On June 24, 2021, Seth Levine joined High Alpha’s Speaker Series to chat with High Alpha Partner Kristian Andersen about his background in venture capital, current trends in entrepreneurship, and findings from his new book, The New Builders.
Seth is a Managing Director at Foundry Group, a Colorado-based venture capital firm and investor in High Alpha. Prior to co-founding Foundry Group, Seth began his venture capital career at Mobius Venture Capital nearly 20 years ago.
Seth’s 20+ years of experience in venture capital has given him a firsthand look at many of the major shifts in the startup landscape over the past few decades. He believes the shift to more transparent deals and information changed VC and entrepreneurship for the better, but not all of the changes have been good.
Below I cover three important trends in entrepreneurship today that Seth unpacked during High Alpha’s July Speaker Series:
Trend #1: Entrepreneurship is declining in the United States
According to Seth and his co-author Elizabeth McBrides’ research, entrepreneurship in the US has been steadily declining. I was surprised to learn that it’s been on a continuous decline since 2008, and the pandemic certainly hasn’t helped either.
There are many reasons that explain why this decline is occurring, but what can we do to change it?
Seth explains that in order to support the next generation of founders, we need to recognize that they look different than the implicit stereotype you might be thinking of in your head (aka a white male in Silicon Valley).
It will rely on the success of women and people of color. In fact, a recent analysis by Seth and Elizabeth found white men are now the minority of business owners in the U.S.
Venture-backed startups are only 1% of the market and only 17% of new companies get money from banks. That leaves 82% of companies to be somewhere in the middle. This all highlights that venture-backed companies do not reflect the entrepreneurial landscape well, and venture capital needs to adapt in order to save entrepreneurship.
Trend #2: We need to expand the definition of entrepreneurship
At High Alpha’s Speaker Series, Seth shared that, “small businesses are incredibly important and the value of a business in society should not be measured purely on revenue”. He argues that small business owners and entrepreneurs are synonymous and not different.
Like I mentioned above, venture-backed startups with white male founders have taken over the idea of what an entrepreneur is today. Entrepreneurship has become somewhat synonymous to San Francisco-based unicorns. This shift in how we define entrepreneurship centers around the false narrative that the only businesses that are worthwhile are the ones that can scale.
Seth uses the term “builders” to describe the broader population of entrepreneurs. He says this new term “describes a much more diverse set of people that are starting businesses today”.
He often receives comments back from people telling him they never thought of themselves as an entrepreneur and now they do. There is a power that comes with that title that encourages people to continue their entrepreneurial and overcome the many challenges they face across the globe.
Trend #3: Black women are the fastest growing sector of entrepreneurship
Despite the overall decline of entrepreneurship, the fastest growing sector of builders are black women. This increase in diversity in the space is long overdue and will only continue to benefit the market. However, though the faces of entrepreneurs might be changing, the systems of receiving capital have stayed the same.
Seth explained that “more access to capital equals more successful business”, and access to capital has largely been run by white males since the beginning of venture capital and modern-day banking.
He projects that there are one to two million businesses that do not exist that should because of poor access to capital. Seth encourages other VCs and banks to give time to those who are less likely to receive capital and are undergoing their entrepreneurial journey. Get involved and be a resource when you can.
For outsiders of the venture capital space that want to support the new builders, Seth encourages us to take small actions that can have a large impact. Some examples include shopping at local or black-owned businesses and/or putting your money in a black-owned bank that historically expands minorities’ access to capital.
The overall goal of his book and our Speaker Series event was to inspire people (especially those who have not traditionally thought of themselves as an entrepreneur) and encourage action to address the problems entrepreneurship is facing.