How to be intentional about finding and evaluating software led by underrepresented founders

In 2020, Black and Latinx founders received only 2.6% of VC investments, according to Crunchbase. That’s $2.3 billion of the $87.3 billion total raised that year through August.

When there’s a disparity in investments or opportunities – especially a numerical one – it’s always important to talk about it. Not only is it important to talk about during Black History Month and other cultural heritage months, it’s just as important to continue the conversation outside of those moments.

This month, I sat down with Airtable’s Albrey Brown to talk about the importance of being intentional about finding and evaluating software products led by underrepresented folks. We dissected the root of the issue behind lower funding for those founders and how investors and buyers alike can work to reverse those patterns with low lift, yet impactful steps.

Currently owning Developer Relations at Airtable, Albrey has a wide range of experience in the software world, from leading and consulting on DEIB initiatives at several SaaS companies, building apps across industries, heading up a Hack Reactor coding bootcamp for women and people of color, and much more.

His personal and professional experience led to a thoughtful conversation not only about the why behind this SaaS funding and diversity issue, but also tactical ways people can make a difference today.

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Let’s set the stage: Why are we talking about this?

Company building is about being an owner. To be an owner and someone who has the time and funds to take on your own venture, you need to be able to take on a ton of risk. At the root of this problem is that underrepresented folks in the United States haven’t had a ton of opportunity to take on risks. Black folks were disenfranchised from owning things until, structurally and lawfully, the Jim Crow era was over in the early 1960s.

But even since then, there have been both laws and strategies put in place to make sure that Black folks can't take on that risk. And that's why we're here having this conversation today, from a systematic point of view.

Why do many investors fail to invest in SaaS companies led by underrepresented backgrounds?

This is a two-pronged problem. The first prong is on the supply side. Underrepresented folks – people of color, women, the Queer community, etc. – historically haven’t been able to take risks and build networks with others building their own companies. That ripple effect means that even today, the pool of entrepreneurs who identify as underrepresented is much smaller given that historical systematic context.

Generally speaking, investors are trained to see opportunities based on patterns. Pattern matching not only ends up applying to the financial aspects of a business, but also what investors look for in leaders. Over time, the archetype of the White male leader has been perpetuated by the fact that others haven’t been able to play the game.

The second prong is on the demand side. Many investors haven't had firsthand experience seeing underrepresented folks as leaders of great businesses. If an investor never spent time or connected with a Black founder who has had a billion dollar exit, for example, it’s hard for them to see that opportunity. If that investor meets a Black founder who could potentially have an exit of one billion, it’s hard for them to make that connection.

These two issues multiplied have led us to where we are today.

Does the funding disparity have long-term implications for software buyers?

I definitely believe the disparity trickles down. As a buyer, you don’t just buy software, you’re investing as a stakeholder in someone’s business. You’re building a partnership, and that partnership moves from opportunity to opportunity and company to company because it’s what you’re familiar with.

Buyers have the same challenge that VCs and traditional investors have. Without being able to see and build a relationship from the start with a vendor led by an underrepresented founder, the probability of you stepping out of your network and finding someone new is much lower.

We build relationships with the people behind the products we use and as buyers, we need to challenge ourselves to be more open to building relationships with people outside of our networks who are also building great SaaS.

How can investors reverse this trend during this next era of entrepreneurship?

It’s not an easy task, but it is important. SaaS investors first need to be reflective and introspective, which is a challenging undertaking. The second piece is committing to building a new network and expanding your existing one.

Expanding your network is an uncomfortable process. Stepping into a new community and saying I’m here to learn, listen, and contribute is a brave thing to do. I would challenge investors to do that brave thing and intentionally seek out underrepresented founders, set up conversations, and listen to their ideas and what they’ve built. Build a rapport with a community of underrepresented folks – and then take action.

Once you’ve built that rapport and trust, start to contribute. Figure out where the gaps are and how you can blend your existing network with this new one and connect founders from both. Start to figure out how you can invest – and remember, it doesn’t always need to come down to money. What’s more valuable than money in these scenarios? Great advice and referrals. Finding these low lift, yet impactful ways to invest in underrepresented founders and continuing to intentionally build that network has long-lasting effects.

A few resources on where to begin to find these networks: On Deck, Y-Combinator, Crunchbase.

How can SaaS buyers be more intentional about finding and evaluating SaaS products led by underrepresented founders, while remaining genuine in their efforts?

In these moments, I do believe there’s a line between being authentic or intentional and being performative.

Being intentional about finding software led by underrepresented founders comes down to building relationships and using your own heuristic to make a decision as to whether you want to buy a product or not.

I would never recommend that a buyer purchase a product that doesn’t fit their needs just because a founder is underrepresented. I would, on the other hand, recommend that if you know your exact needs and you’re in the exploratory phase for a SaaS solution, you should diversify your list of software options.

Start by writing down the products you know and have used before. Look at the founders for those products and ask yourself what the list looks like from a diversity perspective. Are any of those folks underrepresented? If not, how can you intentionally discover other great products who happen to have underrepresented founders?

Evaluate the products you find during that exploration and know that you did the work to diversify your outreach and create a diverse slate, similar to how you might approach recruiting for talent. From there, take off your personal hat and put on your business hat. Use that to challenge the companies you’re evaluating under the same parameters in order to make a clean business decision.

Being intentional is less about giving out charity and more about giving out opportunities. Give underrepresented founders the opportunity to get in front of you, to pitch you, to win your business. If they don’t, that’s fine. You gave them the opportunity and maybe you even go above and beyond by giving them feedback as to other ways they could win in the future.

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Software spend and usage is rising at unprecedented rates. With new tools coming out constantly, investors and buyers alike have a much larger pool to choose from.

Underrepresented founders have historically been shortchanged of opportunities simply because they weren’t given a seat at the table. With great power (and choice) comes great responsibility and in 2022, everyone can take these low-lift steps to discover software tools they may not have considered in the past.

With 2022’s Black History Month behind us, how do you plan to diversify your SaaS search?