To Disrupt Real Problems, Rewrite the Silicon Valley Playbook



As protests over the murder of George Floyd erupted in Minneapolis — and then spread at lightning speed to cities and towns across America — downloads of the Citizen app exploded to over 150,000 per day. Founded in New York City in 2016, Citizen provides advanced filtering of police scanners to give users a real-time map of crime and police activity near them. The explosion in usage was driven by protesters, who realized quickly that they could use Citizen to coordinate with other protesters and monitor the locations of riot police.
Citizen is an example of how tech startups can enable direct political action in new ways. It also highlights the big responsibility companies have with the policy and technology choices they make: controversially, Citizen provides unencrypted user data to law enforcement when presented with valid subpoenas, court orders, or search warrants.
The business of technology is inextricably entwined with the future of our country. And events of the last few months have underlined the urgent need for startups to take a larger role in shaping that future, whether it is the accountability of police forces, the Covid-19 pandemic, climate change, the opioid crisis, or our decaying civil infrastructure.
In a recent essay titled “It’s Time To Build,” investor Marc Andreessen expressed frustration with the inability of our institutions to be prepared for or deal with a threat like a coronavirus, and rallied entrepreneurs to build ambitious solutions to these problems. I couldn’t agree more with this sentiment: What we need right now are people who can take on these problems with creativity, perseverance, and a willingness to take risks, with an understanding of the emerging frontier of technology. The startup world is full of such people.
Yet the reality is that Silicon Valley’s grand ambitions to fix America’s deep-rooted problems through entrepreneurial ingenuity run into the messy realities of politics and society, which they find themselves ill-equipped to deal with. So what should startups and venture capitalists do to help build a better America?

1. Get our own house in order

The startup and VC community’s responsibility for fixing racial injustice and other social problems have to begin with a hard look in the mirror. Despite years of increasingly urgent discussion about the tremendous biases in venture capital toward white men, less than 1% of venture capital goes to Black founders. When partner meetings are overwhelmingly filled with white men, it is hard to check those biases. That’s why venture firms need to recruit and promote Black and underrepresented partners.
Venture funds carving out allocations focused on Black or underrepresented founders are good steps forward, but so far, these are modest initiatives given the size of capital these funds have under management. Limited partners, who invest their money with VC firms, should lean into finding great Black and underrepresented operators and enable them to start their own venture funds. Arlan Hamilton’s Backstage Capital has invested into an incredible portfolio of startups led by underrepresented founders, and she has called out the support she received at key moments from limited partners like Mark Cuban.

