Entrepreneurs and privilege

I will try, this year 2024, to re-write in english some of the articles I wrote in spanish in Emprenderagolpes.com with some updates. I hope you enjoy them.

Whenever I hear about entrepreneurship as a great social elevator, I can't help remembering this joke my dad told me:

A man and a parrot are on a plane, and the animal calls to the stewardess: -Come on, bring me a whiskey, and quickly. -Right now, she answers diligently. On his side, the other guy says: "Please, could you bring me a coffee? - Well, I will do it when I have the time, sir.

A while later, the parrot asks for another whiskey with bad manners and he is served immediately, while the polite gentleman does not succeed in his purpose. -Mr. Parrot," he asks then, "how do you do it? -Well, I treat her badly, so that she knows who is in charge and therefore, she obeys me. The guy then calls the stewards out: -You moron, bring me at once the coffee I asked for!.

Then, the commander arrives and throws them both out of the door of the plane, for behaving that horribly. In the middle of the fall, the parrot says to his companion: "You really are a brave man, you have to be very risk oriented, to offend the stewardess without having wings!

You have to be a real risk-taker to take on an entrepreneurial venture if you don't have an economic or social network to protect you in the fall. Something that is often overlooked in the success stories of entrepreneurship both in Silicon Valley and in Spain, is that many of those founders who are able to take the risk to create valuable companies, come from a privileged environment. This also explains why there are founders who are able to turn down early exit offers that could change their economic situation forever. They are infinitely more likely to remain "all-in" despite the siren calls of a sale, if they have had previous liquidity events, if they come from affluent families or if they had received some sort of secondary sale.

I'm not going to get into defining what the line is that marks privilege or not, but I'm sure most move in the top 10% of the population with the most resources, if not the 1%. During my two years without a salary in my twenties, while we were setting up IMASTE, I always had the certainty that I would not become homeless, because my parents would take me in if everything went wrong or I could go back to try to calculate the structure a bridge with my engineering degree.

Many Silicon Valley entrepreneurs tell you about their dinners with ramen and tap water, but at the same time they have in their closet fancy Stanford degrees that have cost 400,000 dollars and an assured position in a technology company just around the corner.

And I don't just refer to anecdotal evidence from my years of ecosystem experience, but the statistics say the same thing, a 2021 study, shows that 75% of founders raising venture capital come from affluent socioeconomic backgrounds, with parents or caregivers in managerial or professional roles, and almost none of them come from families entitled to welfare benefits.

Not to mention the very limited access women or people from minority backgrounds have to venture capital - in 2020, women received just over 1% of venture capital funding in Europe. Across Europe, 90.8% of all capital went to all-male teams in 2020.

It's not just that founders without financial constraints can take the risk of starting a business, but also that they have stronger networks of contacts, giving them easier access to potential investors and customers. Startups that reach VCs via "warm intros" have 13 times more chances of being funded than those that write directly to investors without prior contact.

We have a lot of work to do to enable greater diversity and equity for entrepreneurs, including relying less on our own networks and intros to meet innovators and opening up to cold-door contacts or getting closer to those places where the founders with the least access are, which obviously are not the prestigious universities or McKinsey alumni.

At KFund we support various initiatives to improve inclusion in the venture capital world, and I believe that transparency in processes and continuous improvement are key elements to help reduce this gap. This is why we have published our first ESG report , detailing our first steps, and why I believe it is important for initiatives like Diversity VC to launch standards that accredit which firms follow best practices.