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Equal access to capital and entrepreneurship is the final civil rights movement

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Context is always important. In the grand scheme of things, I have privilege: I was born a male, in the most powerful country in the world, during the most prosperous time in history, to parents who both went to college, all in a middle-class neighborhood.

I could have been born during my dad’s generation when there were still signs that said “Whites Only” and he was barred from entry. Even now, the fact that I’m half-Jewish and look more ambiguous than “Black” has been a privilege.

But despite my privilege, I’m also confident that my Black heritage made it more difficult for me to raise venture capital. It’s a reality that goes against the classic Silicon Valley ethos: strive for perfection and constantly improve.

It’s in our national interests to make becoming an entrepreneur as egalitarian as possible.

Today — and the data proves this — if you are a white male, you have an unfair advantage when looking to raise venture capital. This doesn’t take anything away from the brilliant white male entrepreneurs that have built incredible companies, but it has made an equivalent crowd of Black founders almost nonexistent.

As a nation we know the benefits of encouraging entrepreneurship across backgrounds: Entrepreneurs create jobs, spark innovation and allow us to maintain our position as the most competitive nation on the planet. It’s in our national interests to make becoming an entrepreneur as egalitarian as possible, and yet we’ve fallen remarkably short of that goal across both race and gender.

I moved to southern China shortly after graduating from UC Berkeley. A lot of my decision-making process at the time was more subconscious, but I always had this feeling that as a Black male, I wasn’t going to get fair treatment working for a large company; I always knew my path to success was through being an entrepreneur and creating my own company. China, not the U.S., seemed the place to do that.

I fell in love with the entrepreneurial spirit of China. And surprisingly, as a foreigner in China, I felt that I wasn’t judged in the context of race. They saw me as an American that could bring them business opportunities and that was it, I felt that I was judged more on the merits of the value that I could bring than I would in the U.S. — and it was refreshing. Spurred by opportunities, I started a successful import and export business in China, and after a few years I had over 30 employees. I loved the experience of working with factories and I found it mesmerizing watching products that we use and wear being made.

At that time, my clients were larger U.S.-based retailers and brands. I could see the growth of Shopify and how this deceptively simple e-commerce product, plus marketing tools like Instagram, allowed small businesses to sell online and market their products in ways that had only been accessible to my larger clients years before. But I kept thinking that there was no equivalent inroad for small businesses to vast resources of supply chain and manufacturing.

That was the reason I founded The/Studio, a custom manufacturing platform that would give small businesses access to factories so that they could easily manufacture products in low quantities, without having to deal with all of the hassle and risks associated with manufacturing — just like the big brands.

At the time, I didn’t even know that raising venture capital was a possibility. And really, this was where my race became an obstacle. Those closer to the concentric circles of venture capital know that venture capital exists and they know how to access it.

Those that are further away don’t know how it truly can scale your company, let alone how to access it. Now, when you have a commodity like capital that is a closely held resource to a favored few, that’s called elitism and cronyism. I believe it’s the antithesis of what Silicon Valley is supposed to stand for and it’s detrimental to America’s ability to lead on a global, entrepreneurial scale.

By 2016, without capital, I had bootstrapped the company to eight digits in revenue. We had more than 100 employees and the business was profitable. I knew that there was a much larger opportunity for us to take advantage of — the same one Shopify seized on — but I felt that I didn’t have the financial resources, nor the knowledge at the time, to really grow the business in the way that I thought was possible or responsible.

It was at this time that I started to understand that at this point in a technology company’s trajectory, they really need venture capital to put fuel to the fire. Not just for the money, though that helps — we needed the counsel and guidance that often comes with it, too.

So I upped and moved to San Francisco. I was very optimistic that it would be easy for my company to raise millions of dollars in venture capital — after all, I was used to reading in TechCrunch about companies that were raising millions of dollars, and sometimes tens of millions of dollars, with no product, just a good idea (and sometimes a bad one). I’d proven my ability as an entrepreneur by already building a sizable business with a massive TAM, plus a product that was live, already profitable and ready to be scaled.

