Terry Irwin (Transition Design Institute, Carnegie Mellon University)
Terry Irwin is a designer, academic professor, and former head of the School of Design at Carnegie Mellon University. She has been instrumental in developing transition design—an area of design practice and research focused on design-led societal transitions away from “wicked problems” and toward more sustainable futures. Terry facilitated the development of systems maps that include the historical foundations of venture capital on behalf of the Nasdaq Entrepreneurial Center’s Venture Equity Project. We discussed her work on this project, how her insights connect to the history of venture capital, and how improving diversity in VC going forward needs to be a systemic solution.
Interviewed October 2021
Developing the Venture Capital Ecosystem Map
Interviewer’s note: Terry started by giving me an overview of the project process, in which she and her team researched and mapped the VC ecosystem and its history from stakeholder experiences. According to the project site, the “systems maps” are visual representations of the participating stakeholders’ understanding of “the lack of funding for entrepreneurs of color in the US and UK.” The stakeholder groups that participated were Black entrepreneurs, capital allocators, community organizers, and researchers. The maps themselves are highly visual and can be explored further through the summary videos on the project site, as well as the systems maps themselves, which are hosted on Miro, a visual collaboration software.
Figure: Historical Evolution Map. (A high-resolution PDF is also available.) Credit: Irwin, Kossof, and the Nasdaq Entrepreneurial Center Venture Equity Project, 2021.
Terry Irwin (TI): The map is not simply a historical bid. We’ve processed everything, trying to retain the stakeholder voices. Statements from stakeholders are front and center. So much research on problems like this strips away what the stakeholders said. I think that gathering these statements together in one place speaks more eloquently than any researcher synthesis could. So we’ve tried to make it incredibly visual and nonlinear. We created a demonstration to show how stakeholder ideas can be used to create systemic interventions.
We would like anyone who accesses the data to encounter it as a systems map, so that they get an overview of how complex the problem is and they interact with the stakeholder voices, which have been anonymized.
Key issues are mapped on the left,* including things like the history of slavery and the systemic racism that has existed for centuries in the US. Also included is the rise of social media, the internet, and e-commerce, each of which has pros and cons. Then there are policies against immigrants, the unequal distribution of and access to educational resources, along with threads like Black self-determination during the Harlem Renaissance.
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Another significant threat, of course, is the history of discriminatory practices in the financial system. But I will say apropos of that, discriminatory lending and financing practices and hiring and metrics is a theme that ran through practically every single map, and it’s very articulately presented in the problem map and the stakeholder relation maps.
We created analysis and insights that look at high-level timeline themes. So some of the themes that run throughout are enslavement, labor, education, land and property, the financial system itself, and then world views, which, as we know, are the root of all of it. Another theme that emerged recurrently was data, transparency of data, lack of data, and skewed data.
Early themes from stakeholder responses were also documented. Some of those include slavery, history, and systemic issues. Some examples are how traditional routes of funding for businesses are not readily found in institutions used by founders of color, the unequal distribution of access to education, war and forgotten Black veterans, private equity, and VC history itself. We also have some citations from that historical research, because the thing to remember about these historical evolution maps is, ideally they are built by several types of experts. So the stakeholders themselves, but also experts from all sectors like historians, economists, etc.
Insights on the History of Venture Capital
Erika Brodnock (EB): Were there any findings around the banking system and the history of venture capital in particular?
TI: We found that some of the most pernicious issues have to do with data. Some with an acknowledged implicit bias, and some with mirroring and pattern matching. The search for unicorns instead of camels came up as a repeated theme.
Overall, we found that denying funding to minority entrepreneurs does not just affect their business or their ability to launch a new idea that could create an impact in the world, but adversely affects communities that already have a history of being marginalized. What came up again and again was that if you fund Black entrepreneurs, that’s a window into strengthening entire communities, lifestyles, and neighborhoods.
EB: Where did the problem start? And how did the problem start? Understanding the history of venture capital, I believe, holds the key to creating some of the change, because if venture capital came about via the banking and insurance industries that came about via slavery, and the proceeds of slavery were the first funds used to create venture capital, is it happenstance that the descendants of slaves ended up being locked out of venture capital?
TI: The birth of capitalism and the much older enslavement economy arose out of systemic oppression. We tend to think of it more in terms of the large, wicked problems that are clustering. Then it shoots down to a particular area like the one we’re looking at. It’s one manifestation of these large landscape forces. And money and enslavement just went together.
It’s a bit problematic to try and identify the origins of venture capitalism because it’s like looking at a river with different currents running through it. We are focusing on trying to show all the different currents intertwining so that everyone who comes to this problem begins to educate themselves about its complexities and different narratives emerge.
Involving All the Stakeholders, Investors Included
TI: It is important to involve all of the stakeholders, but getting to all of them at once is virtually impossible, so we need to engage champions. Make a start with the low-hanging fruit. The capital allocators we engaged with through our research have a clear handle on the problem. They completely understand it. So how do we enlist those folks to help create change?
One of the most powerful leverage points for change is to create new narratives and create new networks of help and new sources of funding. Each of these solutions needs to be employed at more or less the same time at different levels of scale, alongside finding champions within each of these sectors who are interested in helping to shift the narrative.
Another thing that we need is to speak to the capital allocators who are invested in not seeing the industry change to understand how much of that is about systemic racism, how much of it is about risk aversion, and how much is about money and power.
EB: I wholeheartedly believe that, because without capital allocators being involved, things will only ever change at such a glacial pace.
TI: We only have one or two statements from capital allocators that were very direct and honest. And one was, “I’m afraid, if my firm or I fund minority entrepreneurs, I’m going to get branded as a firm that only does that.”
EB: Every piece of data I’ve seen says that it’s less risky to invest in this way than it is to invest in the status quo. Are investors leaving money on the table for fear of being pigeonholed?
TI: Some statements did bubble up from stakeholders who were worried that the lived experience of older generations was being put upon the younger generations and [that it has] perpetuated.
Opportunities for Intervention and Shifting the Narrative
TI: What also emerged is that two areas for very positive interventions are in data. One is about how we make investment practices more transparent, but that must go hand in hand with interventions about shifting narratives, creating role models, and putting new stories out into the world. Then the other thing is addressing this idea of otherness.
EB: Could one way be to stop using words like minority, sub, or anything that means less than?
TI: Yes, coming up with new strategies for terminology. That’s all part of shifting the narrative, getting high-profile stories out into the world, creating media platforms.
If we make a concerted effort to make diversity the norm, it will simultaneously solve so many problems, like the one that’s manifesting in VC. We’ve tried to show that solutions in these categories can address more than one issue. This is the very definition of systemic solutions—or an ecology of solutions. If each solution could be connected, we will simultaneously begin to address many issues, and it’s precisely the opposite of how solutions are usually conceived.