When founders have multiple,intersecting identities that are undervalued by society,the effects are exaggeratedthe Big Rock challenges compound and make it harder for them to move through the founder journey.15 While our research focuses more on the effects of wealth,race and ethnic backgroun
56、d,and gender,we acknowledge the tremendous impact that other visible and invisible characteristics can have on a founders journey.Systemic limited access to start-up network,community support,and resourcesNeed to overcome biases related to founder perceptionLimited established blueprint for successG
57、reater need for mental health resilienceExhibit 2Four“Big Rock”challenges compound for underrepresented founders.7Underestimated start-up founders:The untapped opportunitySystemic limited access to start-up network,community support,and resources In the United States,White families have 13 times the
58、 wealth of Black families and six times that of Hispanic families.16 Many Black and Hispanic founders,therefore,grow up in families that are less wealthy than those of their White peers.This systemic disparity in wealth means they first go to schools with fewer wealthy children,then universities,the
59、n professions,and so on,and ultimately end up with fewer wealthy people in their lives.When they decide to start companies of their own,many have fewer people in their network who they can count on for early friends and family funding,or warm introductions to investors or large customers connections
60、 that can significantly influence a start-ups trajectory.They are also less likely to have personal savings they can use to begin the journey.Our research found that Black and Latino founders were at least twice as likely as their White counterparts to wish they had more financial support from frien
61、ds and family.Underrepresented founders who are immigrants,single parents,or serve as key financial providers for their family or broader community,can also be affected by the wealth gap.Many described how their personal financial circumstances also lead them to give up more equity or favorable term
62、s when negotiating with investors.The old boys club is not about meritocracyEven with advanced degrees and lauded careers,its not easy for underrepresented founders to get their foot in the door.Theyre simply not a part of the old boys cluba well-known term that refers to White,Ivy League-educated m
63、en who dominate the asset management space.As Brad Feld and Jason Mendelson describe in Venture Deals,“Some VCs will fund only entrepreneurs with whom they have a prior connection.Other VCs prefer to be introduced to entrepreneurs by other VCs.Some VCs invest only in seasoned entrepreneurs and avoid
64、 working with first-time entrepreneurs.”17 This means underrepresented founders are disproportionately developing relationships from cold outreach,rather than a warm introduction,which is much less likely to work.Underrepresented founders who have received funding are much more likely to have knocke
65、d on many more doors than their White men counterparts,and yet,they tend to receive less funding.Underrepresented founders are also more likely to receive funding from sources outside of venture capital(such as banks)but are also more likely to say that they did not achieve their desired funding or
66、achieved their desired funding at a lower-than-desired valuation,suggesting that they are getting smaller checks across the board.Mentorship without economic access doesnt close the gapUnderrepresented founders are often tokenized;they are offered a barrage of programs to mentor or support them,but
67、dont provide meaningful support,connections,or long-term contracts.This mentorship without social capital on the line,as one investor pointed out,“is useless.You can mentor me until you turn blue,but if youre not willing to put your social capital at play,its pointless.”To make a difference,inclusio
68、n cant just be seen as a checkbox exercise;those in privileged positions need to become active allies.Founders of color are disproportionately impacted by wealth gaps Founders who are less connected to wealthy communities tend to know fewer people who are willing to use their financial and social ca
69、pital for support.They tend to be less exposed to entrepreneurial,educational,and investor networks,which bring resources that can help their companies grow.16“Wealth inequality in the US by household type,”United States Census Bureau,August 1,2022;Throughout the report we attempt to keep language c
70、onsistent with language used in the sources,if different from our default language.17 Brad Feld and Jason Mendelson,Venture deals:Be smarter than your lawyer and venture capitalist,Third edition,Wiley,2016.Big Rock 18Underestimated start-up founders:The untapped opportunityThis well-researched facet
71、 of human psychology18 negatively affects founders who do not mirror the investors sitting across the table from them(who in North America largely tend to be White men with American accents19).So much of the start-up ecosystem is predicated on“taking a chance”on an individual,and investors areoften
72、subconsciouslymore likely to believe in those who look and act like them.As one underrepresented founder pointed out,“Its not the product-market fit,its the product-market-founder fit.”Unfortunately,this“founder fit”is often an intangible barrier caused by unconscious biases that an underrepresented
73、 founder has to overcome.People trust people who look and act like themWhen underrepresented founders interact with the start-up ecosystem,they face unconscious biases based on their gender,ethnicity,or cultural background.Their outward appearances influence how customers,investors,cofounders,and ot
74、her stakeholders respond,most often in negative ways.Many underrepresented founders have a myriad stories about being doubted by investors on their expertise,dismissed for their naivety,and questioned on their dedication to their company.20 One Latina founder expressed how investors questioned her a
75、bility to collect accurate financials,to such an extent that she had to hire an external auditor.“Some VCs thought I made up the financials.Now Im getting all financials audited.I have to take this extra step because people dont think my financials are real.”Underrepresented founders are more likely
76、 to be questioned on their acumen and dedication to their company than their White man counterparts18 Tamami Nakano and Takuto Yamamoto,“You trust a face like yours,”Nature,July 2,2022;Alex S.Clerke and Erin A.Heery,“The influence of similarity and mimicry on decisions to trust,”Collabra:Psychology,