I started off with several introductions that one of my friends from college and a former VC made for me to several of his previous colleagues. In the traditional Silicon Valley way, I would take one introduction and turn it into another. I began to realize that venture capital is a bit of a social game — and I was about to play it for two years.

Joseph Heller is CEO and founder of Supplied.

Joseph Heller is CEO and founder of Supplied. Image Credits: Supplied

During this process, I want to be clear that I never faced overt racism; everyone was polite and gracious with their time. But when going to pitch meetings and VC events, I got the same feeling that I would get when you go to a high-end country club or a luxury store on Rodeo Drive in Beverly Hills. It was clear that the venture community — and the few entrepreneurs that they anointed to be part of their chosen — were a closely knit elite who wanted nothing to do with outsiders.

An air of arrogance, elitism and exclusivity pervaded literally every interaction. They spoke a certain way, they were looking for cues of who else you knew in their network — and the minute that they discovered that you were not one of them, the meeting was basically over. This feeling was in stark contrast with what in my mind Silicon Valley had stood for. I had envisioned an ideal where any brilliant, hard-working entrepreneur with a good idea and was scrappy as hell could raise money and find success.

In reality, it was a place where your admittance to the club was heavily based on your race, gender and what university you went to (even UC Berkeley wasn’t highly regarded). If you weren’t white, male and from Harvard, Stanford or the Ivies, you had to relentlessly pursue your vision for years to get in through the back door.

The/Studio did finally raise an $11 million series A — after 18 months and 150 meetings and 145 “no’s.” Read that again. I was mostly pitching white male VCs. Their prejudgements and the fact that you don’t know their friends made it a “no” before the meeting even started. The wider data suggests strongly that there was a racial component to this, as does my personal napkin math: Roughly 120 of the VCs I pitched were white and we got zero term sheets from them. Thirty that I pitched were ethnic minorities and I received five term sheets, or a success rate of 17%.

Two years later, I’ve become part of that exclusive group of entrepreneurs that have raised a sizable venture capital round. And I now have a behind-the-scenes view of what Silicon Valley is all about. There are some truly brilliant investors and entrepreneurs in Silicon Valley and the data backs that up; the number of VC-backed companies that go public in Silicon Valley dwarf the rest of the nation for a good reason.

But I’ve also learned that there are a lot of incompetent investors that are investors simply because of who they know, and a lot of entrepreneurs that aren’t the best in the world who get funded because of who they know. In addition, I’ve met a lot of people that would be great investors that never will have the opportunity to be investors, because of who they don’t know and how they look. Likewise, I know many great entrepreneurs, just as good as the ones that have taken major companies public, that won’t raise VC money because of who they don’t know and how they look.

I do believe there is a deep-seated perception in Silicon Valley that people that look a certain way and have a certain pedigree are the best entrepreneurs. The system is set up in a way that reinforces this mentality with a positive feedback loop: The VC structure is set up in a way that they make money off of 10% of their deals and the other 90% can fail, no problem.

If they invest in someone that is unknown within their social circles, they run the risk of being challenged by their partnership on why they made that decision, so the personal risk of going out on a limb is big. If they invest in someone that has a ton of social credibility in Silicon Valley, then even if they fail, nobody will question them. It’s part of the process.

VCs are only human, and if you have billions of dollars of capital to deploy and thousands of entrepreneurs that want to raise money from you, and you can only select a few a year, it’s easy to take the resistance-free route and invest in people that you know. Those people are generally white males. It becomes a self-fulfilling prophecy, because statistically if you invest in predominantly white males and a few of them succeed, then invest in far fewer people of color or women, even fewer of them will succeed. You end up internalizing that bias in your mathematically “objective” decision-making.