2. Focus on urgent public problems

The country faces urgent problems around public safety, health, education, food supplies, transportation, infrastructure, the future of work, and the mechanics of our democracy. The bulk of the innovation and investment we’ve seen from the venture capital and startup ecosystem has gone toward things like improving our ability to network and communicate with each other, help us collaborate with coworkers, find someone to buy our car or stay in touch with our friends and family during the quarantine. But startups have struggled to make as many strides in complex, regulated markets like education, health care, and energy.
To be sure, there are startups that have done great things in these spaces, and I wrote a whole book about them, studying how they find success in heavily regulated markets. What I discovered was that these startups go beyond the traditional Silicon Valley playbook by applying a sophisticated understanding of how to accumulate and deploy power and influence within regulated markets.
Often, the ideal founders to deploy this playbook have different backgrounds than the usual suspects in Silicon Valley and start their companies in different places, too. A founder who can transform public safety will need to understand the nuances and complexities of policing and community services, and might even have spent time as a police officer. In the same way, if you want to transform public education or public health, it helps to have spent meaningful time in a classroom or clinical setting. It takes time and life experience to understand these complex, regulated markets and form a strong hypothesis on a better model.
Just as expertise and empathy matter in who is founding startups, access to deep networks matter in where you are building startups. If you want to launch a public health startup, being based in Baltimore next to the Johns Hopkins Bloomberg School of Public Health may be more important than being in Palo Alto, a walk away from Stanford.
Consider the problem of voter suppression, one of the injustices preventing our democracy from living up to its ideals, as we saw yet again in Georgia’s recent primary elections. While requiring people to bring a photo ID might make elections more secure, it also disadvantages Black and underrepresented people, who are less likely to have adequate identification. After all, getting a modern Real ID-enabled photo ID often requires a cumbersome process of proving your identity at a DMV with multiple paper documents.
ID.me, a startup based outside Washington, D.C., is working to mitigate this problem with their No Identity Left Behind mission. (Full disclosure: I was a small, early investor in ID.me) ID.me has created the first product that enables all individuals to prove their legal identity online — even those without a credit history — so underrepresented demographics can access digital government, health care, and financial services without an in-person visit. In states like California, you can now pre-screen your identity online with ID.me, making it much simpler to get a photo ID from your DMV.
While providing convenience, the ability of startups like ID.me and others to provide your legal identity online has the potential in the future to remove the false choice between security and convenience that voter suppression policies often hang upon.
ID.me was founded by Blake Hall, a former Army Ranger who had grown frustrated by the difficulty of having to prove his veteran status online after leaving the Army.
Journey Foods, founded in Austin by Riana Lynn, a Black woman, is tackling a similarly thorny problem: getting healthy fresh foods in neighborhoods with lower-income and minority populations. These food deserts and the reliance on processed foods they necessitate contribute to higher rates of metabolic syndrome among minority populations. Journey Foods, which has raised more than $2.5 million from investors including Capital Factory and Backstage Capital, is helping to reinvent packaged food with optimal nutritional properties using artificial intelligence to identify ingredients that balance health, taste, and shelf-life.
ID.me is working in the public interest by working with the government while Journey Foods is working in the public interest by simply building a better product. There is no one right way to win in complex, regulated markets. The important thing is not being scared to attack the big problems.
Venture capitalists need to rethink how we fund these startups, too. Some solutions to public sector challenges require hard tech. For these startups, blending venture capital funding with R&D grants from government programs like the Small Business Innovative Research Grants or agencies like DARPA or IARPA may be a better model than pure venture capital. ID.me, for example, has raised over $40m in capital from a diverse range of investors but also received several million dollars in grants via a federal government program to improve digital identification and worked closely with state governments to implement their solution. Capital Factory in Texas has been a pioneer in exploring these kinds of blended funding models through their work with the Department of Defense.
Other startups may build valuable and impactful businesses in markets that will never generate the massive returns that venture capitalists demand to make their portfolio models work. New venture models like Indie.vc and Rethink Impact are promising.
But most importantly, limited partners and venture capitalists need to change how they perceive ROI and time. While roughly 80% of the U.S. economy lies within complex, regulated markets like public safety, health, and education, a tremendous amount of venture capital has gone into the less regulated 20% of the economy over the past 25 years. The truly huge market opportunities lie within the remaining 80%, but innovation in these massive markets often simply takes longer to unlock. You can build massive businesses in these regulated sectors, but you cannot do it overnight. For limited partners and VCs looking to fix our crumbling social infrastructure, the chance to both make a killing and really change the world requires changing your time frame. The recent news of Chris Sacca launching Lowercarbon Capital and Amazon’s announcement of a venture fund to invest in clean energy are promising signs that sophisticated investors are starting to rethink the purpose and approach to venture capital.

3. Help Fix Our Broken Government Systems

Entrepreneurs hesitate to tackle big, thorny challenges in regulated industries because of the perception that it’s impossible to get participation from a gridlocked federal government unless you’re a large industry incumbent that can spend money on lobbying Congress. But the truth is that we are all living through a massive lesson in federalism: If you want to reform your police force, then it is city councils and county managers that often matter more than Congress. If you want to live near hospitals with plenty of ventilators, COVID tests, and contact tracers, then it matters greatly who your governor is. If you want to deploy solar panels to reduce your carbon footprint, then the economic viability will depend greatly on the rules set by your state utility commission.
Much of our day-to-day lives are governed by municipal or state bodies. Yet political engagement and voter participation at the state and municipal level is abysmal, particularly when a presidential election isn’t on the ballot. I live in Arlington, Virginia, a county with around 240,000 residents that leans heavily Democratic. Our election mechanics make it so that Democratic primaries are often the only competitive races, with voter turnout so low that 12,000 votes is often enough to win you the Democratic nomination, almost guaranteeing you a seat on a five-member board that controls a $1.2 billion budget and how most public services operate. A version of this story plays out in most cities, counties, and states across America.
Viewed cynically, this means that laws and regulations at the state and municipal level can be remarkably easy to shape for startups that know what they are doing. But when seen as an optimistic challenge, it means there are impactful startup opportunities in figuring out how to increase civic participation at the levels of government that will make the biggest difference for fixing our world.
Startups have built power apps to improve our wellness in many ways, from our exercise and food habits to meditation and mental health, in each case using design and data to nudge people into healthier habits. If you care about the future of our country though, the wellness that may matter most is our civic wellness, and the habits we most need to form are in civic participation.
There are similar opportunities for startups in “regtech,” or helping other startups better navigate and comply with the labyrinth of laws, regulations, and norms that cover the more than 10,000 state and municipal governments that have the most impact over how our public sector operates in America.
If you are in the business of technology and care about the future of our country, start solving the problems that matter. Instead of bemoaning the gridlock in Congress, lean into making democracy work better.