77、May 11,2021.9 Diversity in US startups 2020 edition,RateMyInvestor,2020.20 Investors tend to ask women founders“prevention-based”questions,which focus on vigilance and security,while they tend to ask men“promotion-based”questions,which focus on hopes and achievementsour qualitative research suggests
78、 that BIPOC founders may experience similar challenges;Dana Kanze et al.,“Male and female entrepreneurs get asked different questions by VCsand it affects how much funding they get,”Harvard Business Review,June 27,2017.Big Rock 2The need to overcome biases related to founder perceptionOne example of
79、 this challenge is in a B2B context.Rather than being offered game-changing,long-term contracts,a number of underrepresented founders described being tokenized as part of a customer initiative to tick a diversity checkbox.One Black woman founder expressed how large companies didnt want to develop a
80、long-term relationship with her:“I get calls for$10,000 or$15,000.People just want to say they are partnered with diverse organizations but dont want to write the same checks.”When developing long-term relationships,unconscious biases continue to play a role.When going to market through a B2B procur
81、ement channel,women founders often describe how customers do not treat them as authority figures.Founders of color need to navigate perceptions around their race and ethnicity.Underrepresented founders also face biases in developing rapport and long-term relationships after an introductionI had two
82、degrees and corporate success;I thought it was going to be different for me.I didnt realize how much of a network I didnt have in the investment space.Black woman founder9Underestimated start-up founders:The untapped opportunityThis tends to bestow a halo of“expertise”upon the founder.For example,an
83、 Indian founder in software or a woman pursuing a beauty start-up align to niches in investors eyes.As one Black woman founder told us,“I have a background in tech and finance,yet people only listen to me when Im talking hair care and beauty care.”However,investors are less likely to believe that th
84、ese“niche markets”come with a significant total addressable market(see Big Rock 3:Limited established blueprint for success).One investor confided,“There are many instances where diverse founders have been told to bring cis,straight,White men into leadership positions because the likelihood of raisi
85、ng capital increases significantly.This is pure discrimination that is particularly present in later stage and growth rounds.”For example,16 percent of women reported that their investors were“mostly women”compared to only 1 percent of men).Consider a Latina founder who said,“I only got closer to a“
86、yes”if there was a Latino or woman investor.I started targeting VCs that were women-owned or diverse.The pedigree and accent mattered less.They could see I was successful and experienced.”Our research shows three conditions that influence investor bias towards underrepresented founders:21 Alice G.Wa
87、lton,“Female CEOs are more likely to be fired than males,study finds,”Forbes,December 1,2018.A founders affinity matches that of the product or target marketOne of the cofounders is a White manA founders gender or ethnic background matches that of the investorThe managerial dynamics described in our
88、 Women in the Workplace 2022 report are similar in a start-up context.The dynamic is exacerbated when there is also a White male cofounderemployees and others in that start-up ecosystem tend to default to the White man as the primary founder,forcing the other cofounder take a backseat.One woman foun
89、der shared that biases“.affected our dynamic.He the White man cofounder became the main sales guy and he felt like he was bringing in all the revenue.I was still the brains Three factors that influence investor biasWhen hiring and managing talent,underrepresented founders continue to fight unconscio
90、us biasesBig Rock 2behind the sales and started doing all the admin work.It strained our relationship and made me feel powerless.”These unconscious biases can even challenge a founders role on the C-suite.A Black woman founder described how a cofounder and investor conspired to replace her as CEOa p
91、henomenon that is particularly common among women founders(see sidebar“Three factors that influence investor bias”).2112310Underestimated start-up founders:The untapped opportunityWhile start-up investors,particularly in VC,are making high-risk,high-growth bets,their decisions are predicated on hist
92、orical pattern matching to decide which companies may be relatively lower risk.This can be a difficult barrier to cross for underrepresented founders,whose ideas,solutions,or business models,by nature of being on the cusp of innovation,dont align with historical precedent.Investors are more likely t
93、o doubt the total addressable market(TAM)for a product or service that they cant relate to.One investor told us that,“Part of the issue is investors understanding the problem that the start-up is trying to solve,when they are not part of that demographic.When a group of women originally pitched the
94、breast pump,they received a lot of pushback because the men investors could not identify with the problem breast pumps were solving.The reaction from men investors was Breastfeeding has been going on for millions of years with no problem,this seems like a want not a need.”An immigrant founder descri
95、bed how some investors struggled to understand the revenue potential of her target market,“I realized that Hispanics were always an afterthought.Innovation and technology were not happening in the Hispanic marketplace,because nobody was paying attention.”This challenge is particularly exacerbated wi
96、th VC investors due to their short-term,high-growth incentives.One Black woman founder told us the story of how her investors pushed her to change her business model change in a way she believed would reduce long-term growth and increase the burden on the underserved market she was addressing.When s
97、he pushed back,they questioned her expertise.Founders should therefore carefully evaluate whether venture funding is the right fit for their idea given the added pressure for outsized returns,and the misalignment of interests between founders and investors that can arise.Investment in underserved ma
98、rkets can sometimes be more about systemic exclusion than economicsInvestors can push underrepresented founders in their portfolio to make choices counter to their mission or visionMy main lender was not bought into the mission.They kept saying,Lets add more fees.Their constant push against the busi
99、ness model was like being married to someone you dont like and doesnt like youpainful.Black woman founderLimited established blueprint for successBig Rock 311Underestimated start-up founders:The untapped opportunityFor those who dont have role models like them or close communities to rely on,it can