We saw this same issue begin to be resolved for women in the last decade. There were very few female entrepreneurs who raised VC money 10 years ago — 823 women-owned businesses, according to a recent Forbes study. There are still very few female-led VC-backed companies today, compared to male-led ones, but there are a lot more now; over 3,450 as of 2019, according to the same study. Women didn’t get smarter in 10 years; pressure was applied to VCs and they started being less myopic.

They realized that women made great entrepreneurs — and investors, too. During the last decade, more VC firms began hiring — and were started — by women, although even now it’s still a meager 11%.

But what about the racial divide? I know a brilliant Black guy that has a master’s degree in electrical engineering and computer science from one of the top five engineering schools in the nation, heads an engineering team for a company that has raised hundreds of millions of dollars and has created a high-tech startup serving enterprise customers, doing over $1 million a year in revenue, is profitable and totally bootstrapped. I’m confident that if he were a white male, he would have already raised significant VC money. He hasn’t.

Again, I don’t think it’s a matter of overt racism. But he probably isn’t accepted and doesn’t feel comfortable in VC social circles; he probably doesn’t have the confidence that he can raise money; he hasn’t seen others that look like him raise money. Because he lacks these things and because he doesn’t have the traditional “entrepreneur look,” he would be dismissed by VCs.

Now, all this being said, change begins with entrepreneurs, too. For instance, we recently launched a new product called Supplied that allows small businesses and boutiques to buy products wholesale directly from factories in China. About 95% of our customers are women — and 60% of our customers are people of color.

We didn’t set out to build a product for this market, but once they embraced it, we embraced them. Initially, my board, which is all white and male, didn’t understand this market and was a bit cautious. I don’t blame them; there was nothing nefarious about their assumptions or initial concerns, they just didn’t have the experience in their life that helped them to understand our customer.

But I did, at least the racial challenges faced by our customer base. I had conviction that there was a business here because I know a lot of women of color that had similar experiences and aspirations as the customers that were gravitating toward our platform, only to be shut out by prohibitively high prices on other “wholesale” platforms.

And I recognized my own inability to fully understand our customer base, as well as the fact that my team wasn’t diverse enough to really understand them, either. So I deliberately tried to recruit more women into our organization. I’m now proud to say that my executive leadership is 33% female, 33% Black, 77% people of color. The team that runs Supplied is predominantly female, just like the customer base.

Both The/Studio and Supplied’s head of marketing are Black women, with one working from Nigeria and the other from Ghana. Our diversity numbers are far better than almost any tech company I’ve encountered. Diversity isn’t something we just talk about; it comes naturally to us, because diversity comes naturally to me.

Silicon Valley has created incredible outcomes, and I don’t want to unfairly malign Silicon Valley as this racist institution that deliberately keeps out minorities and women. But because of many factors — which do include overt racism, historical factors and just human nature — the fact remains that Silicon Valley does not reflect our nation’s diversity across race and gender. Yet.

Our country is becoming more diverse and the rest of the world more wealthy. For Silicon Valley to maintain its crown as a beacon of innovation, it’s important to make it more diverse so it can understand the United States as well as emerging markets. It doesn’t need to be a zero-sum game where more people of color will push out the incumbents. In fact, it will make things more competitive, with a more diverse perspective on the world, which is better for returns and opportunities for all.

Blacks founders and other underrepresented groups also have an obligation to pull up their bootstraps and pursue being entrepreneurs and being funded, no matter how hard it is. This generation will serve as the inspiration — and employer — of the next. The more Black people who get funding, the more Black entrepreneurialism becomes normalized, creating a flywheel effect of normalizing investing in Black founders for VCs and encouraging more Black people to pursue being entrepreneurs.

I firmly believe that equal access to capital and entrepreneurship is the final civil rights movement. We have an opportunity to create real equality — financial and social — in Silicon Valley and the world, all while building the future.

Lyron Foster is a Hawaii based African American Musician, Author, Actor, Blogger, Filmmaker, Philanthropist and Multinational Serial Tech Entrepreneur.

