Women, Latino, and Black founders collectively receive less than 5 percent of the total amount of venture capital invested in the United States, according to a 2023 report from the consultancy McKinsey & Company. (A 2022 Globe analysis found that funding raised by Black founders in Massachusetts is lower than the nationwide average.) And more diversity in the types of companies we nurture around here would help retain talent — and help our economy better weather the ups and downs of our dominant industries.
Those two problems are intertwined, and a thoughtful approach could address both of them.
First, it’s worth noting that the venture capital industry that funnels millions of dollars to promising startups did not spring up out of nowhere. In the years just after World War II, a group of Bostonians wanted to help reboot the peacetime economy and support businesses founded by veterans. Their solution: They formed an investment company called American Research & Development, now regarded as the seed of the venture capital industry. The group included the head of the Federal Reserve Bank of Boston, the president of MIT, and a Harvard Business School professor, Georges Doriot.
American Research & Development backed an MIT spinout called Digital Equipment Company, which grew into a tech giant that employed more than 125,000 people.
When scientists began unraveling the secrets of DNA and manipulating it to create new drugs, other venture capital firms put money into the earliest biotech companies, including Biogen, Genzyme, and Genetics Institute.
In the subsequent decades, an array of other resources for tech and biotech founders have grown up around the venture capital firms. For entrepreneurs in those industries, coming to Boston is like walking the aisles of a Home Depot with a project in mind: Pretty much any tool or material you might need is just a few steps away.
But founders who want to build businesses outside the tech, biotech, and climate tech domains often feel like they’re slogging their way through a swamp instead — without a map.
Sidney Baptista is a classic example: The Dorchester native started an apparel company called PYNRS in 2020, as an offshoot of a running group he’d formed called Pioneers Run Crew. The company’s beanies, bras, and running tights incorporate recycled fabrics, and runners of color are important target customers for the company.
But Baptista says that his two angel investors are people he has known since middle school and that raising money from other investors has been tough — especially as he’s also trying to run the business. “Everyone wants to give me advice,” Baptista says. “They’d rather give money to someone trying to build a rocket ship.”
Poorvi Patodia started Biena Snacks, which sells a line of healthy snack foods made from chickpeas and other vegetables, in 2012. At first, she put her personal savings into the business, and later she tapped friends and family for investment. The food industry, she says, is “hard to break into. It required a lot of cold-calling, cold emails, and lots of persistence to find people who would end up being the first set of connectors, customers, and suppliers.” Getting the company off the ground was an extended grind, but today, the Allston company’s products are in 12,000 stores, the company has raised more than $15 million from venture capital firms, and it employs 25 people.
Derrick Duplessy wants to make it less of an ordeal to get businesses like Biena off the ground. He runs a nonprofit, the Duplessy Foundation, that provides sales coaching to help women, immigrant, and other minority business owners reach $1 million in annual revenue. Duplessy says that many resources exist to help entrepreneurs outside tech and biotech — one that he mentions is Women of Color Entrepreneurs — but “all the organizations, including us, do a terrible job of marketing. If you’re heads down doing what you need to do for your business, you’re not going to find us.”
What would a strategy look like for building better entrepreneurial support systems outside tech, biotech, and climate tech? It’d have four components.
First, we’d identify a handful of industries where Massachusetts already has a track record of success. In retail, we’ve grown companies like TJ Maxx, Marshall’s, BJ’s Wholesale Club, and J. Jill. In restaurants, food, and beverage, we’ve done Dunkin’ Donuts, Panera, Spindrift Beverage, and Sam Adams. In apparel and footwear, there’s Reebok, Converse, New Balance, and Life Is Good.
Second, let’s convene a summit of people, organizations, and investors who already work with businesses outside tech, biotech, and climate. This could include investment firms like Breakaway Ventures and Act3 Holdings, run by longtime Panera CEO Ron Shaich, as well as nonprofits like Entrepreneurship for All, Commonwealth Kitchen, and MassChallenge. It should include commercial landlords eager to fill street-level and office space. Invite the state’s secretary of economic development, Yvonne Hao, as well. Boston XChange, a new incubator and accelerator for entrepreneurs working in “creative industries,” just announced this month by Boston Celtics stars Jaylen Brown and Jrue Holiday along with Olympic gold medalist Lauren Holiday, should be part of the conversation too.
Third, let’s create a guide or AI-enabled online directory to catalogue all of the resources that already exist for entrepreneurs in our chosen industries. It needs to be maintained over decades, not just one or two gubernatorial administrations, so choosing the right parent organization for it is crucial.
Fourth, let’s keep the focus on growing this ecosystem over time. Doing so will include things like recruiting and training executives from our most successful companies to serve as mentors, board members, and investors in startups. It might also include an annual conclave and celebrating the success stories that go national, go public, hit 1,000 employees, or get acquired.
I’m not suggesting, by the way, that we give tech, biotech, and climate tech a free pass on working to improve their own diversity stats. It’s just that we already have diverse entrepreneurs trying to build businesses in other sectors, often swimming against a strong current. I think the strategy laid out here can be a quicker route to building big companies with diverse founding teams — companies that will help create jobs and grow the economy in Massachusetts over the coming decades.
Scott Kirsner can be reached at kirsner@pobox.com. Follow him @ScottKirsner.
