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Updated February 11, 2023Mara Zepeda (Zebras Unite)
Astrid Scholz (Armillaria, Zebras Unite)
Central to the need for change in venture capital is the need to think more holistically about the impact of companies, including their footprints on the environment and influences on the societies they have been designed to serve. Historically, this has tended to be more of an afterthought, rather than purposefully built into the creation of venture-backed companies that strive for hockey stick growth at all costs. We caught up with Mara Zepeda and Astrid Scholz, two of the founders of the Zebras Unite movement, to explore the possibilities of another way. We learned how they have built a founder-led, cooperatively owned movement of 6,000 founders across six continents, who are creating the culture, capital, and community for the next economy.
Interviewed June 2021
Johannes Lenhard (JL): The first time I came across Zebras Unite was in the 2019 New York Times article, where you and the other founders stepped forward with a very unconventional message to the VC and startup community, saying that the system they built does not work for most people; we need to rethink how this whole world is structured. What motivated you to do that and what brought you to that point where you believed we needed to do something differently?
Mara Zepeda (MZ): Before starting Zebras Unite, we were founders ourselves and we had experienced the problem from the side of being an entrepreneur. We saw how limited the capital was, and we all hit a wall that many founders do. All four of us Zebras Unite founders are systems thinkers. Rather than bemoaning how frustrating our situations were and rather than taking it personally, we then began to ask ourselves if perhaps this is a failure of the system itself. Reframing the question gave us a more expansive and wider lens through which to examine existing capital. We came to learn that it does not serve most entrepreneurs and we desperately need alternatives.
Astrid Scholz (AS): One thing to remember is that the four of us were all successful leaders and achievers in our respective domains before becoming entrepreneurs. In my case, I had a great track record raising money for my ideas from philanthropic sources, and all of a sudden I hit a wall when talking to VCs. I was the same person, my salesmanship was the same, but the milieu I found myself in had changed. This was borne out in the questions I was being asked that had no bearing on the quality of the business we were building, our traction, or our potential. The questions were easily recognizable as being in service of the prevailing pattern matching in the VC industry.
JL: Let’s actually go back for a moment: what exactly is a “zebra” and what does it have to do with diversity and inclusion?
MZ: In 2017, we penned this manifesto, “Zebras fix what unicorns break,” in opposition to what we saw with unicorn companies that were generally looking for a massive, outsized return that benefits a small number of investors. They are focused on hockey stick growth at all costs. They tend to be very engineering heavy, and they will marginally throw crumbs at some philanthropic cause, but they are not interested in community benefit and shared prosperity. We know what the unicorn is.
With zebras, we see a completely different psychographic of founder. These are founders that were not interested in getting exorbitantly wealthy and they were motivated instead by shared prosperity and having both profit and purpose. They tend to work at multiple altitudes. On the one hand, their company might be solving a specific problem. They are also systems players and working on systemic solutions as well. They are mutualistic and cooperative. Rather than have a dominant monopolistic market share, zebras are interested in how they cooperate with one another, or with the communities they serve, in order to have strength and advantage through cooperation, not competition. Unlike a unicorn, a zebra is real. We see a lot more zebra companies in the wild than we do unicorns, which is a fantasy animal that occurs once in a blue moon.
AS: We often get asked this question about how zebras relate to diversity and inclusion. That’s a bit of a red herring, if you can pardon that metaphor. Zebras come in many different stripes, and we observe that the types of founders that tend to either be systemically excluded from mainstream venture capital or are actively charting a different course for capitalizing and growing their companies from the get-go tend to be led by people that have live experiences and insights that differ from white, cisgendered males educated at a few elite universities. So zebras are to startups what all the other ice cream flavors are to vanilla—see what I did there? VC: vanilla capital.
Erika Brodnock (EB): Thinking not just about the entrepreneur-side of things but also about the money, what funding alternative do you want to provide and how does that link with increasing diversity in the startup world?
