Hartford Business Journal

31 Hartford Business Journal | April 5, 2021 | HartfordBusiness.com Learning from the data objectively takes courage and the willingness to put away defensiveness. CEOs who ultimately emerge with renewed awareness and the boldness to create a culture where every employee can thrive ultimately acknowledge the issues because they choose to approach listening and learning with curiosity and courage. They ultimately probe and look at ways to proactively address the real challenges facing their organization. The instinct to be the expert in the room and discomfort of leading from behind "The greatest obstacle to discovery is not ignorance — it is the illusion of knowledge," said the late American historian Daniel Boorstin. Becoming more aware is a step in the right direction, and it comes with listening and gaining more knowledge. Newly awakened CEOs or executive leaders can be the greatest asset to progress, but they can be stumbling blocks if they let their newfound knowledge hijack the conversation after a few lessons about DEI. Indeed, passion and commitment are needed to affect organizational change. And, yes, CEOs need to be the champions of this journey. However, this is a time to lead from behind and to champion others who have more experience. Passion, while well-intentioned, must never overshadow the voices of the people who are affected. Fear of the conversation The events of the last year have opened the door for conversations about racism that have never taken place in the workplace before. C-suite leaders are now forced to lead while lacking a basic understanding on the topic and the consequences of saying the wrong thing can have irreparable consequences and serious career implications. Knowing this, CEOs have shared that they avoid the topic or engage in surface discussions to avoid making a mistake. Please know this — it is possible to have uncomfortable conversations that are productive within the right environment where curiosity, humility and compassion are allowed to exist. How? Start by admitting that you don't know what you don't know. Admit ignorance and that you may make mistakes, and partner with experts that can help your organization on this journey. No current impact on the bottom line Organizations today are still able to conduct business in homogeneous environments that lack diversity, equity and inclusion without an impact to their profits. For that reason, CEOs do not see the need to address racism now. That is about to change in the near future, if it hasn't already. Leaders are discovering that culture change is not just about addressing racism but actively creating healthy organizational cultures where every employee feels valued and has access to opportunity. Addressing issues of inequity is in essence ensuring that business remains relevant, not only for customers but for employees. There is a business case for DEI. Leaders who choose to respond with creative and innovative ideas at a time when industry disruption is the norm not only will attract new clients and talented employees, their organization will lead the way of a more inclusive, equitable and diverse organizational future that is already knocking at our doors. Karen Hinds is the founder/CEO of Workplace Success Group in Waterbury and author of five books. Maria Keckler is an executive consultant on communication, leadership and strategy at Workplace Success Group. Q&A Why Black and brown entrepreneurs struggle to raise capital By Anthony Price Mariah Lichtenstern is the founding partner of DiverseCity Ventures and managing director of the Founder Institute, Sacramento Chapter. She is an Aspen Tech Policy Hub Fellow and author of the policy paper, "Removing Barriers to Startup Capital: Democratize Accreditation." In a recent interview she discussed challenges minority entrepreneurs face in accessing capital and what can be done about it. Here's what she had to say: Q: What would you say is the state of raising capital for Black and brown company founders these days? Well, I'm optimistic, but currently less than 1% of venture capital (VC) goes to Black and brown founders. That number has not increased even with all the attention that we've seen in 2020. It's pretty dismal considering the number of people of color in the pipeline. What's even more concerning to me is how many people are excluded from the pipeline of VC fundability because they don't make it through the friends and family round. What do you mean by the friends and family round? Usually, it's expected that before a company is eligible for VC funding, it has a team, it has a product, it has some traction. Ideally, what institutional investors want to see is that you've identified channels where once you receive investment, you can put fuel in the rocket ship and [you are] ready to go. To arrive at that, you generally need a friends and family round to build your product, to do enough marketing, to identify your channels, and validate your channels. By channels, I mean sales channels, whether it's Facebook ads or trade shows or whatever the case may be. The average that it takes to build on to that stage is somewhere around $100,000. This friends and family round is when you raise capital. People who know you, trust and respect you, and are willing to put their money at risk. Unfortunately, because of the wealth gap in this country, white households have 10 times the wealth of Black households and Latinx households, on average. That is, in essence, what the wealth gap is. You see far fewer people who are able to invest in founders of color, especially when you consider the Securities and Exchange Commission (SEC) rules and the type of offerings that non-accredited investors can invest in. You mentioned how white families have more wealth compared to Black families. How did we get to this point where