As BK-XL business accelerator launches, from Tsais' Social Justice Fund, clarity on Brooklyn commitment: 10 weeks + maybe 1 yr. Who's BIPOC? Credit to Nets?

Why the Owners of the Nets Are Funding Tech Start-ups, the New York Times yesterday reported in its NY Today newsletter, noting the window for applicants had opened.

The subtitle: "BX-XL was set up to provide funding to entrepreneurs in Brooklyn from diverse backgrounds."

Well, the word "in" is covering a lot of ground (as is "diverse").

Despite quoting Clara Wu Tsai, "a philanthropist who with her husband, Joseph Tsai, owns Barclays Center"--nope, it's the arena operating company--as envisioning “an entrepreneurial hub that will be inspired and powered by location and diversity, much like Brooklyn itself," and despite the Tsais' Social Justice Fund stating that it's "centering economic mobility and racial justice for BIPOC populations in Brooklyn," the BK-XL accelerator is "in" Brooklyn but not necessarily of Brooklyn.

As explained by Visible Hands, which is partnering with the Tsais' Social Justice Fund, applicants need not be New York City residents but, upon acceptance into the BK-XL program, must be based out of Brooklyn for the duration of the ten-week program that runs between April and June of 2023.

But there's an incentive for them to stay at least a year. According to the FAQ:

BK-XL will invest up to $500,000 into accepted companies. This investment will come in two parts:

An initial investment of $125,000 on a post-money SAFE [Simple Agreement for Future Equity] in return for seven percent (7%) equity, to be received on our around the beginning of the program

An additional investment of $375,000 via an uncapped SAFE with a Most Favored Nation (“MFN”) provision, upon successfully meeting certain growth benchmarks — that you and BX-XL will agree upon in advance — and maintaining operations in Brooklyn for at least one year after the accelerator program concludes.

Applications for the 12 slots close Jan. 20, with the program, at Industry City, held April through June. 

So the Social Justice Fund could end up investing anywhere between $1.5 million, if none get the second investment, and $6 million, if all get that second investment.

At Industry City, they will receive a dedicated desk at the Camp David coworking space and "will be encouraged to work M-F from the space." That suggests that, while the space--with opportunities for interaction and a nearby cafe/courtyard--may be a draw, the founders may already be working from home.

What's BIPOC? 

Reading the various coverage, as well as the websites, provokes a question: if Asian-American entrepreneurs are people of color but not underrepresented, do they qualify?

Note that the Social Justice Fund is an initiative of the Joe and Clara Tsai Foundation, which states in its Twitter bio #BackBlackBK.

From the Times:

“When we think about the economic landscape and the opportunity to support BIPOC founders, Brooklyn is an amazing place to do that,” said Daniel Acheampong, a co-founder and general partner in Visible Hands, a venture capital firm that joined with the Tsais’ Social Justice Fund in BK-XL.

“Just numbers-wise, the Black community makes up 22 percent of the city’s population, but only 3 and a half percent of New York City businesses are owned by Black entrepreneurs,” Acheampong said. “This shows there’s a gap where we should be investing in BIPOC projects.”

BIPOC, which means "Black Indigenous People of Color," is a term of relatively recent vintage. From a November 2021 New York Times article:

Asian and Latino Americans are often left to wonder whether they are covered by the “POC” part of the acronym.

That remains fuzzy. From yesterday's Times article:

Clara Tsai said that Brooklyn “has typically lacked the kind of institutional investments needed to build a community of successful venture-backed companies, especially in communities of color.”

Visible Hands, according to BK-XL, is "the most trusted platform for early-stage, overlooked founders" and is aimed at supporting "historically marginalized founders." According to the FAQ:

BK-XL is open to founders of early-stage startups whose racial identities are under-represented, e.g., Black, Indigenous or people of color ("BIPOC")

Who's underrepresented? 