MZ: If we want to see more diversity in entrepreneurship, we need more diverse funding mechanisms that align with the needs of diverse founders. Diverse founders very often are not coming from the same pattern-matching structures that venture capital is pattern matching, which is largely affluent white men with educational privileges. When we think about the psychology of diverse founders, they have a different relationship to money. Many are not motivated by hoarding, but by sharing, and are interested in giving back to the community that has helped them to succeed. They have a reciprocity and mutuality mindset, and many are interested in creating community and place-based impact. What we are attempting to do is ask about the founders’ values and design capital that aligns with those values.
People have asked us if we are going to start a zebra’s fund, but often when investors want to make social impact, there is an egotistically driven idea of starting funds to be the savior of the industry. We are more interested in how we can influence how funds are created, so that investors have some more creative ideas for how to deploy their capital in ways that achieve different types of returns and serve different types of founders. Much of our work is about education and meeting with investors to say, “What if you make some recoverable grants over in your philanthropic arm? What if you design your capital stack to include revenue-based financing?” We help navigate them towards a capital stack that itself is more diverse. To diversify founders, you must diversify the capital stack. To diversify the capital stack, you must educate investors about why it is in their interest and that it is not that hard. Eventually, we will likely have a fund. Currently, if we decided to start the capital fund we would raise a million dollars, and it would be the hardest million dollars to raise. Instead, we are in talks with $100M funds to help them think about how to diversify their portfolio. It is a far greater use of our time.
JL: Can VCs be rescued? Is the current way of thinking about diversity and inclusion the right thing or do we need more radical systems-level thinking? How do you teach that?
MZ: The tokenization of Black and Brown communities and women to try to shoehorn them into ventures-style returns is not in alignment with anything. They are slowly beginning to realize that there must be a better way. I have hope because demographically, history is on our side. The next generation of people coming up will not tolerate this extractive, winner-takes-all model of making very few very wealthy. Every single young person that I know is not only not interested in it, but they have the discernment to judge people that are in it for rapacious, capitalistic wealth hoarding. When you look at what they want from employers, when you look at the environmental catastrophe that they are facing and how many of these companies are enabling that, and when you look at the way that they have been raised in the shadow of Black Lives Matter and Indigenous rights movements, the next generation will be a forcing mechanism for a number of these VCs.
We are in this bridge generation. We are trying to say things like, “We are trying to save you from yourselves.” It is profound to see investors that do reach this place of enlightenment. When many of them already have philanthropic arms, it is just a question of having both sides of the house speaking to one another. (The Omidyar Group provides an example of how capital can be deployed all the way across the financial system and how grants can be used to catalyze entrepreneurs.) The question now is, how can philanthropic money work towards more social impact companies? How can those companies receive different types of investments? I do have hope. A lot of it must come from trust building and relationship building with these investors, which takes time, but it is certainly not from telling them “you are idiots.” That is not a winning proposition. Building sincere relationships with investors, recognizing how little exposure they have to the founder experience and to diverse perspectives, and bringing them along from a place of compassionate accompaniment are the best things we can do.
AS: An institutional investor I respect likes to point out that there is no accreditation or license for VCs, literally anyone can become one. There is no code of conduct or any kind of proof that you know what you are doing. And it shows! How few VCs have actually been operators themselves and have built companies? So there is a huge opportunity for learning, education, and seeking more authentic relationships with the entrepreneurs that do not look like them. Similarly for the LPs, the people who invest in VC funds and other vehicles: many wealth and asset owners literally cannot relate to the founder experience, and so there is again an opportunity to educate and craft experiences that help them relate. One of the things I liked to do, back in the days before the pandemic, is have people play an interactive board game I created where they navigate a stylized course from idea to Series A in the persona of an entrepreneur who is not like them. The visceral reaction people have to the journey of, say, a Black entrepreneur, or a [Native American] woman along the same path as a white man, is truly enlightening. People get shout-out-loud enraged about the injustice of the system, and I do think there is potential in creating these sorts of visceral learning opportunities.
