Tag: Bellwether Foundation

Emmanuel Yimfor, a researcher from the University of Michigan, presents work on "What explains the venture capital funding gap for black entrepreneurs?" conducted jointly with colleagues from the Federal Reserve Board and Cornell University at the Olin Brookings Commission

Boston University’s Amisha Miller examined 2,000 decisions by a real-world venture capital firm weighing the prospects of startups. Wharton Business School’s Valentina Assenova analyzed thousands of episodes of “The Startup Game,” a simulation played globally that casts students as startup funders or founders as they navigate investment decisions.

And the University of Southern California’s Melody Chang contrasted hundreds of cases of conventional equity funding against cases of the relatively new option of equity crowdfunding. At WashU Olin’s invitation, those three scholars and seven others presented research affirming the woeful inequity in startup funding funneled toward women and underrepresented minorities—and exploring the possible causes and likely effects.

The researchers presented their work at the Brookings Institution in Washington, DC, November 10 to an audience of funders and founders who make up the 2022-2023 Olin Brookings Commission, which is working toward a slate of public policy recommendations to address the inequity.

“I appreciate having my experience validated in the work you all are doing,” said Lori Coulter, MBA 1999, a member of the Olin Brookings Commission. She’s the founder and CEO of Summersalt, a tech-enabled women’s apparel company.

Identifying root causes toward finding solutions

Sonia Siraz, a researcher from the University of Essex in the UK, presented work titled "Not all entrepreneurs are equal: Understanding the root causes of challenges faced by minority entrepreneurs in the U.S." conducted with colleagues from the University of Pittsburgh and The Open University.
Sonia Siraz, a researcher from the University of Essex in the UK, presented work titled “Not all entrepreneurs are equal: Understanding the root causes of challenges faced by minority entrepreneurs in the U.S.” conducted with colleagues from the University of Pittsburgh and The Open University.

Widely reported statistics—reinforced by the stark data shared last week—show that women and underrepresented minorities bring down about 2% of the startup funding provided to founders in the United States. The commission, funded by a grant from The Bellwether Foundation, began its work on this project in September. The seven-member commission, supported by student workers and academics from WashU and Olin, is exploring root causes for the inequity before crafting policy recommendations that could address it. The commission expects to issue its recommendations in April.

As part of that process, the commission organized last week’s academic conference at Brookings. Researchers globally submitted more than 40 papers for consideration. Ultimately, 10 were invited to present their work, sharing early-stage research work focused on the issue.

“This event wasn’t about finding solutions. It’s about examining root causes, and it was very valuable,” said Christine Aylward, founder and managing partner at Magnetic Ventures and a member of the commission. “I have ideas about solutions, and I’m looking forward to getting to those.”

Causes examined in some of the scholars’ research included unconscious bias or other beliefs that lead to different evaluation standards for startups founded by men versus women—or by white individuals versus individuals of color. For example, presenters at the conference shared research showing male founders were asked “promotion” questions—looking for information about startup progress and prospects. Meanwhile, women were asked “prevention” questions—seeking information about staving off problems or avoiding pitfalls.

Unlocking exclusive networks

Another common theme was the power of “homophily”—the idea that “birds of a feather flock together.” Networks tend to develop among people with common interests and backgrounds, which often leads to people outside those networks being excluded from opportunities. Such attitudes, researchers found repeatedly, often lead to the assumption that minorities and women don’t secure as much funding because there just isn’t a robust pipeline of minority and women founders.

Brookings' Andre Perry, Adeleke Omitowoju from the Black Venture Capital Consortium and Nasir Qadree of Zeal Capital Partners conduct a Q&A session after individually laying the groundwork for the Olin Brookings Commission conference November 10, 2022.
Brookings’ Andre Perry, Adeleke Omitowoju from the Black Venture Capital Consortium and Nasir Qadree of Zeal Capital Partners conduct a Q&A session after individually laying the groundwork for the Olin Brookings Commission conference November 10, 2022.

“It is lazy to say it is a pipeline issue. It is lazy to say it’s a talent issue,” Nasir Qadree, founder and managing partner of Zeal Capital Partners, told conference attendees. “If you choose to stay where 80% of capital flows or stay within your own social network, then you are going to continue to see the same types of entrepreneurs. That has yielded a bias in terms of this idea that there’s a pipeline issue.”