100、be a lonely journey.One Black founder told us that he initially struggled to see himself as an entrepreneur.Now that he is one,he feels isolated from both the start-up ecosystem and his own community.“As an African American,I knew I could be an entertainer or an athlete.But my parents never thought
101、I could reach where I am in the business world.My people dont typically make it out.And now that Ive made it,its challenging because my people feel like my success hinders them from having success.Its something that we dont talk about enough.”Underrepresentation creates isolation;representation empo
102、wersIn the face of the first three compounding challenges,underrepresented founders are asked to carry an outsized mental burden that requires dogged perseverance with immense resilience and grit.A woman founder described how challenging it can be when founders dont have access to a close start-up c
103、ommunity to rely on.“It can feel so amorphous.You dont know whats right or left.Its lots of research without human connection.Youre living in your head,and your mom and friends are not always the best ones to go to.Its a lonely place to be.”The journey can feel especially isolating when failure does
104、nt feel like an option.No founder wants to fail,but underrepresented founders are often carrying the burden of success on behalf of their whole community,not just for themselves.Several Black founders in particular,expressed frustration about having to excel while“working twice as hard to get half a
105、s far.”22 One investor described how society places more pressure on underrepresented founders to succeed.A greater need for mental health resilienceBig Rock 422“Report:Women owned start-ups deliver twice as much per dollar invested as those founded by men,”MassChallenge,March 7,2019;Kauffman Fellow
106、s,2020.Throughout their journeys,underrepresented founders develop an incredible resilience through the compounding,systemic inequities they face on a day-to-day basis.One Black man founder told us,“Its hard to find balanceto be a beacon of hope,have family time,run a company,run into roadblocks,and
107、 not give up.There have been times where we put so much on the line;Ive mortgaged my house.As a Black person,youre putting it all on the line.I dont have a safety net.But at the end of the day,Im going to be building someone elses dream or Im going to build my dream.”The grit underrepresented founde
108、rs have developed needs to be celebratedIn the face of statements like,“Is this a real business?”,“Youre just not the CEO for this business”,and,“I just dont understand the product”,underrepresented founders consistently stand up to a barrage of non-inclusive behaviors and microaggressions.They deve
109、lop an incredible resilience;as explained by one investor who seeks to invest in these founders specifically because of their grit:“Theyve gone through a lot more to achieve the same level as White men founders.We find that they have even more tenacity because theyve had to work so hard to get there
110、.”12Underestimated start-up founders:The untapped opportunityThrough our research,we identified six inflection points that,due to compounding Big Rock challenges,have a significant impact on the underrepresented founders journey(Exhibit 3).At each inflection point,more underrepresented founders drop
111、 out of the journey(again,through no fault of their own),leading to the gap in representation with their White male counterparts.A founders journey:Six significant inflection pointsNote:This is not an exhaustive list of reasons;it is rather meant to paint a picture of why the gap in representation i
112、s what it is.It represents key points in the journey but is also not a formula;there is no one-size-fits-all approach to starting and scaling a company.Exhibit 3 All founders are likely to encounter six inflection points along the start-up journey.start-up journey.McKinsey&CompanyPhaseBlueprintingan
113、d buildingPre-seedDeciding to launchthe companyOvercoming lackof communityand psychologicaland fnancialsafety netSearching forproduct/market ftSeedAchieved product/market ftSeries AHyper-scalinggrowthSeries B+Exiting thearenaExitFundingstage“Make-or-break”pointHiring thefrst teamHiring properteams t
114、o build theofering and runthe day-to-day,aligning ondirectionGaining earlycustomer tractionAcquiringcustomersto lengthen therunway and provevalue toother companiesSecuring the nextcapital fusionReceiving thenext capitalinfusion to enableexpansion,hireright skillsets,pay yourselfEvolving theoperating
115、 modelScalling to ensurerunway for futuregrowth andprocessesfor scaleGettingthe frst checkReceiving fundsto build the MVP,hire talent,provevalue for futureinvestorsBig Rock challenges1 Systemic limited access to start-up network,community support,and resources2 Need to overcome biases related to fou
116、nder perception3 Limited established blueprint for success4 Greater need for mental health resilience13Underestimated start-up founders:The untapped opportunityInflection Point 1 Deciding to launch the company“I couldnt leave my job because I needed capital for a security net.My start-up was my five
117、-to-nine job while I was working my nine to five.”“As an immigrant,you dont have your family or financial support.It can be challenging to take that leap because you are thinking about your immigration situation.”Launching is often significantly more complex and difficult for underrepresented entrep
118、reneurs than for their White men counterparts.“Starting a business is what those risk-seeking people do.Im a single mom with a child.”Fewer role models and community to support taking on riskBig Rock 4:A greater need for mental health resilienceBig Rock 1:Systemic limited access to start-up network,
119、community support,and resourcesLess of a safety netBig Rock 2:The need to overcome biases related to founder perceptionInflection Point 2 Getting the first check Getting the first investment is a make-or-break point for any start-up.It is the runway for future growth and provides a halo of validatio
120、n.It can also come with resources and community for founders.“I dont have a network to tap into.Im African American,my family comes to me when they need money.”“Understanding the fundraising process has been challenging.I dont have anyone in my network who has both the knowledge I need to navigate t
121、his properly and is able and willing to take the time to provide the insight.Whats also frustrating is that the organizations Ive joined,which should be able to provide this insight,dont actively share the kind resources that would help folks like me.In short,theres some gatekeeping of information.”
