The following is a conversation between Preston James, Co-Founder and CEO of Divinc, and Denver Frederick, the Host of The Business of Giving. 


Preston James, Co-Founder and CEO of Divinc © www.stoutmagazine.com

Denver: DivInc was the first early-stage tech startup accelerator in Texas, exclusively for people of color and women tech entrepreneurs. And it’s an organization that’s on the move, expanding into other cities, focusing on social justice, innovation, and serving women of color entrepreneurs through their Startup Sistas initiative. And it’s a pleasure to have with us now their co-founder and CEO, Preston James

Welcome to The Business of Giving, Preston! 

Preston: Hey! Thank you, Denver. It’s great to be here. Really appreciate it. 

DivInc was born out of: How do we remove the barriers to provide access to those essential resources for underrepresented entrepreneurs, so that they would have equitable opportunities in entrepreneurship and thereby become contributors in job creation and wealth creation, and things of that sort for the community?

Denver: Share with listeners the founding story of DivInc and a little bit more about your mission.

Preston: So I just got to take you back a little bit. For those of you who don’t know, I am a 20-year computer, Dell Technologies veteran, and I spent most of my tech time there in IT, technology consulting and sales, leadership roles where I led a federal sales team, driving $250 million in technology revenue for the federal business.

One of my last roles there was a global leadership role at the Global Center for Entrepreneurship for Dell. And in that role, we had an initiative to sell more Dell Technology to startups and entrepreneurs, and it’s in that role I got the startup bug. I got bitten by the startup bug there. And really why? It’s because the innovation was just through the roof. Like in every sector you can imagine, great innovations were happening. I had the opportunity to take an early retirement from Dell and try something different in the next chapter of my life. Didn’t know exactly what that was going to be, but in 2014, I decided to go ahead and take that leap of faith. And soon after, I was invited to become a startup mentor. And soon after that, I actually became an angel investor. 

And it was through those experiences, Denver, I can share when I became a startup mentor, I was associated with Capital Factory, and I believe in that moment in time, I was like the only Black mentor out of almost about a hundred at Capital Factory in 2014. And then when I became an angel investor, I became a member of the Central Texas Angel Network. They had 125 members, which was one of the largest angel networks in the states. And I was the only African-American angel investor at that time. And in addition to that, I wasn’t seeing a lot of entrepreneurs of color and women. And then, when I went to demo days that were hosted by accelerators, I would often be either the only Black angel investor or there wouldn’t be a lot of folks of color in that demo day in general.

And so I thought, “Well, OK. Something is definitely not right.” I knew it when I was at Dell, but it was just so pronounced when I actually got into the space. And I really started to dig down deep to try to figure out and understand why this situation existed. And another thing that was uncovered was as an angel investor, I had a lot of entrepreneurs come and pitch to me, a lot of deal flow coming my way. And what I saw, Denver, was that there was this gap between the white guys who would come in to pitch to me; they had in general, generally speaking, greater sophistication, greater knowledge, if you will, than folks of color and women. There was this gap in terms of just the quality and sophistication of the pitches.

And so, I started putting all these pieces together — not in the coworking spaces, not in the accelerator programs, and then the quality of pitches not getting to that investment… becoming investible. And so, all of this came together and I said, “OK. It comes down to just one word — access.” And it was access to central resources that entrepreneurs need. But in particular, underrepresented founders were not getting this access to the education — best practices, know-how; the access to the human and social capital– the networks and the talent and mentors and things of that nature; and then it was also access to the financial capital as well. 

So taking all of that into context, DivInc was born out of: How do we remove the barriers to provide access to those essential resources for underrepresented entrepreneurs, so that they would have equitable opportunities in entrepreneurship and thereby become contributors in job creation and wealth creation, and things of that sort for the community. So that’s how DivInc was born. 

Denver:  Well, man, that’s a need staring you right in the face, so you didn’t have to go looking for this one. But let me ask you about one of those accesses, Preston, and that’s access to capital. How much of venture capital investment is going to Black and Latinx entrepreneurs? And how much of it is directed toward women-led businesses?

Preston: So statistics will show that for Black and the Latinx community, it’s 1% or less; maybe in a good year, maybe 2%. And you’re talking about hundreds of billions of dollars of investment capital, and it’s less than 2% going to Black and Latinx. And for women, I think that number now is probably around 4% to women founders. But if you look at the population, women make up 50% of the US population, Latinx are much higher, and then African-Americans are like 13%. 