One research team from Boston University shared early data from a novel research project begun in early 2021—soon after the May 2020 launch of a newly formed venture capital firm that provides pre-seed investments and mentorship for new startups. “We embedded ourselves in the whole process,” said Siobhan O’Mahony, a professor of strategy and innovation at Boston University. The VC firm, established with the expressed purpose of supporting otherwise marginalized communities, allowed researchers to interview participants throughout the process as the firm whittled down 911 funding applicants to 45.

While their work and data analysis is still ongoing, O’Mahony told conference attendees it was already affirming many of the same observations around investor bias.

Leaving money—and ideas—on the table

Their work also provided affirming data for another oft-observed phenomenon affecting the flow of dollars to URMs and women. Projects conceived in these communities often address needs found in these communities—for example, people living in transit-scarce regions or healthcare for targeting minority populations.

Yet while those needs are identified, conventional investment channels historically and systematically dismiss or undervalue them because the incentives to invest are considered too weak.

“We keep dancing around it, but if you want change, it has to come from the funders,” said Andre Perry, a Brookings senior fellow, professor of practice of economics at Olin and commission member.

The work presented left commission members energized and determined, if in some cases also a little stunned.

“What I heard in this room can make a tremendous difference,” said Martin Hunt, CEO of Swanlaab USA Ventures and a commission member. But, he added, the themes raised by the research also smack of Jim Crow economics. “This work repeatedly speaks to the idea that money is being left on the table by not investing in a broader range of founders. We have to start talking about that. If I’m giving money to my retirement fund and you’re not investing in women, that’s not working. You’re costing me money.”

Pictured at top: Emmanuel Yimfor, a researcher from the University of Michigan, presents work on “What explains the venture capital funding gap for black entrepreneurs?” conducted jointly with colleagues from the Federal Reserve Board and Cornell University at the Olin Brookings Commission’s academic conference November 10, 2022.

Iconic image representing startup funding: coins stacked in ascending heights from left to right with a plant sprouting from the highest stack.

Staggeringly disproportionate startup funding available to founders who are women or underrepresented minorities has inspired the next project by the Olin Brookings Commission.

Doug Villhard

Scholars from WashU Olin Business School and the Brookings Institution have recruited a new seven-member commission—comprised of entrepreneurs, venture capitalists and public policy experts—to develop policy-based solutions for the historically lopsided funding support available to underrepresented minorities and women.

Consider these numbers:

  • Women represent 50.5% of the US population, yet recent reports suggest only 2% of venture capital money went to female founders in 2021.
  • Individuals identifying as Black or African American represent 13.6% of the US population, but Black founders received only about 1% of venture financing in 2020 and 1.4% in 2021
  • Individuals identifying as Hispanic or Latinx represent 18.9% of the US population, yet data from Crunchbase, a database of startup funding, suggests Hispanic or Latinx founders receive only about 2% of venture funding.

“This short-changes not only underrepresented founders but also the vitality of the entire innovation community,” said Doug Villhard, faculty commission chair and director of WashU Olin’s entrepreneurship program. “Rather than simply talk about the past, this commission intends to identify meaningful public policy solutions to drive more equitable funding, unlock more potential and further spur our economy.”

Continuation of key partnership

Dedric Carter
Dedric Carter

The project is the second backed by a $750,000 grant to WashU Olin from The Bellwether Foundation. The grant called for three separate annual commissions—formed jointly with Brookings—tackling “megatrend” issues affecting the quality of life in the region and across the country.

The first Olin Brookings Commission project concluded in April. Participants developed an artificial intelligence-driven tool to flag suspicious shipments of prescription opioids and developed policy recommendations designed to empower the tool’s use among federal agencies, law enforcement and industry.

Gisele Marcus
Gisele Marcus

Among the initiatives the 2022-23 commission will undertake will be a national conference of researchers presenting work focused on unearthing the root causes for disproportionate funding and informing any potential public and private policy solutions to address the yawning gap.

That conference is planned for November at the Brookings Institution in Washington, DC. The conference organizing committee is chaired by Olin’s Daniel Elfenbein, professor of organization and strategy.

Informed by veteran innovators

Dan Elfeinbein
Dan Elfeinbein

In addition to Villhard and Elfenbein, the project will be led by WashU faculty members Dedric Carter, Olin’s professor of practice in entrepreneurship and WashU’s vice chancellor for innovation and chief commercialization officer; and Gisele Marcus, professor of practice, diversity, equity and inclusion.

A key component of the Bellwether funding calls for student involvement. Ming zhu Wang, a fifth-year Olin PhD student in strategy, will organize related research, along with five MBA entrepreneurship fellows who will assist with planning, research and feedback.

