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A simple question you can ask about new startups: Are they building a gizmo or app to bring American consumers more joy or convenience? Or are they building a product or service that radically improves the lives of the poor and disenfranchised around the world?
The founders of these two archetypical types of companies, it turns out, have pretty stark demographic differences. Most traditional tech company founders are white and male, while comparatively far more women and minorities go the social good route, according to a new report by Fast Forward, an accelerator for what it calls “tech nonprofits.”
That report, entitled “The State of Diversity and Funding in the Tech Nonprofit Sector,” shows that 47% of all tech nonprofit founders are women, compared to just 17% at traditional startups. Minorities make up 30% of all tech nonprofit founders compared to 13% in the for-profit field. Just what earns a nonprofit that “tech nonprofit” distinction could be the subject of its own debate. “We classify a tech nonprofit as a tech company building original software or hardware, but leveraging a nonprofit business model so they can focus 100% on social impact,” notes report co-author Christina Shatzen in an email to Fast Company.
Fast Forward–which is funded via corporate grants from Google, the Omidyar Network, and BlackRock–has developed a public repository for these groups, called The Directory. The online database allows organizations to share more about their programs, location, budget size, and founder demographics with allies, the press, and potential funders. (Participants range from groups like AbleThrive, which has created its own online directory of groups and services for people with disabilities, to Zidisha, an online microlending community that connects lenders and borrowers around the globe directly.)
The Fast Forward report culled information from 348 groups listed in the Directory, along with additional information from CTOs for Good, an alliance of so-called “tech-forward” groups including Charity Navigator, Charity: Water, and Code For America.
“Tech nonprofit founders are far more diverse than founders of for-profit tech companies,” note co-authors Shatzen and Shannon Farley in the report. The simple reason: “Founders solve problems they experience” and white men typically don’t experience as much hardship. That’s something Fast Forward as seen firsthand with its own accelerator program, the report notes, in which 84% of participants have had some sort of personal connection to their cause area.
There may be proportionately more tech nonprofits founded by women and minorities, but most still encounter one major obstacle to growth. They’re unable to attract serious funding from foundations, which leaves most trapped with annual budgets below $500,000, the level at which the stress of making payroll has been shown to affect a group’s ability to make change.
The fact that 33% of founders who are women of color succeed at breaking the $1 million in funding mark is still more than double the success rate of similar founders at traditional tech companies, the report notes. In cause work, that’s an important milestone because it makes such groups eligible for more kinds of institutional investment.
While the report’s authors don’t pinpoint an exact cause of the fundraising difficulty, they do point out a troubling correlation: 92% of foundation CEOs are white. Mission-wise, tech nonprofits face a catch-22 that others in Silicon Valley likely understand: “They must build their product before they can prove impact, and they cannot build the tech product without funding.” The cause areas where women and minority founders appear most likely to attract major grants are healthcare and civic engagement. White men, however, are attracting far more investment in their ideas around topics like education and human rights.
Awareness doesn’t solve the problem, but it’s a start. Major funders can use Fast Forward’s Directory to find more underrepresented and underfunded groups.