A Google search led me to Crunchbase, which reported 5/4/22:

Despite record-shattering venture investment in 2021, Black, Latino and female startup entrepreneurs continue to receive only single digit percentages of that capital.

According to a 6/27/22 memo from the House of Representatives Committee on Financial Services, preceding a hearing, “Combatting Tech Bro Culture: Understanding Obstacles to Investments in Diverse-Owned Fintechs”:

In 2021, VC [venture capital] investments in the fintech industry reached $35 billion. However, the majority of that investment has been directed towards White and male-founded companies, with a small minority directed at companies founded by women (2%) and people of color (23%),  with Black founders receiving only 1% of investments and Latinx founders receiving just 1.8%.

Note that fintech (financial technology) does not necessarily reflect the full spectrum of startups, which may be somewhat more diverse, but the numbers are stark:

VC-backed founders are estimated to be 77.1% White, 17.7% Asian, 2.4%, Middle Eastern, 1.8% Latinx, and 1% Black... some capital markets experts have argued that a VC workforce with more diverse representation may lead to increased VC capital flow for diverse founders.

The implication is that Asians--a broad category--are somewhat overrepresented. So it would be interesting if the BK-XL program, funded by an Asian/Asian-American couple, excluded Asian founders. 

Note: I tested out the eligibility quiz as a putative East Asian male and found that identity was eligible.

But let's see who gets funded--and, perhaps more importantly, from where they've applied and their longevity in Brooklyn. Will these be Brooklyn businesses, or just ones incubated here? Will they hire people and grow within Brooklyn?

Are the Nets presenting the accelerator?

Maybe it was just shorthand. Or maybe it's strategy.

But it's notable how BK-XL was, at least in one message circulated to the project's mailing list, being credited to the Brooklyn Nets, as seen in the recently circulated image (right), rather than, as officially stated, "a partnership between the Social Justice Fund and Visible Hands."

The initial press release was headlined Clara Wu Tsai, the Social Justice Fund, and Visible Hands Launch “BK-XL,” the Largest Accelerator Focused on BIPOC Founders.

As I wrote, the focus on Clara Wu Tsai--in the midst of the controversy over suspended Nets star Kyrie Irving--seemed to be a way to take the focus off Joe, who'd engendered some backlash given his own indirect unsavory associations.

It also seemed a way to generate another halo just in time for the couple to receive the long-noticed Jacqueline Kennedy Onassis Medal from the Municipal Art Society (MAS), which I had criticized, primarily, for the MAS's willingness to overlook its crusade against "supertall" towers, given the Tsais' prominent purchases within one such tower.

Gaining value

 

So, is it possible that the Brooklyn Women's Business Center and the Local Development Company of East New York, of their own volition, decided to alert people that "The Brooklyn Nets Accelerator (Grant) Application Opens December 5, 2022" and "The Brooklyn Nets Presents the BK>XL Accelerator for BIPOC Business Founders!"?

Maybe, but unlikely. 

Whether or not the Social Justice Fund suggested a focus on the "Brooklyn Nets," it's a way of 1) pointing to a better-known entity and 2) providing a halo for brand that, in just the past month, has alienated some fans and followers, especially Black ones, with what they saw as heavy-handed treatment of Irving. 

See for example this petition, Free Kyrie and get Joe Tsai to step down as the governor of the Brooklyn Nets, which has some 600 signatures so far and includes, among the reasons for signing:

• "What they are doing to kyrie is a modern-day version of buck-breaking and I'm not having it"
• "Joe Tsai ACTIVELY supports Islamphobia and the genocide of Uyghers with millions of dollars but is trying to hold Kyrie accountable for posting a tweet" 

Note: "ACTIVELY" and "genocide" do not capture a more murky situation.

Burnishing the brand is important on multiple levels: attracting ticket-buyers, attracting (and keeping) sponsors, avoiding more criticism (especially in public), and keeping the Nets as a team that other players (in a mostly Black league) would want to join.