122、Making do with less of a network“Investors perceived me as a mom-preneur and that impacted how they viewed my market potential.I would get coded comments like,We couldnt tell if this was a lifestyle business or a scalable business.”“Ive learned that I have to brag.I have to do the song and dance:I w
123、ent to Harvard.I have to start by saying were revenue-generating.and I still get push-back.”Selling investors on product-market-founder fitBig Rock 3:Limited established blueprint for success“Ive been in the Hispanic industry for almost 15 years.I wasnt expecting to have such a hard time convincing
124、investors of the market value.You have to be patient and educate themI had metrics and even showed numbers including census data.but many investors still did not understand the opportunity.”Selling investors on the target market“Fundraising was exhausting.People left in the middle of my pitches.Duri
125、ng the process,I felt like an outsider.After 100+pitches,I was overwhelmingly struck by the monoculture of the capital marketsI only pitched to one woman and one person of color(a Chinese man)through our entire process.”Staying resilient through the initial fundraising journeyBig Rock 1:Systemic lim
126、ited access to start-up network,community support,and resourcesBig Rock 4:A greater need for mental health resilienceI had learned to adapt my language on the phone to appear White,but when it came to being in person,I would pray before walking in the room to make sure I would receive the same react
127、ion as I did on the phone.Black woman founder1414Underestimated start-up founders:The untapped opportunityInflection Point 4 Getting initial customer traction Getting traction with initial customers is vitalit signals market fit and paves the way to more funding.“I worked hard to not get pigeon-hole
128、d as a woman.I want that diversity role,but I can help in other areas.I started to think maybe I am niche.But I dont want to be a niche;I just want to be known as being good at what I do.”“Another founder told me that as a Black woman,the only way I was going to secure large clients was to hire a Wh
129、ite guy to be a figurehead in the company and give him equity to show up to Sales meetings.This is certainly a tactic other Black founders have resorted to.It is a tragic parallel to trying to buy a house as a Black couple in the 1960s.”Dealing with tokenism,microaggressions,and other bias from cust
130、omers“We had limited funds,so we focused on building a great product that was better than competitors,but we didnt have enough money to both build a product and market it.Every white male investor I talked to told me that my market did not exist,and within two years,that same contingent poured milli
131、ons of dollars into funding a group of White guys in the same space.Since I couldnt compete with their war chest in the B2C space,I switched to B2B,and only started to gain investor interest following the murder of George Floyd.Of course,their war chest has now followed me into the B2B space.Being a
132、 Black Founder feels like being a Motown artist in the 60syou innovate with no money,and others take your sound,pour money around marketing it,and cash in.Its systemic and happens to many Black founders I know.”Less of a customer network to build tractionInflection Point 3 Hiring the first teamFindi
133、ng the right talent can have a major influence on the direction and success of the business.Many underrepresented founders told us variations of,“Im a Black/woman/LGBTQ+founder.I dont come across as Elon Musk.People arent always excited about working with me.”Hiring despite not fitting the founder“m
134、old”“They started three years after us,but a VC gave them over$2 million from day one.With those kinds of funds,you can hire smart people in specific disciplines,a head of marketing,product head,press person,basically a whole team,and quickly slap up a website.But I was sitting alone in a coffee sho
135、p trying to figure it all out on my own.”More limited capital and network to hire teams and pay for top talentBig Rock 1:Systemic limited access to start-up network,community support,and resourcesBig Rock 2:The need to overcome biases related to founder perceptionBig Rock 2:The need to overcome bias
136、es related to founder perceptionBig Rock 1:Systemic limited access to start-up network,community support,and resources15Underestimated start-up founders:The untapped opportunityInflection Point 6 Evolving the operation modelWhen the operating model evolves to promote growth that is directionally ali
137、gned to the mission,companies can achieve a longer runway,greater valuations,and a more successful exit position.Big Rock 4Pressure to change the vision or mission“A specific food trend was really big at the time and our investors thought it had a lot of growth potential,but didnt really fit with ou
138、r brand which was based on a family recipe.We literally had to sell our identity because of the economics of how the VC funding model works.It prioritizes short-term growth over everything else.”“Its been a huge burden on my psyche to go through this journey as a founder,to be in different sets of c
139、ommunities,to not always have support,and to have to code-switch;its really taxing.”Resilience and grit to the finish line“The acquiring company decided that they only wanted me and not the team.They thought it would give them a diversity halo,but I dont think that is a real thing and even if it wer
140、e,I dont think it can be acquired.I was surprised at how much that mattered.”Inflection Point 5 Getting the next This capital infusion is essential for founders to be able to expand their runway and scale.It enables them to bring on the right talent,establish more robust internal processes and tools
141、,and access cash flows necessary for larger customer contracts and marketing efforts.Its also often the first time founders begin to pay themselves.Big Rock 3“Underrepresented founders tend to undervalue themselves or under-raise.Its related to imposter syndrome and knowledge gaps.They may raise les
