The way we invest in new ideas in our society is broken.
Billions of dollars are in the hands of a few venture capital firms in several U.S. states. These firms are most likely invest in people from their ZIP codes, graduate schools, and networks. The result: people in most communities aren't empowered to solve local problems in context, opportunity for new ideas to grow is highly concentrated, and new ideas rarely have a level playing field. 78% of venture capital goes to 3 U.S. states (CA, MA, NY); less than 5% goes to women CEOs, and less than 1% goes to people of color in the U.S.
It doesn't have to be this way. In the words of journalist James Fallows, who recently took a three-year, 48-city tour of America in a single-engine plane, "America thinks of itself as having a few distinct islands of tech creativity; I now see it as an archipelago of startups and reinvention."
If we put money behind talented entrepreneurs who are tackling problems in cities beyond the traditional startup hubs, we'll see better results for both investors and the world. By expanding our reach, we'll end up backing ventures with solutions to the country's biggest problems: access to opportunity for all, through improvements in health, education, and financial services, and improving how we use our resources as a society, through better innovations in energy, water, and food.
But in order to change the results, we'll need to change the process. Village Capital's new program, VilCap Communities, empowers communities across the world to identify the problems that need solving, and in turn enables entrepreneurs in those communities to solve these challenges in a local, contextual way. VilCap Communities' US program launched in Salt Lake City last month, following the launch of the Global program in Amsterdam in February.
The 16 pioneer communities that gathered for the US launch heard from leaders like AOL co-founder Steve Case, as well as their peers, about the importance of spreading the startup wealth beyond a few cities. Each of the 16 communities has committed to develop a problem thesis that their community is well-positioned to address; source local entrepreneurs with unique insights into the problem; and run business development programs to train these entrepreneurs.
Together, the 16 US communities have pre-committed over $1 million to invest in local companies. Crucially, they will invest using Village Capital's core innovation, peer selection, which lets entrepreneurs decide which of their peers gets funded, and has made the process of getting resources to build a company more open, transparent, and fair.
Entrepreneurs across the U.S. can solve society's greatest problems - and build their communities in the process. We just have to enable them to do so.
You can find the first US class of VilCap Communities here.