Morgan Stanley-Backed Tech Entrepreneur Could Be Mentoring The Next Elon Musk
In the first of a six-part series, Moguldom talks to Miami tech entrepreneur Brian Brackeen, CEO of Kairos.
Brian Brackeen has managed explosive growth at his Miami-based facial recognition firm, Kairos, raising more than $5 million in venture capital.
Kairos is one of five startups run by women and founders from underrepresented groups that will be moving into Morgan Stanley’s headquarters in November for three months of incubation in its new startup accelerator.
Brackeen spends a lot of time these days mentoring entrepreneurs. The conversation invariably turns to funding.
“I feel like there’s a lot of data that could be used, particularly in AI,” Brackeen told Moguldom. “We could run every single deal through an algorithm and I could tell you which groups are being fairly treated and not. It’s really more about sharing information … and matching the entrepreneur’s background to the deal terms on a larger scale. The challenge is, the worst offenders are the least likely to share data.”
Brackeen talked to Moguldom.com about what diversity means to him, and how Google and Facebook could help create Elon Musks at companies founded by members of underrepresented groups.
Moguldom: Google and Facebook generate billions of dollars of revenue from Black users. So many users are offering their data and content for free. Why haven’t Google and Facebook come up with a $300 million fund to fund black entrepreneurs?
Brian Brackeen: Google has done some (funding of black entrepreneurs) though not enough. I’d love to see them target a little more. I’m not familiar with almost any large systemic Facebook approaches to solving this problem. As you know (there’s) the Paypal Mafia effect: If you buy a firm for a great number, the founding team, some of its earliest investors all do so well that they can go on and do other things. Companies that are founded by minority founders have larger amounts of minority investors and larger amounts of minority early employees. That would impact so many lives and create so many Elon Musks. But those companies are not getting the opportunity to exit because they lack the network connections to do so. Facebook could change all of that.
Moguldom: Silicon Valley has tried to excuse its lack of diversity by saying, “It’s the pipeline thing,” or “There’s not enough black and female engineers,” or “It’s not us.” For the black entrepreneur that does get capital, do you feel that their term sheets are dirtier? We’ve seen biases in housing, auto loans and small business loans where the data consistently supports that the black consumer gets a dirty term sheet.
Brian Brackeen: Probably, and for different reasons, some of which include ourselves. Our early friends-and-family rounds tend to be people who invested in real estate previously or other asset classes. So they create terms that are not standard. If you start on the wrong foot, you’re always playing catch-up for the rest of that firm’s life. If the valuation’s too low for the very first time, if you’re not doing convertible notes for the very first time … you can never catch up. The earliest-stage investors in minority firms including those that are minorities … it’s on the entrepreneur to have a network that they can say, ‘Hey, look at this term sheet. Is this fair?”
My grandfather always used to say, ‘Not all money is good money.’ You’ve got to understand terms and make sure you’re accepting the best terms for the company. When you get to the venture area, you need to get multiple term sheets to minimize the opportunity that you’re not getting the best deal. Like the auto loan, like the home loan, we see that on the consumer side when you get multiple quotes, you do better. The same is true for entrepreneurship. The challenge is: can that founder get multiple quotes?
Moguldom: Just like in housing, auto loans, and small business loans, where you see this pattern over and over, do you believe there should be regulatory eyes on venture capital investing as a check for the investors to be treating entrepreneurs fairly?
Brian Brackeen: … I feel like there’s a lot of data that could be used, particularly in artificial intelligence. We could run every single deal through an algorithm and I could tell you which groups are being fairly treated and not. It’s really more about sharing information, beyond Pitchbook and other services like that, and kind of matching the entrepreneur’s background to the deal terms on a larger scale. The challenge is, the worst offenders are the least likely to share data. That’s where maybe the government can come in and have more expectations around Sunshine-type of laws.
Moguldom: Is it hard to hire Black employees in Miami?
Brian Brackeen: Miami is incredibly diverse. One of the things I’ve learned, even about folks of African descent in Miami, is that there’s so many different shades and different folks here. In Philadelphia, we tend to have only African Americans — folks who are traditionally from the south or from Pennsylvania in general. In Miami, you have Afro Cubans, Afro Brazilians, folks from Jamaica, Belize, you name it. We’re all Black Americans but they also come from different places as well. So that’s what I believe — true diversity.