Denver: Yes. I think Latinx is now about 18.7% or something like that. So these are not even close. 

Preston: 18.7%, 20–. not even close. And so, to the point of your question, we’re basically excluding a very significant portion of our potential population in terms of innovation, in terms of job creation, in terms of wealth generation. It’s just… it’s abysmal, right?

Denver: That’s a good word. 

Preston: That would be my word of the day — abysmal — in terms of what we’re doing. 

And I think I’m in a unique position where I’ve taken an approach, Denver, to try to understand what are the challenges from the entrepreneurial side, obviously as an African-American male, a Black male in the United States. But also trying to look at it from the investor side of the house, too. And say, “OK. Let me understand your perspective. What’s your world like, and why are you not investing in Black and Brown and women? Well, what’s going on?” And taking that understanding and really trying to find solutions to: How do we build a more authentically diverse, equitable, and inclusive ecosystem, society, if you will, so that we can maximize social-economic growth at the end of the day?

Denver: Yes. Makes sense. I saw a study the other day, which really shocked me, but investors of color are less likely to invest in entrepreneurs of color than they are white entrepreneurs. And you don’t expect that to be the case, but this was the study out of California that I saw recently. 

The other thing that gets me surprised a little bit is we talk about the wealth gap between white and Black in this country is about 10 to 1. And I kind of leave it at that, but then I start to say to myself: Does business equity play a role in this equation? 

Preston: Absolutely.  And I don’t know how much people understand that aspect. 

Denver: And it’s an interesting aspect. It really is. 

Preston: It is. Because most people think about maybe their income, right? Or–

Denver: Wages, yes. Something like that. 

Preston: –income, and what’s being handed down from inheritance or homeownership. Those are the areas most people think about. But when you think about business equity, like “OK. Can I build a business?” And if you go to the table and say, “OK.” When you fill out applications, you want to… maybe you want to buy a piece of land or maybe you want to sell your company, and whatever it is, you can go in and say, “OK. My net worth is… here’s what I have. Here are the assets I have on the table.” And the value of your business is on that paper, and that could be a million, that could be $2 million, that could be $50 million. But that’s part of your net worth, and that’s something that could be passed down, that could be inherited. And so business equity is critical

Everybody needs to come to the table understanding that this is a collaborative cohort. We’re here to help each other. We’re here to lift each other up and work together to make each other successful.

Denver: Yes, it sure is. Preston, take us inside of one of your programs, your accelerator programs. How do you get selected to be part of a cohort? How long do these accelerator programs go on? And what goes on inside of them? 

Preston: So, for selection to get in, what we’re looking for– we focus on early-stage, Denver, because we recognized that there was really this gap at the very early stage. And so, the requirement for us, that entrepreneurs are coming to us with what we call a minimal viable product. 

So think about a beta version of your product or service, that you have something and you’ve already validated that there’s some market opportunity for your product or service. And then along with that, we’re looking for the team. We’re looking at teams and entrepreneurs. Do they have the grit to hustle? Do they demonstrate perseverance and passion to go and execute that? And then, obviously, we’re trying to look for some semblance of their ability to execute because if you’re just a strategist and a visionary, and you can’t execute, it’s just going to be a good idea on paper. 

Denver: A lot of good ideas on paper out there. 

Preston: Exactly. The other thing we look for is, it’s kind of a funny way to put it, but are they “people people”? Are they collaborative? Because that’s critical in terms of the collaboration that we want to build within the cohorts themselves. 

So, we look for those folks, and then we look at: Is this going to be a big market opportunity? So, is this a big business, or is this something small, local? We want something that’s going to be able to scale. We want something that can grow and drive impact, business-wise or socially. And then, we build, go through a selection process, interviews, with the top 20, and we narrow that down to the top 10. And what we look for is 10 companies. There can’t be conflicts. No conflicts. Can’t have any conflicts. But everybody needs to come to the table understanding that this is a collaborative cohort. We’re here to help each other. We’re here to lift each other up and work together to make each other successful. 