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Unmind raises $47M for a platform to provide mental health support in your workplace

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Mental health has been put into the spotlight in a big way in recent times. For many of us, our lives and lifestyles have changed massively in the last year, and alongside that, we’re collectively facing pandemic-fueled mortality on a global scale in a way that hasn’t existed for generations, a perfect storm of sorts that has inevitably had an impact on our state of mind and our moods.

Today a startup that has built a platform to help people think about and respond to this situation is announcing a big round of growth funding, specifically to help address all of this and how it plays out in one of the more stress-inducing aspects of our life — our workplaces.

Unmind — a London startup that has built a mental health app for the workplace — has raised $47 million, a Series B that it will be using to continue investing in its research and development and also to expand its business reach. The funding is being led by EQT Ventures –- a very active investor at the moment in UK growth rounds — with participation also from Sapphire Ventures and previous backers Project A, Felix Capital, and True.

The core of Unmind’s service is an app built around a set of questions to help employees explore their own states of mental health, which could include depression, anxiety, insomnia, and a host of other manifestations. It provides advice and content to begin addressing the results of that — exercises, advice, podcasts, links for further reading, and links to seeing further help from professionals (not more machine interfaces, but humans). It also provides a service to the employers, sharing anonymized data from the app with them so that they, too, can consider how better to respond to their employees’ needs.

The app has seen some notable traction especially in the last year, a time when the conversation about mental health has become much more commonplace and critical, given the environment we’ve been living in.

Unmind does not disclose user numbers, nor how they have grown, but it tells me that uptake and adoption of its app ranges from 15% to over 60% of an organization’s workforce (this varies by size, and the emphasis that the organization itself puts on using the app, among other things). It said that of those employees who are using Unmind, 88% have said they experience an improvement in mental wellbeing, work, or relationships, while 92% report higher confidence, awareness, and understanding of mental health.

The company also said that revenues grew by more than 3x in the last 12 months. Meanwhile, its customers include major retailers like John Lewis and M&S, high street bank TSB, Uber, Samsung, Virgin Media, British Airways and Asos — a list of companies that have strong degrees of customer service around them, have been greatly impacted by the lockdowns, and you can imagine must have a lot of people working in them pretty stressed out as a result of being on the front lines of interfacing with a stressed-out wider population of consumers.

The company was co-founded by Dr Nick Taylor, who previously had been a clinical psychologist and worked for years in mental health care (and before that was a classically-trained singer), who said he came up with the idea after feeling like he was seeing too many people only for the first time at a stage when their issues were already very advanced.

“I kept encountering the same frustration time and again: I wish I’d met this person six months ago,” Taylor said in an interview.

As with all kinds of preventative healthcare, it’s always better to identify and work on issues before they grow big and more urgent, and so he set out to think about how one might approach the concept of a preventative check-up and check-in for mental health.

The workplace is not a bad place to base that effort. Not only is it often a source of stress for people, but it’s a regular place for them to be every day so creating a way of assessing mental health through that implicitly creates a kind of routine to the effort. It also potentially means a closer connection to the employer to work on issues more collectively when and if they emerge, in a way that the employer might not do (or ever discover) through other means.

The connection between work and mental health is a longstanding one but has perhaps been proven out more than ever before in the last year.

“I didn’t know what would happen with mental health during Covid,” Taylor recalled. “I actually wondered if it would be demoted,” given all of the other conflicting priorities. “But the prevalence of mental illness has escalated. It’s out of control. And in the workplace, it’s a leading cause of absenteeism and turnover.” And given how full-on everything has become, including likely more hours spent working since now it all has merged with our home lives, we all know (and may well be among) many people who are feeling incredibly burned out right now.

Taylor said that in fact quite the opposite has happened to his early skepticism: mental health has become front of mind, “and the shackles of stigma are falling away.”