142、s,give up too much equity,or struggle to close with big customers because they dont have the cash.It can limit the runway and cut off their arm for future rounds.”“My series-C valuation was low.I wish that someone in previous rounds had told me that you can be valuated higher.”Difficulty bridging th
143、e funding gap and finding trustworthy mentors to provide guidance“I had received government grants and funds from impact investors.But when it came to taking it to full commercial level,it was hard to excite US investors about our metrics because they were hesitant about investing in Africa.European
144、 investors could more easily de-couple the mission from the economic viability.”Challenges in proving traction with large-scale investorsBig Rock 1:Systemic limited access to start-up network,community support,and resourcesBig Rock 3:Limited established blueprint for success Big Rock 3:Limited estab
145、lished blueprint for success Big Rock 4:A greater need for mental health resilienceAs a White male founder,you are empowered to fail;it is celebrated.But as an underrepresented founder,you dont have that same mindset.These societal norms tell you that if you fail,you failed and its your fault.not th
146、at you couldnt fundraise,or the market wasnt ready.Venture capitalist16Underestimated start-up founders:The untapped opportunityIts clear that investing time,money,and resources into underrepresented founders is both a crucial step in social equity and an economic imperative.The stakes for investors
147、 are highoutsized returns(particularly in the near term),increased company profit,and greater innovation for customers and consumers in underserved markets.Stakeholders who figure out how to effectively act now stand to gain by leaps and bounds.We identified four actions that stakeholders can take n
148、ow to move the needle(Exhibit 4).Please note that this list is not meant to be exhaustive.Intentionally hire and promote women and BIPOC individuals as investorsIncrease the flow of cash and capital investments that benefit women and BIPOC founders and investorsDeploy networks,industry knowledge,and
149、 customer relationships to benefit women and BIPOC founders and investorsDevelop and transparently track standardized DEI metrics to drive accountability across three solution areasFour key actions for stakeholders1234While these actions sound simple,only a select number of organizations have made a
150、 focused effort to date(for example,Harlem Capital,the 22 Fund,Kapor Capital).Incumbent market leadersparticularly investors with LP roles or who invest directly in foundersalso stand to gain.The first three actions in Exhibit 4 are somewhat linearachieving more investor diversity level lays the fou
151、ndation for an increased diversity in investments,which in turn creates more opportunities for White men and other leaders to deploy their social capital.Transparently tracking metrics and progress throughout the whole process creates accountability and can help stakeholders know where to focus thei
152、r efforts.Several types of investors stand to gain from the outperformance of gender and ethnically diverse portfoliosindividual investors,companies,investing institutions,and government actors.Success will look different for each type of investor.For companies,building programs to bring innovative
153、offerings can deliver value to current and new customers as well as employees.Government actors can stimulate entrepreneurship,and drive wealth creation and employment for women and ethnically diverse citizens.Individual investors and institutions stand to benefit from the outperformance of underrep
154、resented founders and the potential of underserved markets.For each of these key actions,we provide examples of what is working,opportunities for improvement,and questions stakeholders can ask themselves to reflect on their organizations progress.23 For further information,please see company website
155、sharlem.capital;.Exhibit 4 Four key levers can move the needle for underrepresented founders.17Underestimated start-up founders:The untapped opportunityResearch shows that a more diverse pool of checkwriters naturally leads to a more diverse portfolio.24 The current ecosystem,in which AUM is heavily
156、 concentrated in the hands of White men checkwriters,requires an intentional shift in hiring and promotion practices to accelerate the representation of women and BIPOC checkwriters.Many investors and other entities are making progress at the checkwriter level:Limited partners are intentionally hiri
157、ng or promoting BIPOC and women as capital allocators to help increase capital investment diversity.Seattle Foundation,for instance,seeks to maximize returns and maintain standards of fiduciary care while increasing the gender and ethnic diversity of its active investment managers.The foundation sta
158、tes,“We are dedicated to appointing the best possible managers,with proven track records,while ensuring no one is excluded due to implicit biases.”25Newly-minted organizations are democratizing the LP process to include socioeconomically-and gender-diverse LPs.Ninety-five percent of fund managers at
159、 Portfolia for example,are women.Portfolia aims to bridge the gender gap in check writing to enable greater investment into underrepresented founders.27Incumbent leaders are looking to engage women and BIPOC on this career path before they enter the workforce.JPMorgan Chase,for example,hosts fellows
160、hip programs ranging from a few hours to a few months for women,Black,and Hispanic or Latino undergraduate students to learn more about the types of roles available in finance and what it takes to be qualified for them.26 Though this pipeline is not directly into the start-up funding ecosystem,it he
161、lps boost the representation of women and BIPOC in finance who may eventually work with start-ups.Intentionally hire and promote women and BIPOC individuals as investors24“The power of diversity:Why homogeneous teams in venture capital are bad for business,”West River Group,September 21,2021.25“Inve