Within the cohort itself, the programming consists of workshops pretty intensely over the first six weeks or so, going over the business model, revenue model, financial modeling, if you will; go to market planning, market research, and we can go on. All the real strong fundamentals that you need to have to really build your business, we go into that pretty, pretty intensely.

And then, over a 12-week period, you have those workshops, but then you also have mentor office hours. So you’ll be meeting with subject matter experts pretty much every week starting with week three, where now, you kind of know what you need, whether it’s a developer, or marketing, or legal, or financial, or sales. Whatever it is, you can meet those mentors, and they will help you along the way. 

And then during the program, Denver, which is really, really critical and a lot of the founders really appreciate is… what we do is KPI sessions. So key performance indicator sessions. So they have to come in and basically say, “OK. Based on the revenue model formula that we’ve gone through, here are the key aspects of my business that I really need to focus on to move my business forward.” And each week, they’ve got to commit to certain activities that are going to drive that needle forward. Now, that commitment is loud and clear to us and the rest of their peers, so they’re being held accountable every week. And if they fall short, it’s like, “OK. Great. You said you were going to do 50 customer surveys, and you did 25. Well, next week, you owe us 25, plus another 25.” 

We’re doing pitch coaching with them to really help them verbalize and articulate the value proposition of their business, which is really, really critical. If you want to get investment, if you want to hire people, if you want to get strategic partners, you need to be able to articulate and differentiate your business from others.

Denver: Yes. Right. 

Preston: You know what I mean? We’re pushing. And that’s all through the program. They get pitch coaching as well. So we’re doing pitch coaching with them to really help them verbalize and articulate the value proposition of their business, which is really, really critical. If you want to get investment, if you want to hire people, if you want to get strategic partners, you need to be able to articulate and differentiate your business from others. And so, we work hard in all of that. We help them develop their pitches, and then we do a demo day at the end of those 12 weeks.

One thing that I will point out that I can’t say, “OK, this is the one thing that we do in the program,” but we facilitate a culture of family within the program. And we spend a lot of time together. Even if we were doing it virtually right now, we’re spending a lot of time together because a lot of these folks are going through what maybe a typical entrepreneur goes through, plus some. 

Denver: No doubt about it. I was just thinking, there are early-stage companies that are just learning how to generate revenue for the first time, and then COVID comes along. So I would imagine there’s got to be a lot of mutual support about trying to lift each other’s spirits up because this is tough in any environment. And in this one, it is impossible.

Preston: Yes. And I think that this is where it becomes really important because even after the accelerator program, we continue to support them for another 18- to 24 months in a very informal way. 

So when they hit situations like this, whether it be COVID or something else that happens; their ability to pivot their business, change their businesses; or deal with something that’s happening on a personal level — maybe their parents got ill or whatever. So they’re dealing with a lot of stuff. Or maybe the co-founders are no longer getting along. What should they do? How are they going to handle it? What do you need to do legally? So DivInc is sort of like their ability to go back home, and say, “Hey, Preston, Brooke, can you help me with this? This is what I’m going through. I need to think this through. I need somebody to talk to.”  We’re there for them for that. 

Denver: That’s great. To have a trusted and non-judgmental listener at the other end that they can rely on is… you can’t even put a price on that. That’s just indispensable. 

Let me ask you a macro question, Preston. And I mean whether this is in Houston, where you went to in January, or Austin, your home base, what does a city need to do to create a more inclusive startup community? 

Preston: So I think, from my perspective, they need to start by being, number one, very intentional. They’ve got to put a stake in the ground and say, ” OK. We’re going to do this. And we know it’s going to be hard, and so let’s go out there and find the partners that can help us do it. Because we don’t know what we don’t know, and so who are the partners that we can find to help us create, say, an ecosystem within an ecosystem?” And whether it be DivInc, or whether it be some organization like DivInc, or a few other partners, they’ve got to be committed to working with those partners and keeping an open mind, open eyes, open ears to do some joint programming, to make investments in terms of dollars as well as people resources, and commit to that.

So, I’ll give you some examples. In Austin, one of our key partners, community partners, if you will, Capital Factory, a lot of in-kind in terms of their coworking space, in terms of their resources, we’re able to use that. And they are a hub for a startup community. So that allows us to bring the DivInc community and network in to leverage the resources of Capital Factory, where typically, in the past, folks may not have gone to Capital Factory because they didn’t feel comfortable or wanted. And so now DivInc eases that. Now, we can create this– 

Denver: It’s sort of an on-ramp for them to get in there. Yes. 