A nine-member commission has been named to oversee and guide the project while providing input and insight from the perspective of innovation practitioners. Members include:

In the next 10 months, commission members will collect and distill data and industry input over several meetings—including the November conference—with plans to release a comprehensive report of its findings and recommendations by April 2023.

Top row, Seethu Seetharaman, Michael Wall, Anthony Sardella; bottom row, Annie L. Shi, Chenthuran Abeyakaran.

Data scientists from WashU Olin have developed a process for flagging suspicious transactions across 100 pharmaceuticals—a process with a stunningly high level of precision and one that can immediately take aim at curbing the country’s decades-long opioid epidemic.

Working with a US Drug Enforcement Administration database that tracked six years’ worth of pharmaceutical transactions, the five researchers developed an “anomaly detection” system that could flag future suspicious shipments with 100% precision.

In other words, as the researchers noted, when their process says a transaction is suspicious, it is. Basically, their anomaly detection system doesn’t flag a transaction unless it’s sure—which does mean some bad buys could sneak under the radar if they don’t meet the system’s criteria.

“The signals of anomaly detection are very strong for these egregiously suspicious buyers,” the study’s authors wrote. “This renders our algorithm very valuable for practical use.”

Built to guide the fight

The system was conceived as a tool to help deploy limited resources as authorities tackle illicit trafficking in narcotics.

“Having 100% precision is a very important feature of our (process),” the research team wrote in its paper, under review with the Journal of Marketing. “We are willing to sacrifice some recall (and increase false negative errors) in order to enable the practical adoption of our proposed algorithm.”

The research team—all associated with Olin’s Center for Analytics and Business Insights—includes Annie L. Shi, a doctoral student in marketing; Seethu Seetharaman, co-director of CABI and Olin’s W. Patrick McGinnis Professor of Marketing; Anthony Sardella, CABI senior research advisor; Michael Wall, co-director of CABI and a professor of practice in marketing; and Chenthuran Abeyakaran, BS ’21/SI ’23.

Their work comes under the auspices of the Olin Brookings Commission, a project operated by WashU Olin and the Brookings Institution to address critical policy issues affecting communities. The project is funded through a grant from The Bellwether Foundation.

Organizers of the first commission under the Bellwether grant focused on the opioid epidemic that’s killed half a million individuals in the US in the past two decades, according to the Centers for Disease Control. In July, the federal government reached a $26 billion settlement with the country’s three major drug distributors and pharmaceutical giant Johnson & Johnson for their roles in the epidemic.

“Addressing this issue and enabling distributors to have a predictive system that can be used to flag and halt suspicious orders of opioid drugs, is the central focus of this study,” the research team wrote in its paper, “Nip it in the Bud! Managing the Opioid Crisis: Supply Chain Response to Anomalous Buyer Behavior.”

Training the anomaly detector

The team “trained” its anomaly detection system by using a recently released DEA database called Automated Reports and Consolidated Ordering System—or ARCOS.

That database tracked millions of prescription drug transactions—their manufacture and distribution—spanning 2006 to 2012. By zeroing in on opioid transactions, with the guidance of a smaller database of known illicit transactions, the research team identified patterns of behavior across 40 different criteria. The scholars also developed a standard they called “morphine milligram equivalents”—or “MME”—to create reliable comparisons among various opioid transactions.

Ultimately, they found that seven criteria were enough to create an extraordinarily precise tool to flag suspicious transactions. For example, when looking at “average MME purchased per transaction,” suspicious buyers purchased almost 10 times as much as legitimate buyers. When they looked at “median MME purchased per transaction,” suspicious buyers purchased almost 20 times as much.

In the context of the research team’s detection and alert system, members of the Olin Brookings Commission will likely investigate proposals that affect public policy affecting the trafficking of illicit narcotics. Some of those policy areas could include:

  • data sharing and cross-agency communication;
  • revised and modernized data reporting;
  • funding sources and spending needs for system maintenance;
  • response guidance when transactions are flagged.

Pictured at top: top row, Seethu Seetharaman, Michael Wall, Anthony Sardella; bottom row, Annie L. Shi, Chenthuran Abeyakaran.

WashU Olin’s Center for Analytics and Business Insights is on the cusp of creating a machine-learning tool to flag suspicious opioid sales, just as government lawyers announced a multibillion-dollar settlement against three major drug distributors—a settlement that requires a database to track the destination of every opioid dose.

