As a first-time entrepreneur, Adrianna Cantu was focused on building the software that powers her Austin-based health care startup.
Now, she says, she believes that building a network is just as critical.
“We were laser-focused on our application, but having a really rich network of mentors and investors and experienced CEOs who can give you advice and provide seed funding is something that can make or break you,” said Cantu, founder of two-year-old Revealix, a health care analytics company.
That’s why Cantu joined DivInc, a new Austin-based startup accelerator for diverse entrepreneurs. Founded by former Dell Inc. executive Preston James, DivInc aims to help women and ethnically diverse entrepreneurs get access to the resources and capital needed to get a startup off the ground.
“In health care, most of my peers were female and most of our employees were female,” Cantu said. “Moving into the entrepreneurial world, one of the first things I noticed was there were so few women. And I didn’t know how to enter this new ecosystem. Now I feel like I can do that.”
One of the biggest barriers to success for women and minority entrepreneurs is access to capital, experts in the startup world say. That money is often crucial to helping startups hire key people and ramp up development, and can provide a runway as they launch their products and expand sales and marketing.
But drawing more women and diverse entrepreneurs into Austin’s booming startup scene — where personal connections often lead to funding — has been a challenge. The vast majority of Austin venture capital continues to go to startups led by white men, and networking events typically reflect that.
It is in no way just an Austin issue: Nationwide, just 10 percent of venture capital dollars have gone to women business founders in recent years, according to a TechCrunch study, and less than 2 percent to African American business founders, according to research firm CB Insights.
Only about 1 percent of all Latino-owned businesses created between in recent years received venture capital or angel investments, according to a report by the Stanford Graduate School of Business.
But in Austin, new accelerator programs and venture funds are working to change that, and tech leaders who are women and people of color say they are optimistic that the picture is changing.
“I think there’s been a realization that the more inclusive Austin’s tech community is, the more innovative it is,” said Laura Kilcrease, who founded the Austin Technology Incubator and is founder and managing director of Austin venture capital firm Triton Ventures.
“I think the other thing we should say is that these efforts aren’t being made in spite of other people, i.e. white men. There are key white guys who are very involved in this too. There’s a belief that it’s good for everyone.”
‘Blindness to diversity’
From its downtown headquarters in the Galvanize co-working space, DivInc launched its first class of 10 entrepreneurs last month. The startups will spend 12 weeks working with industry experts and mentors doing market research, product development, financial projections and perfecting their fundraising pitches.
Meanwhile, True Wealth Ventures, an Austin-based venture capital firm focused on women-led companies, is raising a $20 million fund. The firm, which has closed on $4.7 million, will back startups that have women in decision-making roles, such as founders and executives. It has already begun vetting Austin-based startups, said founding general partner Sara Brand.
“Nobody’s doing this in this region, and there are so many outstanding opportunities to make investments that have simply been overlooked,” Brand said. “We expect to get higher financial returns just by the diversity of the portfolio.”
The coding community is also working to expand its reach. This month, Women Who Code Austin hosted its second annual Austin Diversity Hackathon, where 150 participants spent a weekend at the Capital Factory tech incubator forming teams, pitching ideas and creating apps. At the end, they pitched their results to a panel of judges.
“The goal was for women and people from underrepresented communities in tech to network, expand their tech portfolios and meet other people in Austin’s tech community,” said Sara Inés Calderón of Women Who Code.
Networking groups are also filling the void. Women@Austin — an organization founded three years ago to draw more women into tech leadership roles by providing mentoring, networking and access to investors — has grown to more than 700 members. Its monthly gatherings, which tackle topics like finance and fundraising, have become a hub, with members meeting potential advisers and angel investors, leading to new deals.
The group was started by Austin software entrepreneur Jan Ryan, after she looked around an Austin tech conference and realized that not only were there no women speaking on panels, there were only a handful of women in the packed ballroom.
“Austin has a terrific ecosystem, but it was clear three years ago that women weren’t taking advantage of the ecosystem,” Ryan said. “But when we have approached people and taken the initiative to bring their attention to the issue, the response has been great. They may not have known they had a blindness to diversity.”
Meanwhile, through educational and networking events, Ryan said many first-time women founders are changing the way they go about raising money, which can determine whether a young company moves forward or fails.
“What they’re realizing is they need to start earlier to build the relationships that lead to their funding,” Ryan said. “Men have built-in networks and they use them very early on, instead of waiting until there’s a critical need for funding and then knocking on doors.”
Ryan said she found that many women were holding off on talking to investors until they felt their product or business plan was perfect. Male entrepreneurs were more comfortable initiating a conversation in the unpolished, unproven stage, she said.
“The truth is, funding is a relationship game, and you need to start at the very beginning making those connections and getting a lot of eyes on your deal,” Ryan said.
“Investors really are used to investing in people who look like them, we know that. Or they will invest in women that have been vetted by a network they trust. It’s a very long road if you try to cold call a lot of VCs and try to get introductions when they don’t know you and they have no connection to you.”
‘Weren’t getting direct access’
When Preston James left his role at Dell’s Global Center for Entrepreneurs in 2014, he decided to mentor and invest in startup founders. He became a mentor at Capital Factory and joined the Central Texas Angel Network.
That’s when James, who is African American, noticed that few of the participants looked like him.
“I saw a tremendous lack of diversity and lack of inclusion,” he said. “Those that were coming to the table asking for money were falling a little short in many ways. They weren’t getting direct access to the resources and the network that you need to build a successful startup.”
The experience led James to found DivInc, a nonprofit startup accelerator for founders who are women or minorities. The idea of the three-month boot camp is to go beyond the usual one-day workshops or weekend seminars for women or minority entrepreneurs, which James says don’t provide the depth that founders need to advance their startups.
DivInc will serve as a pre-accelerator, James said, giving entrepreneurs the chance to catch up with peers who have already had access to mentors, investors and other resources. Nine startups are participating in the first class.
The DivInc team has signed on more than a dozen advisers, including Austin tech executives who will work with founders on product development, marketing and financial plans.
DivInc also is collaborating with other groups including Capital Factory to help expand its network and connect diverse founders with key players in the Austin startup community.
The hope is that the program will prepare the entrepreneurs to get accepted into national accelerators such as Techstars or 500 Startups, and give them the pitching skills and investor connections they need to raise seed funding.
That’s what DivInc participant Tito Salas is hoping. Salas founded CodersLink, a talent agency that connects U.S. companies to top Hispanic tech talent in Latin America. Now a year old, CodersLink has built a network of 500 senior developers, and Salas said he wants to scale the business and get ready to raise seed funding.
“We are meeting the influential people who can connect us with more potential customers, more users and with capital,” Salas said. “It’s very difficult to grow if you don’t have a network, and we didn’t. Now that we are building one, I get why it matters so much.”