inclusion

Valuations of venture backed companies and the number of unicorns are rising based on the leading nationwide surveys, but closer examination of the data reveals not all startups are seeing the effect. The median valuation for female-founded companies, for example, was lower in 2017 (approximately $11 million) than it was in 2007 (approximately $15 million), according to research from PitchBook’s Dana Olson. In comparison, the median valuation for male-founded startups has increased by approximately $8 million between 2007 (approximately $21 million) and 2017 (approximately $29 million). Olson also found that, across all industries, a much higher percentage of VC-backed, male-founded companies (35 percent) received at least one round of follow-on funding than female-founded companies (2 percent). With regard to exits, male-founded startups are acquired more than 11 percent of the time, while less than 0.5 percent of female-founded startups ever reach the same milestone. Male-founded companies also have a higher rate of IPO (nearly 1.7 percent) than female-founded startups (less than 1 percent).

The final part of this series explores the tactics and strategies associated with increasing exposure to innovation and broadening economic opportunity.

Last week, The Digest explored recent research examining the role that exposure to innovation plays in determining future inventiveness. The study’s authors, led by Stanford’s Raj Chetty, find that a child’s characteristics at birth – their neighborhood, socioeconomic class, race, and gender – are highly predictive of their propensity to file a patent later on in life. Based on their results, the authors recommend strategies that focus on increasing exposure to innovation and broadening intergenerational economic mobility. This article explores these types of policies in depth, as well as additional tactics that may help reconnect America’s communities with greater economic opportunity.

This article is part one of a two part series focused on the intersection between economic opportunity and the economic development practice.  

A lack of economic opportunity could threaten American innovation, according to new research from Stanford economist Raj Chetty and other members of the Equality of Opportunity Project. The authors advocate that in light of empirical research showing the worsening effects of economic segregation and inequality, the economic development community needs to support new strategies and tactics that can deliver “realistic economic opportunity” to more communities across the country. If the future of American inventiveness depends on place-based economic opportunity and exposure to innovation as the study suggests, troubling times may lie ahead.

In a report of FY 2011-2016 data, the National Science Foundation finds that rate of female participants in its currently-funded Engineering Research Centers (ERCs) may be higher than for overall engineering programs. Specifically, participation among female faculty is better by about seven percent, by about 15 percent among female undergraduates, and a more modest 1-2 percent increase among doctorate students. This seems to be a significant gain in a field in which male Ph.D.-holders outnumber women 6:1 (per NSF data for 2015).

The National Science Foundation (NSF) has announced the recipients of 27 Design and Development Launch Pilots as part of its INCLUDES initiative. The initiative is aimed at enhancing U.S. leadership in science, technology, engineering and mathematics (STEM) discoveries and innovations through a commitment to diversity and inclusion. The 27 pilots feature public-private partnerships that will develop blueprints for broadening STEM participation and are funded through two-year, $300,000 grants. Although the vast majority of awardees are based at universities, the program attempts to engage partners from private and corporate philanthropy, industry, non-profits, K-12 school systems, federal agencies and scientific professional societies, and any other organizations affiliated with STEM. A key feature of NSF INCLUDES is its focus on uniting a wide variety of collaborators to generate pioneering solutions to persistent problems. These pilot projects will create an infrastructure that enables large-scale coordination and wider STEM participation.

The Blackstone Charitable Foundation has announced its first cohort of eight organizations in the Chicago-area entrepreneurship challenge. Named the BX Challenge, up to $3 million in grant funding will be provided over three years to innovative organizations that effectively recruit and support diverse entrepreneurs and scale startups in the Chicago area. The selected programs will serve underserved populations, including communities of color, women, veterans, and immigrants. The inaugural cohort includes SSTI member UI Labs, which was awarded $100,000 to create a partnership between City Digital and Colony 5 to help community based start-ups tackle urban challenges and explore ideas on smart city developments through entrepreneurship. Other inaugural cohort awardees include:

Unfair treatment is the largest driver of employee turnover in the tech industry, according to a new report by authors at the Kapor Center for Social Impact with support from the Ford Foundation. In the 2017 Tech Leavers Study, the authors surveyed a national sample of 2,000 adults who in the past three years have voluntarily left a job in a technology-related industry. They find that unfairness or mistreatment in the work environment was the most frequently cited reason for leaving (37 percent), especially for professionals from underrepresented populations (e.g., women, black, Latinx, and Native American). Additional reasons for leaving a previous employer include seeking better opportunities (35 percent), dissatisfaction with the work environment (25 percent), dissatisfaction with job duties (22 percent), and being recruited away (19 percent). The authors estimate that mistreatment-based turnover in the industry costs approximately $16 billion per year. To help address this issue, the authors recommend comprehensive diversity and inclusion initiatives that include five elements: having a diversity and/or inclusion director; explicitly setting diversity goals; providing bonuses for coworkers that refer candidates from underrepresented backgrounds; conducting training on unconscious biases; and, establishing employee resource groups. 

As U.S. cities increasingly focus economic development strategies on technology and innovation to spur economic growth, they should be cognizant that growing these businesses and jobs can also exacerbate local inequities and should, therefore, develop plans to address this issue, according to a newly released report from the Equitable Innovation Economies Initiative (EIE). Prototyping Equity: Local Strategies for Equitable Innovation Economies is a report of the EIE, a multi-year project launched by the Pratt Center for Community Development, PolicyLink, and the Urban Manufacturing Alliance focused on inclusive growth strategies for innovation and manufacturing. In addition to describing the importance of pursuing an equitable innovation economy, the report also documents the initiative’s cross-sector efforts in piloting new approaches across four regions: New York, NY; Indianapolis, IN; Portland, OR; and, San Jose, CA.

Researchers of American entrepreneurship now have a timelier socio-economic portrait of the nation’s employer-owned businesses as a result of a public-private partnership between the U.S. Census Bureau, the U.S. Department of Commerce’s Minority Business Development Agency, and the Kauffman Foundation. Last week, data from the first Annual Survey of Entrepreneurs were made publicly available, which provides a detailed picture of the American entrepreneur in 2014 by examining race, ethnicity, gender, and geography. A brief released by the Census Bureau notes that more than 480,000 firms with paid employees (roughly 8.9 percent) of the 5.4 million U.S. firms with paid employees in 2014 had been in business for less than two years, according to the recent Annual Survey of Entrepreneurs data.

In an effort to advance entrepreneurship among their student bodies and grow their regional entrepreneurship ecosystems, six historically black colleges and universities (HBCUs) will receive up to $24,000 in support services as part of a new program from the Delta Regional Authority. Funds from the HBCU Entrepreneurial Ecosystem Initiative will primarily be used for universities to work with partners to identify entrepreneurial resources within the regional system, categorize strengths and weaknesses, and to strategically build around opportunities. Additionally, the selected schools will each host a two-day technical assistance and rapid acceleration workshop that seeks to teach student entrepreneurs about the types of skills and resources needed to launch and scale businesses. Student entrepreneurs will then pitch their ideas for a chance to be selected to present at Founders Weekend, where finalists will receive mentorship with successful minority entrepreneurs, business model development, and other services.