162、stment manager diversity,”Seattle Foundation,2023.26 For further information,see“The advancing Hispanics and Latinos fellowship program”and“The advancing black pathways fellowship program,”JPMorgan Chase&Co.27“Portfolia creates investment funds designed for women,backing innovative companies,for ret
163、urns and impact,”Portfolia,2023.118Underestimated start-up founders:The untapped opportunityOpportunities for improvementHow does the diversity of your organizations capital allocators compare to the diversity of the United States,or the city or state in which your organization is based?What goals h
164、as your organization set for diversity in capital allocator roles,if any?What partnerships has your organization formed to facilitate successful recruiting and retention of women and BIPOC investors?Reflect on progressWhile these examples demonstrate a start in promoting diversity in investor roles,
165、there is significant opportunity to push further on the institutional investor side.The gap is unsurprisingly even wider for LPs.Several actions can help:Push for at least two women and BIPOC candidates in the hiring pool for any checkwriter role.“Checking the box”with only one diverse candidate in
166、a hiring pool has been shown to be highly unlikely to make a meaningful difference in achieving equitable hiring outcomes.Research shows that likelihood of hiring a woman or BIPOC candidate grows by 79 or 194 times respectively,if there are at least two candidates in the finalist pool.28Focus on ret
167、ention practices for women and BIPOC investors at the top.One woman investor told us,“One investing firm I worked at had 30 or 40 percent women in my analyst class,but the firm only had one woman managing partnerand she left within a year of joining.It didnt feel like there was any actual interest o
168、n the investor side in changing the boys club even though the woman from HR in charge of hiring was amazing and working towards equity all the time.”It is not enough to invite diverse investors to the tableas we discuss in Women in the Workplace,organizations should set management and senior leaders
169、hip diversity goals and develop formal sponsorship or mentorship programs for women and BIPOC employees.Fintech in Action,32 and minority-focused investing or finance clubs at many“feeder”universities(for example,BlackND Capital,33 Whartons Black Investment Club34).Beyond these programs,firms can fu
170、rther expand their pipeline by targeting historically black colleges and universities(HBCUs)and career fairs with national organizations for women and those from different ethnic groups.Internally,organizations can also develop internship and apprenticeship programs for underrepresented candidates.H
171、ire externally when internal pools do not provide enough diverse talent.Organizations that are still making progress on their diversity goals with respect to current employees,can look externally to candidates for women and BIPOC checkwriters in parallel.A range of voices from different backgrounds
172、at the top can provide a greater set of experiences to inform deal flow and challenge biases.Build partnerships with pipeline programs for a pool of top-notch investor candidates.A variety of organizations are working to build a more diverse pipeline into asset management.Girls Who Invest,for exampl
173、e,provides access to investment education,mentorship,community,and internships to build the pipeline of women investor candidates.29 Other such programs are Wall Street Bound,30 Greenwood Project,31 128 David R.Hekman,Stephanie K.Johnson,and Elsa T.Chan,“If theres only one woman in your candidate po
174、ol,theres statistically no chance shell be hired,”Harvard Business Review,April 26,2016 29“Our team,”Girls Who Invest,2023.0 Wall Street Bound,2023.31 Greenwood Project,2023.32 Fintech in Action,2023.33“BlackND Capital,”Institute of Global Investing,University of Notre Dame,2023.34 Wharton Black Inv
175、estment Club,2023.19Underestimated start-up founders:The untapped opportunityCommit to investing in women and BIPOC founders and checkwriters by addressing unconscious biases,setting goals,and broadening your sourcing pool.Many stakeholders are making progress in this area:2Increase the flow of cash
176、 and capital investments that benefit women and BIPOC checkwriters and foundersLeaders are intentionally addressing biases in the due diligence process.The Due Diligence 2.0 Commitment uses several screening tools created and vetted by women and BIPOC founders to ensure a more fair and bias-free due
177、 diligence process.35 Using these types of tools can help drive a more equitable due diligence process.Traditional LPs are making a concerted effort to invest in diverse founders and managers.Princetons endowment follows diversity criteria to drive outcomes such as allocating 26.8 percent of its US-
178、based assets to funds managed by women-and BIPOC-owned firms.36Government,companies,and other organizations are stepping in to provide grants to more accessible funding mechanisms.The Small Business Administrations“Americas Seed Fund”offers grants to underrepresented founders via programs like the G
179、rowth Accelerator Fund Competition and SBIR Catalyst.37State government funds are investing in women and BIPOC emerging managers and committing to grow their allocations over time.The Connecticut Pension Fund allocates 5 to 10 percent of its$23 billion portfolio to emerging,diverse,and local manager
180、s via the Connecticut Inclusive Investment Initiative.The initiative also includes a commitment to grow full-sized direct allocations to emerging managers to develop increasingly larger funds.3835 Due Diligence 2.0,2023.36 Princeton University Investment Company,July 28,2020.37 For further informati
181、on on both programs,see the sbir.gov website.38“Connecticut Inclusive Investment Initiativeupdated CT Horizon Fund,”State of Connecticut Treasurers Office,2023.20Underestimated start-up founders:The untapped opportunityWhat percent of your organizations capital is invested in women or BIPOC founders