This is part of what has really caught the eye of investors: technology that is not just effective, but very relevant to right now. “It is now universally recognized that our Mental Health is as important if not more important than our physical health – but has long been neglected. That is now changing rapidly,” said Alastair Mitchell, a partner at EQT Ventures. “As a result there has been a massive rise in the popularity of consumer mental health apps which is now being matched by surging demand from employers and employees for the same in the workplace. Unmind is the leading mental health app for the enterprise and we are so excited to work with Dr Nick and the team to support their scaling globally.” EQT is also a strategic investor, not just a financial one: it’s rolling out Unmind across its own workplace and its many portfolio companies.

Unmind, it should be noted, is not the only company that has identified this “opportunity,” if you could call it that. They include other startups like SF-based Ginger — which has also built a platform that partners with employers, but also healthcare providers and other stakeholders, to help people identify and manage their state of mind. Ginger has been well-capitalised over the years. Others in the same space include Welbot in New York, Spill also out of London and a host of others providing different aspects of mental wellness like Calm and Headspace, the meditation apps.

I’m inclined to think that, given the size of the problem and that mental health should not be a bunfight but something that takes a village to address, the key will be in how each company approaches its remit, and how people respond to it, and whether what people do ultimately use results in better bridges for employees to getting the help and peace they need, whether it’s from the app or a professional.

“We have a responsibility to connect with our mental health in the same way that we do when it comes to healthcare,” Taylor said, likening the effort to how it takes a number of skill sets sometimes to work on the complexities of a health issue. “Great healthcare integrates across a number of systems.”

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Dutch startup QphoX raises €2M to connect Quantum computers with a Quantum modem

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When eventually they become a working reality, Quantum computers won’t be of much value if they simply sit there on their own. Just like the internet, the value is in the network. But right now there’s scant technology to link these powerful devices together.

That’s where QphoX comes in. Thus Dutch startup has raised €2 million to connect Quantum computers with a ‘Quantum modem’.

The funding round was led by Quantonation, Speedinvest, and High-Tech Gründerfonds, with participation from TU Delft.

QphoX aims to develop the Quantum Modem it created at Delft University of Technology (TU Delft) into a commercial product. This networks separate processors together, allowing quantum computers to scale beyond 10’s or 100’s of qubits. Look out for the Singularity folks…

Simon Gröblacher, CEO and co-founder of QphoX told me: “It is the exact same thing as a classical modem except for quantum computers, so it kind of converts electrical and microwave signals to optical signals coherently, so you don’t do any of the quantum information in the process. It then converts it back so you can really have two quantum computers talk to one another.

I noted that there’s more than one type of quantum computer. He countered “We are in principle agnostic to what kind of quantum computer it is. All we do at the moment is we focus on the microwave part, so we can work with superconducting qubits, topological qubits etc. We can convert microwaves to optical signals and they can talk to each other. Currently, the only competitors I know are all the in the academic world. So this is we’re the first company to actually starts building a real product.”

Rick Hao, Principal with Speedinvest’s Deep Tech team, added: “ We want to invest in seed-stage deep technology startups that shape the future and QphoX is well-positioned to make a major impact. Over the next couple of years, there will be rapid progress in quantum computers. Quantum Modem, the product developed by QphoX, enables the development of quantum computers that demonstrate quantum advantage by combining separate quantum processors.”

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UK fashion portal Lyst raises $85M in a ‘pre-IPO’ round, reportedly at a $500M valuation

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E-commerce continues to be a huge focus for investors watching consumer behavior and spending patterns in the wake of the Covid-19 pandemic. In the latest development, UK startup Lyst, a portal for high fashion brands and stores to sell directly to users, has picked up $85 million, in what the startup is describing as a ‘pre-IPO’ round.

The news comes as the company says that it has now grown to 150 million users browsing and buying from a catalog of 8 million products from 17,000 brands and retailers.

List said that gross merchandise value in 2020 was over $500 million, with new user numbers growing 1100% growth in new users. GMV has definitely been accelerating. Lyst has been around since 2010 and said today that lifetime GMV is more than $2 billion.

