Demetric Duckett, Living Cities managing director, is leading the initiative.

In 2008, one of Silicon Valley’s most famous venture capitalists, John Doerr, said that the most successful entrepreneurs “all seem to be white male nerds who’ve dropped out of Harvard or Stanford and they absolutely have no social life. So when I see that pattern coming in, it was very easy to decide to invest.”

That kind of pattern recognition – not singular to Doerr, quoted in historian Margaret O’Mara’s The Code — produced the software tech boom, and the dismal statistics and limitations the venture capital industry lives with today. Only three percent of venture investment goes to women. A study by RateMyInvestor and DiversityVC that polled 10,000 founders over five years concluded only 1% of venture-backed founders are Black.

The demographics and politics of the United States is changing. The number of women and people of color who want to be entrepreneurs is growing, as is the pressure to tackle system racism and sexism. But there still aren’t enough investors willing to fund founders outside the white male Ivy League bucket, and investment is key in every kind of business, but especially the innovative and fast-growth ones that could make a difference in wealth creation in overlooked communities.

So, now, the questions are: How do we create a new pattern of success? What does a successful woman, Black, Hispanic, or low-income entrepreneur look like (my guess is no hoodie, and not as socially challenged)? And where do you find a new generation of investors who will do for them what the previous generation did for those college dropouts who made the software revolution?

Yesterday, the Kauffman Foundation announced a $1.67 million grant to nonprofit Living Cities to answer, in part, those questions. The idea is to create a new investment vehicle to invest in fund managers of color, who, it’s thought, will in turn invest in overlooked entrepreneurs. The vehicle may be a $100 million fund of funds, said Demetric Duckett, managing director at Living Cities, who is leading the initiative at the nonprofit.

‘This is proving’ that the fund managers and entrepreneurs that are seen not as not viable are … viable,” said Philip Gaskin, vice president of entrepreneurship at the Kauffman Foundation. (Disclosure: the Foundation is a founding sponsor of Times of Entrepreneurship).

 “It’s OK, venture capitalists, to come out of your risk zone. These demographics of folks can be just as successful,” he said.

The grant grows out of the Foundation’s research into early-stage finance for entrepreneurs.  It runs a Capital Access Lab, which provides early capital to emerging funds that make investments to underserved entrepreneurs, particularly entrepreneurs of color, women, and those in rural areas.

Founded in 1991, Living Cities, which has offices in New York and Washington, D.C., has been running two $40 million funds that leverage investment to help transform the finance system and create wealth in overlooked communities – for instance, by investing in CDFIs. Duckett said the new investment vehicle will likely seek to raise funds from impact investors, first.

The foundation and nonprofit are taking on a deeply rooted, complicated problem at the nexus of finance and entrepreneurship. Demonstrating success may not be enough. In 2019, Stanford researchers concluded fund managers of color may face more bias the more successful they get. Research sponsored by the Knight Foundation found that fewer than 1.3% of the $69.1 trillion in global assets under the four major asset classes – mutual funds, hedge funds, real estate and private equity – are managed by women and people of color.

The structure of venture capital itself may not be amenable to change. Investing in general is more about luck than skill. Venture investing is about neither: It’s about the network, as Charley Ellis once explained to me. The author of Winning the Loser’s Game, who was on the boards of Vanguard and the Yale Endowment, told me, “The fact that it’s called venture capital is a terrible distraction. It’s really human resources.”

In other words, the top venture firms – which are the only ones that consistently show S&P 500-beating returns — plug their white male Ivy League founders into the most powerful networks of accountants, lawyers and other resources and influencers. Many of them are, not surprisingly, white, male and Ivy League educated themselves. Changing the system means, well – changing the whole system: Finding a financial structure and a network that can operate just as powerfully for women and people of color.

“Look at all the things that go into an entrepreneurs’ success … transportation, health care, childcare, capital, credit,” said Gaskin. “All of those things go into it, and those are all large things. Being a part of that type of conversation, being part of the solution and at the table with so many organizations, how gratifying.”

The need IS great. Venture finance, with its focus on fast success – most funds work on a 10-year time frame, and support for entrepreneurs who don’t show growth quickly dries up – is uniquely equipped to speed up wealth-building in communities. One of the things Living Cities will need to overcome is the idea that investing in fund managers who aren’t white men is concessionary, and that those who do it will be giving up returns.

“We need to create proof points in order to get to a place where investment makes sense,” Duckett said. “They need not think they’re doing a favor.”

He likened it to two trains in the station at the founding of the country: In his view, he said, the white community got a big head start.

This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit and connect with and