there's such a huge disparity in wealth? I would say economic engineering, to be concise. Historically, Black people were disproportionately impacted by the economic devastation that was happening across the country. They had been left out from relief. It was 1933 when the Securities Act came out. Then in 1934, the Securities and Exchange Act came out, which formed the SEC. In that same year, Franklin D. Roosevelt formed some other federal agencies, which included the Federal Housing Authority (FHA), Home Owners Loan Corp. (HOLC), and National Recovery Agency. Within FHA and HOLC, they codified policy that excluded Black people from receiving loans to purchase homes within their communities, excluded them from owning or purchasing or building homes within white communities, and prevented people who were non-Black from owning, purchasing, or building homes in what were considered Black communities. That has now come to be known as redlining. When you look at the analysis of why we have this wealth gap at all, it points to redlining, essentially the real estate dynamics. It seems like we have an apartheid of investing for Black and brown founders. Would you agree with that? You hit the nail on the head in calling it a form of economic apartheid. It's very nefarious, because it's covert. The SEC standards for what constitutes an accredited investor are $200,000 a year [for individuals], $300,000 for households for at least the previous two years, or a net worth of $1 million, excluding the personal residence. When you look at who is accredited in America, only 10% to 15% of American households qualify — only 1.3% of these are Black and 2.8% are Latinx. In 2020, the SEC expanded the definition of an accredited investor. It seems that these rules are having a disparate impact on people of color. What do you propose as a solution to this problem? Yes, on Aug. 26, 2020, the SEC did revise the rules. It opened it up to venture capitalists like myself to be accredited and for people who hold a Series 7, 65 or 82 license. It doesn't open it up to securities attorneys or to CPAs or CFAs or a whole host of other professions that are arguably sophisticated. What I am proposing and petitioning the SEC to do is to allow people to complete a self-attestation form that says, 'I am aware of the capital and liquidity risks of this investment. I am personally sophisticated or I have access to sophisticated advisors, such as attorneys, investment advisors, CPAs and the like, and I want to make this investment.' I think if the SEC requires that issuers have their investors sign this attestation, then they can make sure that investors are aware of what the risks are. Anthony Price is the founder and CEO of Connecticut-based LootScout, which counsels small businesses how to raise capital and publishes Mini Books. OPINION & COMMENTARY Anthony Price Karen Hinds EXPERTS CORNER Why CEOs resist addressing diversity, equity and inclusion By Karen Hinds and Maria Keckler The recent violence in Atlanta against members of the Asian community and the high-profile trial of a former Minneapolis police officer charged with murder in the death of George Floyd is keeping the racism conversation front and center in the headlines and on the minds of leaders. Many of them, however, are still grappling with how to address this issue in the workplace, not realizing that it's not going away any time soon. Unfortunately, many CEOs are still struggling and resisting the diversity, equity and inclusion (DEI) progress their employees hope to see within their organizations. Why the resistance? I offer five reasons, based on observations and candid conversations with C-suite leaders, as an invitation for self- reflection about the cost of resisting the urgent need for proactive executive leadership during this critical time in history. Lack of awareness It is no secret that an overwhelming number of C-suite leaders lack deep awareness of issues affecting the Black, Indigenous, People of Color (BIPOC) community. Many of them, by their own admission, grew up in homogeneous neighborhoods and attended colleges or universities where instruction and leadership was carried out by people who looked liked them. And when they started their careers, the trend continued. They may have had brief interactions with members of the BIPOC community but not truly meaningful relationships. In most cases, their conversations tended to be transactional, rarely about issues of race that go beyond the stereotypical storylines of marginalized people. Although many leaders acknowledge that racism exists, they struggle to internalize the deep roots of structural racism and its detrimental impact on their organizations and their employees. After attending an awareness session, one leader blurted out, "How could I have lived my entire life and not realized this is the reality for so many?" Simple. They grew their careers, raised their families, accumulated wealth, and led multimillion-dollar operations woefully unaware of a major crisis. Leaders have before them an unprecedented opportunity to change the cultures of their organizations for the better — but first they have to be willing to listen and commit to becoming aware of how systemic racism is affecting their workplaces. Not realizing that the culture they built has caused harm As consultants, delivering DEI climate assessment results is one of the most difficult parts of our job. CEOs tend to focus on what the organization is doing well for their employees and resist the idea that the organization they have built with deep pride could be inadvertently nurturing an environment where their BIPOC employees may be experiencing various degrees of discrimination, microaggressions or practices and policies that perpetuate racism or roadblocks to advancement.

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