Analyzing a database of more than 400 million opioid transactions from the US Drug Enforcement Administration—a database that includes 277,000 buyers from 2006 to 2012—Olin researchers are building an algorithm that would help law enforcement officials identify shady opioid transactions in the future. The Olin scholars are working to understand key differences in the characteristics and behaviors of convicted buyers who they have identified in the data set to that of unconvicted buyers to inform their model-building approach.

“We want to ‘learn’ what variables distinguish the ‘bad’ buyers from the ‘good’ buyers,” said Seethu Seetharaman, Olin’s W. Patrick McGinnis Professor of Marketing and co-director of the Center for Analytics and Business Insights. “Once we learn the important variables that distinguish bad buyers from good buyers, we train a machine-learning algorithm to take these variables for a given buyer and give a probability score of that buyer being a bad buyer.”

Research to support policy recommendations

Seetharaman, along with CABI co-director Michael Wall, is collaborating with Luoyexin (Annie) Shi, an Olin PhD student in quantitative marketing, on the analysis. The research underpins the first of three projects by the Olin-Brookings Commission. This first project centers on the opioid crisis and what policy measures are needed to confront it long-term.

The entire initiative was made possible by a $750,000 grant from The Bellwether Foundation Inc. This first commission, like the next two, is charged with tackling topics affecting the quality of life for people in St. Louis and across the country.

Seetharaman said the team’s work on the DEA data has quickly shown promise as a law enforcement tool to flag transactions that divert often legitimate prescription therapies toward illicit uses.

“Using the predictive algorithm, the DEA could predict a buyer’s probability of being a bad buyer,” he said. “This way, the DEA can allocate their human and capital resources wisely among high-value leads.”

A well-timed approach

The results come just weeks after lawyers for states, cities and counties plagued by staggering numbers of opioid deaths announced a tentative $26 billion settlement against three distributors of pharmaceutical painkillers: McKesson, Cardinal Health and AmerisourceBergen. The settlement would also include Johnson & Johnson, which no longer supplies raw material for opioids or sells such painkillers in the United States.

“Under the deal, the three distributors, which control 85 to 90% of the market, are required to establish and fund a ‘clearinghouse’ that shows where every opioid dose is headed,” The Washington Post wrote in its report on the settlement. “They must check the database before sending out each shipment of pills and hold theirs back if it appears that the recipient is asking for an extraordinary amount of drugs, a typical sign that some are being diverted and sold on the street.”

According to The Post, more than 100 billion prescription hydrocodone and oxycodone pills were distributed in the United States from 2006 to 2014. Last year, approximately 69,700 people died of overdoses involving opioids in the United States.

Shi said the database she’s analyzing—known as ARCOS, or Automated Reports and Consolidated Ordering System—covers the sale of 14 main varieties of opioids. Those can be further broken down into 170 kinds of substances, and further broken down into 9,133 different products.

The inaugural Olin-Brookings Commission includes a dream team of data scientists, law enforcement authorities, medical professionals and addiction experts with years of industry and policy experience between them. Commission chair Anthony Sardella—founder of evolve24, Olin faculty member and CABI research advisor—serves as a critical conduit between research efforts and the expertise of the commission.

In their current project, supported by CABI, the group is charged with identifying strategies for combatting the epidemic of opioids and recommending any changes in local, state and federal policy that might help curb the problem and sharpen the response from experts.

The commission’s next meeting is set for August 19. The group intends to issues its final report and policy recommendations in early 2022.

Members of The Bellwether Foundation: Ginger Smith, Bob Smith II, and John Wolfe, along with financial advisors from Dunker Street, toured Olin’s new Knight Hall and Bauer Hall buildings on December 9, 2015. The Foundation also held a board meeting at Olin that day. They were especially interested in visiting the new state-of-the-art Bellwether Classroom, named to honor the foundation’s generous support of Olin. The Bellwether Classroom features two translation booths, a full complement of audio/visual features and is the largest tiered classroom in Olin with 91 seats.

Bellwether Foundation logoThe foundation promotes the ideals and aspirations of its founders and supporters beyond their lifetime by providing funds to organizations for projects that anticipate the future in the areas of the arts, computer science, education, finance, health care, medicine, and the social sciences, including research in any of these areas.

In 2004, The Bellwether Foundation established a professorship in entrepreneurship and was named in honor of Robert Brookings Smith. Barton Hamilton is the Robert Brookings Smith Distinguished Professor of Entrepreneurship.

The Bellwether Foundation was established by the late Robert Brookings Smith, a former Washington University trustee and entrepreneur, and also the great-nephew of Robert S. Brookings, who served as the president of the university’s governing board from 1895 to 1928.