11/10/2011 07:02 pm ET | Updated Jan 10, 2012

Arrington Controversy Fuels Portland's Black Leaders

Michael Arrington had no idea a firestorm of controversy would ignite when he fumbled a question from Soleded O'Brien during an interview for CNN's documentary Black in America: New Promised Land, Silicon Valley, which officially airs on Nov. 13.

Q: "How many Black entrepreneurs do you know?"

A: "I don't know a single Black entrepreneur."

Arrington could have met several Black entrepreneurs at the University of Portland on Nov. 4, where 70 Black, White and Hispanic education and economic leaders, including several entrepreneurs, enjoyed dinner, movie and stimulating conversation. The venue included a screening of CNN's upcoming Black in America documentary. And Michael Arrington's response to Soledad's question caused an unmistakable stir in the room.

Arrington is an iconic figure in Silicon Valley. He is the founder of Techcrunch, one of the leading media platforms covering the tech startup space. He's also an investor who oversees another iconic platform, Techcrunch Disrupt, where each year, startup companies compete for an opportunity to pitch their ideas to top investors.

Job Growth Ecosystem

The process of entrepreneur-meets-investor is the foundation for an equity risk capital investment space responsible for fueling thousands of fast-growing startup companies, which are responsible for more than 21 percent GDP each year and all of the net new job growth in the nation since 1980.

You read that correctly... young companies produced all net new job growth in America since 1980. The top performing 1 percent of young companies produces 40 percent of all jobs in America in any given year according to the Kauffman Foundation.

Where Are Black Angels and Entrepreneurs?

So, when Michael Arrington says he doesn't know any Black entrepreneurs, it's a telling statement. Arrington's ignorance regarding Black entrepreneurship doesn't say he is racist. It does, however, suggest he likely doesn't know any Black angel investors either. It strongly suggests the processes of job growth and wealth creation, in which Arrington is entrenched, is missing a significant portion of America's innovative resources: Black Americans, both tech entrepreneurs and angel investors.

Those missing components undermine the strength and vitality of the American economy.

Arrington's point offers us insight into an inconvenient truth: The venture capital industry has failed to significantly benefit Black and Hispanic sectors of urban regions, where investments have generated significant wealth all around those areas, leaving economically blighted doughnut holes. The processes of job growth and wealth creation routinely flood regions that sit adjacent to economic deserts.

The elephant in the room is that investors invest in people -- individuals and teams -- as opposed to just ideas. If Blacks and Hispanics aren't putting our capital at risk investing in startups, then we aren't in the room when angels meet entrepreneurs. Our money, however, is in the room when venture capital is in play. Those resources, comprised of public and private sector dollars, include pensions and a variety of other institutional funds.

The absence of Blacks and Hispanics from the entrepreneur-investor relationship ecosystem results in large scale economic patterns of significant disparity that follow along racial fault lines from pipeline (education) to productivity (company growth).

Meritocracy Myth

But the mantra in Silicon Valley and elsewhere across the entrepreneurial landscape is meritocracy rules in the innovative startup space. Hard work and creative ideas are the myth of success in the Valley. The reality is that attracting equity investment is exceedingly difficult regardless of the merit of one's ideas, and it's primarily about relationships.

And if you're Black, as is Wayne Sutton, a co-founder of the NewMe Accelerator featured in the CNN documentary, you can be viewed as a problem simply by being present in Silicon Valley after sunset. Sutton was stopped by the police while walking back to the home where he and other NewMe entrepreneurs spent two months preparing to present their creative ideas to would-be investors. Sutton's experience is a Silicon Valley paradigm that makes a very strong statement -- which cannot be ignored by chanting "meritocracy." The police in Silicon Valley saw a problem when they saw Sutton walking at night. What do investors -- who admit they invest in people -- see when faced with an unfamiliar entrepreneurial paradigm?

Tech startups led by Black founders received 1 percent of all investments in tech in 2010.

Portland, Oregon Entrepreneurial Ecosystem

Arrington's point about not knowing any Black entrepreneurs, while arguably misstated (he actually knows a number of Black entrepreneurs) is on point. There are far too few Black tech entrepreneurs and far too few Black investors in the angel space. Thus, the economic engine of entrepreneur-meets-investor doesn't exist to any appreciable degree in Black America.

Portland, Oregon is a microcosmic example of a national problem. Portland's Black urban areas appear disconnected from the processes of job growth and wealth creation that exists all around them. STEM education (science, technology, engineering and math) is a robust component of Oregon's economic ecosystem and helps fill the pipeline of creative and eager innovators who take risks to create new jobs in the tech sectors. Blacks are severely under-represented in Portland's tech sector and perform poorly in Portland's public schools.

Moreover, Blacks are largely missing from Portland's growing equity investment community. And there is no comparable infrastructure in Portland's disconnected urban sectors to the Oregon Entrepreneur Network (OEN), which boasts wraparound resources for entrepreneurs and connections to pools of angel capital.

The America21 Project

The Shiley Hall of Engineering at the University of Portland was a fitting venue for Black leaders to assemble (like state representative Lew Frederick), educators (like Dean Sharon Jones), investors (like Jaymes Winters, CEO of Blue Leopard Capital), and the Urban Entrepreneur Network and Portland Urban League. The discussion focused on economic solutions presented by The America21 Project. The organization's visionary approach to transforming the economic state of Black and urban America is predicated upon three core pillars: STEM education and workforce development; entrepreneurship, especially high-growth; and access to capital and capital formation.

Portland leaders are on a path of problem-solving. The America21 Project is leading that effort. The foundation of entrepreneur-meets-investor is the primary focus of The America21 Project's economic summit -- A Gathering of Angels and Entrepreneurs at Rutgers University, in conjunction with The Center for Urban Entrepreneurship & Economic Development (CUEED) on Nov. 15 and 16 in Newark, NJ.

Arrington's inadvertent exposure of a widely held notion among CEOs, investors and the job growth and wealth creation infrastructure, fueled a controversy that has elevated the discussion of race and economics to a visible platform across the nation.

The struggle to increase diversity in many corporate sectors is often met with the same "I don't know any minorities" mantra. Yet, in Portland and Newark, new discussions center on solutions that include developing new entrepreneurial infrastructures in disconnected sectors, and strengthening the nation's overall economic competitiveness in the 21st century global innovation economy.