VentureForward Blog Series: Funding Exceptional Social Enterprises Starts with Challenging your Pipeline

Note from NVCA: As part of NVCA’s VentureForward initiative, we launched this blog series in November 2017 for industry leaders to share their perspectives on why diversity and inclusion (D&I) are important for the future of VC, their firm’s activities and approach to D&I, and guidance for how we—as an industry—can drive meaningful change.

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Christy Chin, Managing Partner at the Draper Richards Kaplan Foundation, continues the series with her post below (which originally appeared on the HBS Impact Insights blog):

Funding Exceptional Social Enterprises Starts with Challenging your Pipeline

At DRK, our work is guided by a singular belief: that finding, funding and supporting exceptional social entrepreneurs and the organizations they start is the foundation for creating lasting impact for our world and its most vulnerable populations. Since 2002, we have invested in more than 130 organizations, including Kiva, Room to Read, One Acre Fund, Living Goods, Last Mile Health, Crisis Text Line, and EducationSuperHighway; and newly named 2018 Skoll Award winners, myAgro and Global Health Corps, to name just a few.

But recently, we’ve been reflecting on our approach to finding exceptional social entrepreneurs – and we’ve learned that we must start by asking hard questions about our pipeline: Are we really seeing the full set of potential applicants? Are we accessible and approachable to the most compelling applicants, many of whom get started outside of the usual geographies and may not have access to existing ecosystems? And importantly, how can we answer these questions if we don’t know who we are missing?

Adventure Scientists

In today’s world, answering these questions is critical. Cheryl Dorsey, the CEO of Echoing Green, posited in a recent SSIR piece that many of the best emerging leaders by definition come from places that too many funders miss. These social entrepreneurs have lived the problems they are solving, and have the authenticity to create movements and drive community action. At DRK, we asked ourselves: How can we be confident that our pipeline reflects these leaders, and that our selection process is welcoming and valuable to them?

This past year, we have pushed ourselves to look beyond the success of our past investments and look at how robust our pipeline is. We have created systems to track, analyze, and reflect on our pipeline, enabling us to better understand the challenges that prevent some social entrepreneurs from getting to us. We now look regularly at who is reaching us – and by inference, who is not. We’ve simplified our open application form, while making sure to capture metrics that reveal our pipeline’s diversity, including demographics, geography, and issue area; and we’ve sought to hear from applicants about their experience working with us.

What have we learned so far? We have seen greater breadth of issue areas and geographies in our pipeline, likely from outreach in areas such as food, environment, and criminal and social justice; and geographic outreach in Africa and India. We saw that 40% of organizations in our pipeline were women-led. 30% of US applicants were first or second-generation immigrants, and about the same percentage were first-generation college graduates. Nearly 25% were African Americans.

Students for Education Reform

We also saw gaps, most notably that we had little exposure to Latino social entrepreneurs, and that we still needed to do more to drive gender and racial balance. Too much of our pipeline was still coming from the usual actors and places, particularly US coastal cities; and too many of our international organizations, especially in Africa, were led by foreigners rather than locals. The data made it clear that we must work harder to meet Cheryl Dorsey’s challenge.

So, what have we done to get started?

We’ve embedded this mindset in our entire investment team by discussing our pipeline data at least quarterly. Requiring that all deals start with our application form, no exceptions, has greatly improved our data quality. We’ve piloted a nominating process, most recently in patient outcomes, to build a wider network of referral partners. We’re resourcing efforts to reach communities that have not been represented enough in our pipeline by attending convenings that are new to us, and by leveraging new partners on the ground.

Food Forward

Equally important, we’ve sought to better understand those entrepreneurs who have reached us, but have not ultimately been funded. Beyond analyzing demographic data, we’ve also created a short anonymous survey that we send to applicants we’ve had to decline. It has averaged a 40% response rate, which quickly showed us that social entrepreneurs have so much to share with funders. We receive immensely helpful qualitative feedback on whom we might be missing and how we might be more accessible, transparent, and entrepreneur-friendly.

One early lesson was clear. Many of our declines were from organizations that were too early, even for us. They were in the ideation, pre-pilot stage. Now instead of a quick “no” we instead signal “not yet” and do our best to explain why. We believe this is an important distinction both internally and externally. Based on other feedback, we have made our website clearer and have made our application more flexible to different styles (e.g., written summary, 2-pager, pitch deck, etc.), in order to lessen the burden on applicants.

Over time, we hope that these efforts will help drive greater diversity in our pipeline and ultimately in our portfolio. But we recognize that this work is never done. Now that we’ve learned how to challenge our pipeline, we’re only going to continue.

Read the other posts from this series:

Greg Sands – Focus on Progress, Not Perfection

Lisa Lambert Diversity & Inclusion is a Growth Story

Maha Ibrahim  Canaan Forward: Diversity as an Asset

Carmichael Roberts Being Different

Kate Mitchell Time’s Up – We Need to Fix This

Ray Leach Adding an Organic Approach to Diversifying the Venture Capital Industry

Andy Schwab Diversity Breeds Diversity

Jessica Strong & Terri Glueck Investing in Inclusion

Christine Herron & Trina Van Pelt No One Said Diversifying Venture Capital Would Be Easy – But Here Are Some Hacks

Rob Hayes Making Diversity Core to Community