182、?How does your organization screen and evaluate potential investments?Reflect on progressOpportunities for improvementCommit to processes to receive and review cold outreaches.Since many underrepresented founders do not have the same access to warm introductions to investors as their White men peers
183、,welcoming cold outreaches can ensure organizations are not just considering who is in their network.This comes with a commitment to restructure time spent sourcing deals,but widening the early part of the funnel can serve to strengthen the overall investment pool.Radicle Growth,for example,discover
184、ed that by offering a cold,outreach-based inclusion challenge for underrepresented founders,they were able to rapidly identify a large number of potential investments.39Consider expanding your organizations investment thesis to include a focus on underrepresented founders and investors.Many underrep
185、resented founders seek out diversity-focused and-led investment firms;publicly incorporating these themes in your organizations thesis can attract more high-potential underrepresented founders.Develop partnerships with other women-or BIPOC-led funds and organizations.Many underrepresented founders r
186、eceived their first check from a smaller fund or incubator but struggled to bridge the gap to their next funding round despite strong performance.Larger,more established organizations,including traditional VCs,could partner with other institutions(for example,smaller diversity-focused VCs)to bridge
187、this gap and create a pipeline of high-potential companies created by underrepresented founders.Pursue strategies to eliminate bias in outreach review and due diligence.Organizations could consider creating a simplified form to collect key information(such as a short description of product or market
188、,valuation,and founder credentials)from all potential investments(from known and new founders),and creating a blind review process to select applications to move forward to diligence.Publishing investment criteria can make this even more powerful,so founders can quickly find firms with which they ar
189、e aligned.2 9 Findings from interview with Radicle Growth on April 19,2023.21Underestimated start-up founders:The untapped opportunityUnderrepresented founders often lack supporters who are willing to put their social capital on the line to connect them to investors and customers.To be of real use b
190、eyond a check,organizations need to consider how they can deploy their unique knowledge,connections,and resources in support of underrepresented founders after they invest.A number of institutions are making plays:3Leverage non-monetary strengths to level the playing field for women and BIPOC founde
191、rs and investorsCompanies are integrating start-ups into their platform-based revenue models.SAP.iO Foundries runs an inclusive start-up initiative called SAP.iO No Boundaries,which is designed to support start-ups led by underrepresented individuals,share and promote their success,and integrate the
192、ir solutions into SAPs portfolio via a revenue share model.This fosters additional innovation while providing underrepresented founders meaningful guidance and revenue generation.40Institutions are starting to amplify alternative funding vehicles(for example,permanent capital,invoice and debt-based
193、financing).The nonprofit Coralus(formerly known as SheEO)offers 0 percent loans to underrepresented founders solving global challenges.Coralus has established a perpetual loan fund that pools together funds from government grants,partners,and individual contributors.43Diversity focused venture-capit
194、al firms and other organizations are starting to incorporate a focus on mental health in their model.Kapor Capital has curated a series of virtual sessions on mental health to address Black wellness in a program called“Black Minds Matter.”44Institutions are forming partnerships to collectively conne
195、ct start-ups with access to customers and industry expertise.Radicle Growth hosts an annual inclusion challenge with Nutrien to invest in underrepresented founders and help them connect with customers.Founders receive access to deep industry expertise and executives who can serve as a sounding board
196、 and potentially turn into partners.41 Nutrien sees this as an opportunity to support innovative,inclusive market solutions and create a more diverse pipeline for their own workforce,and Radicle receives the obvious benefit of an innovative investment opportunity.Investment-focused institutions are
197、developing programs to meaningfully provide resources to underrepresented founders,which can expand their investment markets and increase their interest from a variety of stakeholders.Goldman Sachs has committed$1 billion to teams with underrepresented founders through“Launch with GS.”As part of thi
198、s initiative,it has also established a non-equity cohort program for underrepresented start-up founders that features access to expertise,investors networks,executives,other entrepreneurs,and resources to scale.420 SAP.iO No Boundaries,2023.41 Radicle Growth,2023.42“Launch with GS Entrepreneur Cohor
199、t,”Goldman Sachs,2023.43 For further information,see Coralus.world website.44 For further information,see K.22Underestimated start-up founders:The untapped opportunityHow do you,or how does your organization,interact with or sponsor underrepresented founders?What resources,knowledge,or connections d
200、o you(or does your organization)uniquely have that you could use to elevate women and BIPOC founders?Reflect on progressOpportunities for improvementCommit to offering expertise on a specific topic or skillset tailored to an underrepresented founders needs.To provide meaningful,industry-and geograph
201、y-specific advice beyond light-touch support that can easily be found online,commit to developing connections and relationships on topics related to your organizations expertise.Consider developing alternate funding vehicles to benefit underrepresented founders.Almost a third of underrepresented fou