Preston: Exactly. And then we begin to do things together. So now, Capital Factory and DivInc have been doing the Black in Tech Summit and the $100,000 Pitch Challenge for the last three years, specifically for Black and Brown and women founders. Notley Ventures is another. Notley came in and they provided investment funding to help DivInc get over a hump, if you will, and allow us to really expand our team while also providing us as a nonprofit some back-office support for operations. 

And so that’s how you lean in and partner. The organization itself doesn’t… the Notley Ventures of the world and the Capital Factories don’t have to do all the work themselves. Partner, collaborate, do things together. The Notley folks and the folks at Capital Factory, they’re venture capitalists in town who have access to financial capital. Use your network to tap into that financial capital to help us. Corporations can do the same thing. 

So now, in Austin, it’s always been very collaborative and friendly, but now, people are being much more intentional, much more collaborative not just with DivInc, but also with entities like University of Texas and with other organizations in town to find leadership, to find talent. Now, you create this culture of collaboration outside of the normal networks. 

Denver: Absolutely. And I think the normal networks, as bad as they may be sometimes, it’s just that a lot of these people are not on their radar. And what happens is when you make these connections, you get to know these people, and you begin to get them on your radar and you say, “Wow, what a talented bunch, but I didn’t know about this!” So it begins to have that multiplier effect that goes on and on and on.

Preston: Absolutely. And I love the way you said that. That’s absolutely exactly what’s happened. People on both– sort of like on the entrepreneur side and on the other side, too. Like, “You know what? I didn’t know Denver was such a great guy, man, and he’s so well- connected.” Yes, but Denver has been doing this for years. You’re just now getting to know him, and he’s just now getting to know you. And unfortunately, the two of you could not have met before because your networks were so different. But now, we bring that together, and then it becomes, like you said, the multiplier effect. And it’s beautiful…it’s beautiful to see. 

And so many foundations and philanthropists restrict the funding to just programs, and it takes people in operations optimizing operations to execute those programs. So, I would just love to see more foundations and corporations support the operational side as well as the program side, and understand that and become a vested partner in making that happen.  

Denver: The multiplier, yes. And these guys have a different take on a problem that I haven’t seen before because they’re coming, so therefore, it’s more interesting. It’s like, “Wow. We’ve never tried this.” And that just is a great, great ecosystem to set up. 

Preston, you’re a nonprofit organization so you have a pretty good understanding about the sector at large, and I want to ask you something about it. What changes would you like to see in the sector– the way philanthropy is done– that would help not only the philanthropic sector but also use those resources to help change the whole sense of inclusion and equity for our society at large?

Preston: So that’s a really great question. And a few things, actually. We’ve been very fortunate as I mentioned earlier to have a relationship with Notley Ventures, which is a venture philanthropist, if you will. And I think fundamentally, Notley gets it because it’s about venture by investing capital into nonprofit organizations, but also supporting them on the operation side. 

And so many foundations and philanthropists restrict the funding to just programs, and it takes people in operations optimizing operations to execute those programs. So, I would just love to see more foundations and corporations support the operational side as well as the program side, and understand that and become a vested partner in making that happen.  

Then the Notley piece I talked about also is making resources available to support operations. Corporations can do the same thing. They have in their midst access to resources that could help backend operations optimize their operational capacity. So corporations can do that as well. 

And then the other thing I would say, and we’ve been very fortunate to have very engaged partners, but I think there could be, Denver, these corporate city-local partners collaborating more strategically to support initiatives, especially major initiatives. So, be it like homeless or entrepreneurship or what have you, but how do multiple corporations and foundations come together, put their monies together, put strategic initiatives and resources together, to go push and really make a change? As opposed to “Yes, this company did this, and that company-sponsored DivInc, and this company-sponsored DivInc.” But I bet you, if this company and that company talk to each other about how they can best support DivInc, we might come up with something pretty big. You know what I mean? 

And so really kind of taking an innovative… more innovative approaches to how we support nonprofits and encourage collaborations across the board. 

Denver: Yes. It’s interesting what you say there because the two things I heard you say is the second one was systems. Look at the system. Don’t look at this one-off in terms of giving here and giving here. Take a look at the system. 

