An Answer- Where are the minority tech entrepreneurs?
Today, Jeremy Shoemaker, at shoemoney.com posed the question Where are all the black tech entrepreneurs-why there are no prominent black high tech businesses? This extended from a Q&A time he was doing on his web site. Upon leaving a comment/answering the question I found that this would be worthy of a post/answer here. I answer more minority generally than specifically black.
One of the studies done (Dartmouth’s Tuck School of Business) on the topic of minorities in business finds that barriers to marketplace are lessened as profit margins go down. Of course, the market that has the highest profit margins is high tech, which has the highest barriers. The lowest profit margins are service work- moving companies, janitorial, etc. When it becomes time for business awards time where do you find minorities? In the service sector.
MAIN BARRIER- ACCESS TO CAPITAL
I know we all hear the stories of Microsoft, Apple, Dell, Yahoo, etc. where they started in their garage or dorm rooms. However, there does come a day when they had to grow up, and sit in front of a banker (or similar suited investor). Having the credit or collaterization is problematic in any minority business venture. One may have the credit, but not a thirty percent capital requirement of a SBA 7(a) business loan. Particularly, when one may be looking at a million dollar capital requirement to compete. Remember, existing contractors dominate the RFP process; they are going to keep the contracts as large as possible to keep the competition low.
Outside of government or corporate contracts, that is consumer business, which the previously mentioned computer icons built their empires on, capital is still a major concern. Scaling a business takes capital, and unless self-funded, one finds himself back in front of banker explaining why he has a great idea and why he is bankable. In the high-tech sector, the Microsoft’s and Yahoo’s came in early. Think buying Manhattan for a bundle of beads vs. buying a single brownstone in Manhattan today. In high-tech today it takes major capital to be big and profitable. Best example, Google, would not have the dominance it does today without huge investment dollars early on. Even scaling a web site like Squidoo, MySpace, or Facebook, takes money for bandwidth, servers, and manpower. At some point a cash injection took place. Rupert Murdoch bought MySpace, he has the cash to do whatever he wants but I ask the question- has MySpace ever been net positive on a balance sheet? Look how long it took Amazon to go into the black.
SECONDARY BARRIER- EXPERIENCE
The mention of the latest Internet darlings Squidoo, MySpace, or Facebook brings up another barrier to minorities in high tech entrepreneurship- experience. The experience I speak of is two-fold.
First, growing up a minority one begins to see the world through that experience. In the previous paragraph the web sites mentioned are all social web sites. I pose the following hypothetical question- if a minority programmer built these web sites, how would they be different? I submit that they would be focused toward their specific ethnicity. Because growing up outside of dominate culture, we do not look at the world as a whole, particularly in business. Being a minority makes us unique, with unique advantages, and we want to leverage that advantage. Also, our unique ethnicity makes up our community and often we want to assist that community, further that community. Unfortunately, this is a time when it can become a handicap, because this brings a self-imposed limitation.
Second, minorities are late adopters, leading to delayed experience. Allow me to say not because we want to be! I grew up in a comfortable middle class household in the 1980’s. My only access to a computer was in school and I had shown high aptitude back with the Apple IIe. But having a computer in the home was just not a priority. Remember back then computers cost more than they do now (and that was in 1980’s money!) and all you could do was program them after booting from 5 ¼” DOS disks, then look at a green or amber screen. I guess I could have mowed grass in the summer or sold coke bottles, but I was more interested in getting a car or another OP shirt. I satisfied myself buying computer magazines that would give code inside for games on systems (I didn’t understand it but thought someday I would). My next round of access was in college but all I did with computers was write term papers printing on dot matrix printers. When I was going back for my second degree, the Internet was coming about and that changed everything. I proceeded to flunk out because I spent all my time in the computer lab playing with HTML, UNIX, and PERL. Finally, I caught up.
Remember me mentioning Microsoft, Apple, Dell, Yahoo? I ask you, could anyone build a company to compete with them now out of their garage? It was timing for them, after all look at the companies and softwares that lie in their wake- Lotus, DBase, WordPerfect, Netscape, Packard Bell, OS/2, Lycos, AltaVista. High tech moves fast, and being late means being out of the game.
Remember cash and credit? Remember the iPhone coming out being $500? Well, that was just to get the phone. You still have to get the account with Sprint (?) and maintain it. And if one’s credit is not stellar a sizable deposit is needed. Even today, $300 for the iPhone and the necessity of good credit (parent’s credit) would keep the iPhone out of the hands of many minority young people. This means that app creation or hacking is out of the question until later. Then the high tech window has done passed for the next great app, again.
If you think of many of many the IT icons, they had a head start. Not a huge one, but enough of one. Steve Wozniak grew with a dad who worked for Hewlett Packard and taught him circuit boards. Provided him with an environment that soldering irons and boards were ubiquitous, meaning the household budget didn’t end with rent and utility payments. Bill Gates grew up with a lawyer as a father, which allowed him to follow and fund his interests. One of Microsoft’s early investors (pre-IBM) was family, meaning the founders came from family that had money to give.
All this to not whine about poor minorities nor to reinforce stereotypes of hoods, barrios, and ghettos. But it is to stress a point that until a strong upper-middle class is prevalent in minority communities, minorities will be late adopters due to prevailing conditions. Also, let it be noted that this does not remove minorities from competing, just need to be aware of it and address it.
ANOTHER BARRIER- DISCRIMINATION
Yes, there is the discrimination, which is near improvable, except statistically, who will deny people access due to color of skin. Yet, this is not the discrimination that prevents minorities the most. The discrimination that is most crippling is self-discrimination. When minorities build web sites for their community are they supported? If off-line business is any indication, the answer is no. How many defunct web sites are there for every Black Planet? Still, this may be good if it makes minorities lift up their eyes to see that there is a larger world beyond their own that is looking for their next great idea.
The other self-discrimination is belief in their own success. Having the cash and credit to sit in front of the banker is only half the battle; the other is the ability to sell them. That comes from confidence, not just in the idea but also in one’s self. That you to deserve to be there at that moment for the sake of history. That is where one who will find the belief to continue in the face of adversity, to continue to seek to make it happen. When Steve Jobs was pitching for Apple, computer manufacturing was never cheap, he sat in front of bankers in the 1970’s with cut off jeans, sandals, and a beard. Did they discriminate? You bet they did! Did it stop him? No, he was discouraged, but persevered to find an investor who made Apple happen. Minorities are so often told that they are the victim; they internalize it and match their world to that expectation. Take that no from a banker and mumble that it was due to your color; you will never get a yes. Even if it was obvious that he was racially discriminating, don’t give yourself that option. Just keep moving.
In my city the city’s Human Rights Department had minority business awards. One of the winners was asked his secret to success. He was an African-American Electrical Engineering firm, he responded with one word- perseverance.
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