202、nders we surveyed wished they had more access to alternative funding vehicles.Vehicles such as invoice-based funding or a 0 percent perpetual loan to build an initial MVP could go a long way.Develop programming for key topics for start-up founders,such as types of funding,how to raise capital,and wa
203、tch-outs.Organizations could offer specific knowledge programs on functional and growth areas(for example,payroll,human resources,and scaling)to equip underrepresented founders with the insider know-how to succeed.Commit to connecting underrepresented founders with other investors,customers,and reso
204、urces in meaningful and structured ways.To address the imbalance in over-mentoring and under-introducing underrepresented founders,commit to create structured introductions that include testimontials to a founders skills,or specifically framing a request to the connection on behalf of the founder.De
205、velop mutually beneficial programs or partnerships for underrepresented founders that tap into your organizational strengths.These types of programs can increase exposure to underrepresented founders and deliver value to your organization though innovation penetration into new,underserved markets.Th
206、e SAP.iP Foundries start-up class of 500 included 200 underrepresented founders as part of the SAP.iO No Boundaries initiative;these founders disproportionately represented 51 percent of the exits and 50 percent of the unicorns in the portfolio.4545“2022 year in review,”SAP.iO Foundries,2023.323Unde
207、restimated start-up founders:The untapped opportunityDevelop and implement standardized metrics to drive accountability and transparency across these three solutionsWhich,if any,DEI metrics do you,or your organization,track?What goals could you,or your organization,set to achieve greater transparenc
208、y and accountability?Reflect on progressParity calls for companies to publicly commit to interviewing at least one qualified woman or person of color for every open vice-president,C-Suite,and board position.Parity also provides a practical roadmap,a tool to track progress,and a public honor roll.46G
209、aingels commits to allocating 50 percent of all VC management fees from institutional funds to its Venture Inclusion Program.This program is designed to increase minority participation in the innovation economy through career fairs,board diversity,scholarships,and fellowships.48Act One Ventures crea
210、ted Diversity Rider,a call to action for venture firms and checkwriters to allocate a minimum percentage or dollar amount of each round to women and BIPOC investors.This commitment now includes more than 85 firms with over$14 billion AUM.47Establishing standardized metrics and regularly tracking the
211、m can help organizations hold themselves accountable to making real change.Publicly committing to hiring targets for women and BIPOC investors,allocating capital to underrepresented investors and founders,measuring non-monetary support,and tracking outcomes can motivate organizations to hold themsel
212、ves and others accountable to tapping into the vast economic innovation potential.Several organizations have begun making commitments:46 For further information,see parity.org website.47 For further information,see diversityrider.vc.website.48 For further information,see website.424Underestimated st
213、art-up founders:The untapped opportunityThe opportunity for improvement for this action is simple:make more public commitments and measure outcomes.Organizations that have made commitments can consider being more transparent about their progress.Most importantly,visibility into and amplification of
214、the outcomes of these three actions can make massive strides for the ecosystem to raise the bar for harnessing this untapped economic opportunity.Opportunities for improvement4Through this research,we have recognized the urgency to act now and the role we can play in fostering growth for underrepres
215、ented founders.McKinsey runs a program called Next 1B Founders,including a Next 1B:Scalers growth diagnostic to provide tools,capabilities,and networking access to accelerate the growth of consumer product brands started by Black founders.We have also launched InNYC and InLA,start-up accelerator pro
216、grams focused on providing pro bono McKinsey engagements to underrepresented founders in New York City and Los Angeles.In this report,we have highlighted the myriad challenges that women and BIPOC founders face that have resulted in a significant gap in the funding they receive.We have also highligh
217、ted the massive opportunity that lies in addressing these challenges,which is why we have come to view them as“underestimated.”These individuals have been able to persevere through an onslaught of systemic challenges to emerge strong,often outperforming their peers.By doing more to support underesti
218、mated founders and closing the gap in investment opportunities and other less tangible support,representation in the US start-up ecosystem could shift to more closely match that of the country at largeand make leaps and bounds toward a more equitable and prosperous society.Vasanth Ganesan is a partn
219、er in McKinseys New York office,where Anil Nathan is an associate partner,and Allen Weinberg is a senior partner;Ramya Mahalingam is an associate partner in the San Francisco office,and Audrey Ware is a consultant in the Charlotte office.The authors wish to thank Liz Anthony,Maria Anthony,Mehrdad Ar
220、jmand,Selma Belghiti,Omi Bell,Momo Bi,Mariam Braimah,Peter Braxton,Ilene Chen,Jonah Darnel,Mychal Frelix,Julie Gilbert,Tracy D.Gray,Arne Halleraker,Jazz Hampton,PJ Hill,Eva Ho,Andrea Hoffman,Kange Kaneene,Joelle Kayden,Andrew Kitirattragarn,Kelsey Kruse,Ashif Mawji,Miquel McMoore,Fernando Montejo,Kr
221、isti Naidech,Abdul Omari,Lorenz Pallhuber,Ansel Parikh,Tanya Perkins,Emilie Poteat,Jake Prigoff,Lynn Richa,Malcolm Robinson,Adrianna Samaniego,Daria Siegel,Lisa Skeete Tatum,Terell Sterling,Jarrid Tingle,Tanya Van Court,Carlos Vargas M.,Ann Winblad,Olga Yermolenko,Isabel Rafferty Zavala,and Jacki Zehner for their contributions to this report.Copyright 2023 McKinsey&Company.All rights reserved.Conclusion25Underestimated start-up founders:The untapped opportunity