And the other thing that you were talking about that struck me about operations was trust. Don’t give your money for a specific project, but if you think the organization is worthwhile, trust them. You know what I mean? 

Preston: Trust them. 

Denver: Because you don’t have a crystal ball. You don’t even know what you’re going to need. And if anything tells us that we don’t have a crystal ball, it would be this past year. So how can you tell them exactly where it’s going to go when stuff happens? And then…you know what I mean? You don’t. So I think those are two really wise pieces of advice.

Preston: Yes. You have nailed that one. I agree. It’s really interesting, Denver. Robert Smith from Vista Equity put out a challenge to corporations to commit 2% of their profits in his particular Black- and Brown-led nonprofits. And when you think about it, it is a lot of money, but it’s not a lot of money to corporations. And so, why not lean in with that 2% trust? 

And if you don’t want to trust– the reason why you don’t want to trust is because you’re putting money out there sort of blindly. And it’s like, well, don’t do it blindly. Like, if you feel connected to the mission, you feel connected to the team: “Let’s go ahead and invest in some of that, and let’s work with them over time — three years, four years, five years. Let’s do it that way,” as opposed to, “Hey, we’re doing this this year,” and Boom! One time. 

Denver: We’ll let you know in 11 and a half months as to whether we’re going to give you the money next year. So on December 15… How do you plan? How do you plan for something like that? 

Preston: Right. 

Denver: Let me close with this, Preston, and it really has to do with your leadership. And I’d be very curious, having gone through what you’ve gone through and helping mentor some of the people that you’ve had, what you’ve learned this past year about your own leadership, leadership in a crisis, and what do you think you’re going to take away from it that’s going to inform the way you lead going forward? 

Preston: What I learned is that my voice counts more than I thought. Not just internal, to my team and just within my own circle, but I recognized that my voice counts for the people who don’t have a voice. And in some cases, that’s kind of scary, right? But– 

Denver: And a responsibility, isn’t it? 

Preston: It’s a responsibility. And so, there is this community obligation, if you will, in terms of the leadership from that perspective, and I have a responsibility to leverage that for the good for those who don’t have a voice. And that was a big one for me because I didn’t– really, I’m not a social media guy or anything like that, but what I had recognized is that at the points in time when I was sharing insights and perspectives and giving guidance, that it was weighing in pretty… much heavier than I thought. I mean, I’m competent. I’m a competent leader, but that was very, very important. 

The other thing, too, was that being vulnerable and allowing vulnerability is key as well

Denver: Hard to do, though, but it is key. 

Preston: Yes. It’s really, really key to allow people to not be OK and be able to help them through the crisis. And I think corporations were going through sort of the same thing. So, leadership in nonprofit, leadership in corporations – it’s the same thing. The corporate leaders had to step back and say, “OK. Whoa! What’s going on here?” Because it affects productivity; it affects everything that’s going on if you’re not able to hear and understand and share everything that’s happening. 

And so, those were the sort of two key things for me: that I need to leverage my voice, my power; lean on some folks. I mean, a lot of white male friends didn’t know what to do, and so I had to nudge them a little bit and not let those sit on the side who were comfortable sitting on the side. It was easier to sit on the side. I’m like, “No. That’s not what you should be doing.” 

Denver: Yes. It’s so interesting when you can show that vulnerability, it allows everybody else to show their own vulnerability when the mask comes off. And I’ve observed, too, when leaders do that, and they don’t really know what to do and they don’t have all the answers, everybody on the team wants to help out. 

But when a leader acts like they have all the answers, “I guess he doesn’t need me.” You know what I mean? “I’ll just wait for him to tell me what to do,” and you’re very passive. But when somebody says, “I know where we want to go, but hey, this is tough. Hey, what can I do?” everybody gets engaged and you really begin to co-create. It really is interesting. Great insights.

Hey, for those who want to learn more about DivInc, tell us about your website and how they can help support this wonderful work of yours. 

Preston: So you can reach out at https://www.divinc.org, and you can also reach me at [email protected]

Denver: Well, I want to thank you, Preston, so much for being here today. It was a real delight to have you on the program.

Preston: Oh, man. It was great. Thanks for having me. I had a great time.


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