The Key To Solving The Prison-Industrial Complex Could Be Within The Venture Capital Community
June 03, 2022 at 4:17 pm
The U.S. locks up more people per capita than any other country globally. That’s the startling statistic released in 2020 by the Prison Policy Initiative, which revealed that roughly 2.3 million Americans are incarcerated at any given time.
Yet, just as concerning as the number of people in prison is what happens to the 650,000 inmates released each year. With some 27% of the formerly incarcerated (somehow) surviving without formal employment; necessities such as healthcare and housing; and even custody of their children. And without these things, staying out of prison is a battle many will lose.
With direct control over investor funding, VCs are uniquely positioned to advocate for hiring practices that benefit former prisoners. But as a recent Harvard Business Review story asked, how are corporate DEI efforts helping the formerly incarcerated — who are disproportionately brown and Black — secure and keep jobs? One well-known remedy would be to Ban-the-Box and no longer ask potential hires whether they have criminal records. It’s an initiative whose time has clearly come. But why isn’t this happening, especially when our country needs skilled labor more than ever?
As the Co-Founder/Managing Director and Advisor of Lockstep Ventures, we are answering this question. Established in 2020, we invest in businesses committed to combating inequality and supporting social justice. With an eye toward empowering Black entrepreneurship, we support companies that address racial disparities in health, wealth, education and prison reform. These are issues crucial to Black America that the VC community has historically overlooked. At Lockstep, we call this philosophy “Disparity to Prosperity,” and it directly informs every investment we make. Let us explain why.
The majority of formerly incarcerated people are Black and brown, while most VCs are white.
This imbalance directly impacts the hiring process when nearly 45% of Americans have an immediate family member who is incarcerated. A recent study by The Sentencing Project states that Black Americans are incarcerated in state prisons at nearly five times the rate of whites, and Latinx people are 1.3 times as likely to be incarcerated than non-Latinx whites. Yet, as of May 2021, there were only five Black CEOs at Fortune 500 companies. The investment community is equally disparate — just 1.3% of angel investors are Black, and a mere 4% of VC firm professionals identify as Black or Latinx.
Sure, equal employment regulations have been in place since 1964, but HR teams rarely acknowledge the intersection between race and incarceration. Much of this is due to the lack of BIPOC corporate leadership. Without advocates in seats of power, formerly incarcerated people fall through the employment crack. Banning the box can’t come from a well-meaning hiring manager — it has to come from the top.
“Post-conviction poverty” robs America of GDP growth, but we know this can and must be remedied.
“Post-conviction poverty” — the socio-economic fallout of exclusionary hiring practices — is real and damaging. We have seen communities, such as Hunters Point, San Francisco, become depressed over time due to the failed war on drugs and mass incarceration, which created a revolving door of people unable to get jobs due to their criminal records. The result was people on the street, back in prison and, in many cases, dead. But as our work illustrates, the solution is simple: require the disclosure of a criminal record after an interview, not before.
Reformed individuals like Terrance Stewart of Time Done call this process the “X-files.” Once they “X” yes on the conviction question of a job application, they are automatically denied regardless of skill or need to fill the position. Need proof? According to a three-year study conducted by Arizona State University, Black men without criminal records are 20% less likely to be called back for a job interview than white men with a criminal record.
Time Done, which tackles employment obstacles faced by former inmates, says that nearly 70 million Americans have some sort of criminal record. (8 million of those people live in California.) With the majority of these bans in place for life, a 2021 Time Done report estimates that criminal records have cost the state of California over $20B in lost GDP — this is a price we are paying.
Our economy can no longer afford to overlook any qualified candidate for any reason.
We stand at a moment of unprecedented labor shortages, and the private sector no longer has the luxury of blindly discarding qualified candidates. This is why we view fair-chance hiring as both a moral and corporate imperative. At Lockstep, we are helping to prove that venture capital can, and should, lead the way.
Indeed, many VCs we support are already making this movement happen. Take Alejandro Guerrero, the CEO of Act One Ventures. Last year, he successfully launched a diversity rider, committing his firm to invest in under-represented communities. There’s Greyston Bakery, which has a simple mission called Open Hiring, accepting anyone who is willing to work — no interviews, no background checks and no resume required.
There’s also Defy Ventures, an employment training program that helps the formerly incarcerated become successful entrepreneurs. Defy’s Entrepreneurs-in-Training (EITs) participate in B-school-like courses that include intensive leadership development and executive mentoring. A similar set-up is deployed by the Center for Employment Opportunities (CEO), which helps newly released folks cultivate their inner career capital and secure financial stability. And one of Lockstep’s portfolio companies, Fleeting, a Black-owned tech trucking company, helps formerly-incarcerated individuals cultivate new lives during a three-month training program while tackling America’s persistent supply-chain crisis.
Like Fleeting, we ask all of our portfolio companies to commit to open and inclusive hiring practices — particularly for those with criminal records. Once they commit, Lockstep deploys Greyston to help with open-hiring, Defy to mentor EITs and CEO to influence how government invests in criminal justice and workforce development. It’s a holistic approach to hiring reform that allows each firm to support and learn from each other.
As Lockstep demonstrates, only VC has the leverage to implement change on this scale.
In 2020, nearly 2.5 million people were employed by venture-backed companies. This is why we play an important role in helping champion a clean-slate initiative. From mandating inclusive employment riders to fair-hiring training to long-term performance tracking, VCs can (and must) provide formerly incarcerated people with job security and pathways to success. By infusing accountability into early rounds of funding, we reduce the need for corrective action later on and avoid losing the valuable talent needed to keep our economy growing. VC companies like Lockstep have the power to enact change — change companies, change the workforce and change lives.
Marcus Glover is the co-founder and managing director of Lockstep Ventures, a VC firm that addresses the issues that perpetuate racial inequality in the U.S. through venture capital.
Michael Franti is a globally recognized musician, humanitarian, activist and award-winning filmmaker, revered for his inspiring music, devotion to health and wellness, and worldwide philanthropic efforts. He also serves as an advisor for Lockstep Ventures.