EB: Quite a few people have said to us that they do not want to be the charitable case. They want access to the same amount of money and opportunity. It is not just about giving them something, it is also about giving them the same as all the white men with Stanford degrees have had for many years. How do you address that?
MZ: It is not so much that philanthropic capital needs to go to the diverse founder, instead it is that they need to be participating in the ecosystem and field building. Philanthropy could go to education, cooperative models, or advocacy campaigns so that pension funds are freeing up capital. Philanthropy can be a very powerful lever towards systems change in the ecosystem. It is not about giving the check to the founder, it is about giving the check towards organizations that are working at a systems level, so they can start to bridge the blood-brain barrier between. Philanthropic capital can be creating different conditions for more entrepreneurs to succeed. The psychographic founder that we tend to serve is not coming from the place of what is in it for them, growing a company and then exiting. The people that are part of our movement recognize that users, employees, and community are creating value. If you think about value creation in a multi-stakeholder way, traditional venture capital does not serve you because you cannot include those stakeholders easily, other than giving them nominal amounts of equity.
If you come at the value creation, you can say the value is created with this group of people, and the capital that I would need to go and pursue should be in alignment with the values those people have. Venture capital does not do that. We need people that are pushing the Sequoias and the Andreessen Horowitzs of the world. However, the expectation is that if they get the venture capital, then they have a billion-dollar exit. We can have a much higher number of Black women that are receiving venture capital, and then need to create the conditions to ensure that they are able to get the billion-dollar exit, so they can tell us a success story at the end of the day that aligns with LPs expectations. To do that, you must create the market conditions for a Black woman to have a $3B exit. That is where Zebras Unite wants to help and would like to play. Yet, every dollar of venture capital you are taking, you are making a promise that you are going to 10X or 100X that. For every one success story, you have 99 failures. We are asking, how can 100 entrepreneurs succeed on their own terms with the capital that they need? If you have a venture mindset, you are saying, “I believe that I am the one who is going to make this exit, and I don’t care if the 99 others get left in the dust.” The zebra mindset is just a different one that says systemically, for the sake of our community’s economic development, the environment, and the next generations, we need to figure out how more people can succeed at this game on their own terms. It is a different mindset.
JL: What are concrete next steps that you are taking as Zebras Unite?
MZ: We have over 25 chapters in cities from Amman to Mexico City. Each one of those chapters is rejecting the Silicon Valley status quo. We are excited to see that there are entrepreneurs and investors that are taking a stand and saying, “Keep the Bay at bay. We do not need Silicon Valley to come and infect our entrepreneurial communities.” I am excited about the cultural wisdom that is going to come from our chapters because each one is so unique.
In terms of innovation, we are working with investors that are thinking holistically about much more meaningful systems change to address this larger sub ecosystem of problems. We are finding those investors, philanthropists, and people that think on a systemic and holistic level, rather than band-aids. Here in the US, the wealth gap for Black and Brown entrepreneurs is just so extraordinary. The Inclusive Capital Collective (ICC) is an initiative that is being incubated under Zebras Unite. It includes 100 BIPOC fund managers in the country, and we are incubating a co-op of them inside of Zebras Unite. The thinking is that this cooperatively owned infrastructure will then start to generate generational wealth in these communities, because rather than be a non-profit, they will be a co-op, which will then allow them to own the means of production of their own capital. We are very interested in layering alternative ownership structures on to these new innovative models so that people are not just bucketed and non-profits.
AS: The Inclusive Capital Collective is also a great illustration of how we are going about mobilizing more capital to founders of all different stripes. Rather than creating our own fund, we are building distributed infrastructure to serve hundreds of, in the case of the ICC, mostly BIPOC, fund managers and entrepreneur support organizations. Instead of slowly building from our own Fund One, to Fund Two, to Fund Three, we can thereby support a range of types and sizes of innovative capital vehicles and their managers, and create leveraged opportunities for them. We believe we can mobilize larger volumes of capital faster this way, and plan to do a lot more of this sort of collective design of capital and entrepreneur support ecosystems all over the world. Stay tuned!