“Lyst is rapidly becoming a fashion category leader, which hundreds of millions of fashion lovers rely on to decide what to buy. While our app and website already enjoy very large audiences in the USA & Europe, fashion e-commerce remains under-penetrated in general, with huge growth potential globally. We’re excited to use this raise from top-tier investors to continue personalising the fashion shopping experience to each of our millions of customers, while helping our partner brands thrive,” said Chris Morton, Lyst’s CEO and founder, in a statement.

We have contacted the company to ask about the timing and location for a public listing and while it has not commented, we understand that London or New York would be the most obvious locations for a listing, which is not likely to be for another year or even three.

For now, Lyst has disclosed that investors in this latest injection include funds managed by Fidelity International, Novator Capital, Giano Capital and C4 Ventures, as well as a mix of financial and strategic previous backers Draper Esprit, 14W, Accel, Balderton Capital, Venrex and LVMH. Carmen Busquets — a strategic advisor to the company who co-founded Net-a-Porter, one of Lyst’s competitors in the space — also increased her investment in the company with this round, the company said.

Lyst is not disclosing its valuation but PitchBook notes that with this round, it is $500 million post-money. (We’ve also asked the company to confirm whether this is an accurate figure.) Sky News, where the funding news was leaked last night, did not have a valuation figure.

For some further comparison and context, though, Farfetch, another competitor in the same space as Lyst, listed publicly some years ago and currently has a market cap of $14.4 billion. And more generally, there is a lot to play for here online, not just against other pure-play fashion portals, but also standalone retailers, marketplaces like Amazon, and increasingly social media apps like Instagram, TikTok and Snapchat, which are all looking at how they can better capitalize on how their platforms are already being used quite aggressively and widely for social commerce.

Social media sites would be an ironic but perhaps very unsurprising competitor for Lyst, which started life as a pioneer in the concept, creating a way for people to follow influential high fashion brands and influencers on its platform — who were not actually called “influencers” at the time, but curators and bloggers (the more things change, eh?) — and get alerts when items would be posted by them for sale.

People might have originally been very skeptical about how well high fahion (read: expensive, sometimes esoteric) might play over screens, but over time Lyst and the others in the same proved it all out in spades, raising successive rounds over time to back up its premise. Balenciaga, Balmain, Bottega Veneta, Burberry, Fendi, Gucci, Moncler, Off-White, Prada, Saint Laurent and Valentino are among the brands that appear on Lyst today.

Over the years, more variations and competitors have presented themselves, but the salient fact remains that high fashion has a huge target audience delivered in the right way, and that is something that investors, brands, influencers, and these marketplaces themselves have all doubled down on in the pandemic.

It’s been a time when people who have not found themselves outright struggling financially (and there are lot of those, unfortunately), have instead found themselves with more disposable income since they went out and travelled significantly less than before. Fashion and buying goods for ourselves has become a form of escapism, and for those who get a lift out of the tree falling in the forest and being there to hear the sound, we can still put on the outfits, snap ourselves for our Stories, and exposure will still be ours.

“Lyst has made huge progress over the past year with its industry leading app for the fast- growing online luxury fashion market – a trend which looks set to continue as consumers retain their newfound digital habits, and demand for fashion rises further post-pandemic. In recent years we have seen other high-growth fashion tech businesses taking the next step, and we believe Lyst is well positioned to capitalise on this market momentum. Draper Esprit has backed Lyst since Series A and we believe this latest round sets the business up for an exciting next phase,” said Nicola McClafferty, a partner, Draper Esprit, in a statement.

Lyst also announced a few appointments to firm up its executive bench in the lead-up to its next steps as a company. Mateo Rando previously at Spotify, is joining as chief product officer to focus largely on Lyst’s popular mobile app. And Emma McFerran, formerly general counsel and chief people officer, is stepping up as COO and a new board member.

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