Last week, SXSW announced the 45 finalists for its upcoming pitch competition in March. The list in many ways looked as expected: There were quite a few AI startups and many companies based in California. But it wasn’t 100% business as usual. The list encompassed a much more diverse group of founders pitching compared to an average VC’s portfolio.
Sure, it wasn’t a perfectly diverse pool by any means but the number of women and founders of color is noticeable enough to be notable. This isn’t a one-off, either. Many pitch competitions both big and small tend to showcase a more diverse slice of the venture market disproportionate to how these groups are represented in funding data.
Pitch competitions are ingrained in the fabric of the startup ecosystem, and in many ways they can help level the playing field for underrepresented founders. It offers an avenue for funding in lieu of a friends and family round. It can also be a catalyst for underrepresented founders to get in front of potential investors and VCs who maybe wouldn’t have seen their pitch otherwise due to bias or a lack of a shared network. But of course, it doesn’t come without downsides.
Some pitch competitions, like the one at SXSW, do this intentionally, Chris Valentine, an event manager at SXSW, told TechCrunch+. Valentine said it starts with bringing on an adviser network and judges from diverse backgrounds to ensure they aren’t only showcasing one type of founder.
“It’s important to have diverse founders,” Valentine said. “The best have to rise to win a showcase, and I still believe that we will have the best rising to the stage. For an event for 20 people or 200,000 people, [event producers] should always be thinking of creating a reflection of the population as a whole onstage.”
While other notable startup pitch competitions like Slush aren’t structured purposefully to be diverse, it, like many others, still looks more diverse than the average VC portfolio. Former Slush CEO Eerika Savolainen said that the competition’s metric-driven and application approach to select companies helps them get past the biases that are keeping these founders out.
The good
Pitch competitions help underrepresented founders not only get some prize-money capital but also market their startups and help signal that they’re good candidates for further VC investments. Melissa Bradley, a general partner at 1863 Ventures, which hosts pitch competitions, said that a win at a pitch competition can jumpstart a flywheel of success for a startup.
“The money signaled that we actually believe in them and think they can grow, but hopefully it becomes a leverage point for them to continue to raise money,” Bradley told TechCrunch+. “Many of those women, who are able to win those pitch competitions, they were able to raise more money. We were the first check in.”
Michelle Dalzon, the founder and CEO of Katapulte, a startup that helps CPG brands land purchase order funding, said that her time with pitch competitions did help expand her network and that they’ve helped her land in front of investors she might not have pitched otherwise.
The competitions can also help founders brush up their pitching skills. “It gets you prepared for an investment meeting, or even just pitching your company to whoever,” Dalzon said. “[Pitch competitions] seem to ask similar questions, but with a few specific to the particular pitch competition. I think overall these competitions, it also gets you to understand your businesses better. It asks you questions that you may not have asked yourself.”
Evan Leaphart, the founder and CEO at fintech Kiddie Kredit, said it’s helped him home in on how he wants to describe advancements and new strategies in his business and what story works best to sell the pitch. He added that some of the questions he’s gotten might be dinner conversation for folks who grew up intertwined with the venture ecosystem but are new to founders from the outside.
But none of this is to say that pitch competitions are a perfect solution. These events take up time and resources and can be wasted effort if a company doesn’t win. Plus, it’s a burden to have to go this route to expand a network that many founders just already have.
The burden
In some ways, pitch competitions help advance the persisting narrative that underrepresented founders need guidance, mentorship or advice, instead of capital, which isn’t accurate. While pitch competitions can help startups with marketing and building a potential network, sometimes participating in a pitch competition doesn’t come with those things or a capital prize at the end, making it a time-heavy exercise with few outcomes.
Pitching regular VCs, on the other hand, is less of a time commitment than attending and preparing for an event. And even though these meetings often also result in “nos” and wasted time, they can lead to a warm intro or at least a potential professional relationship, and that intimacy is not often found in pitch competitions.
“The talented white men just get money from the VCs; there is so much more work when you are battling hundreds of other founders,” said Darrel Frater, a venture partner at Serac Ventures. “These accelerator programs where you have to spend weeks among months, it’s a hurdle that the white founders just don’t have to play in.”
Leaphart said the pitch competition route creates a different dynamic between early-stage founders, too. Instead of them working together to make intros to VCs and give each other feedback, they are battling for a limited pool of resources.
Also, despite pitch competitions generally showcasing a more diverse group of founders — many of whom win and go on to raise additional funds because of the visibility or connections they bring — it clearly doesn’t do much in terms of moving the needle for future fundraising for underrepresented groups of founders.
“I wish the representation in pitch competition represented the same amount of funding from venture capital,” Leaphart said. “If you stay in that space, it can feel performative and then you are more in competition with your peers and less in collaboration.”
Funding is still abysmal for both founders of color and women, as TechCrunch’s Dominic-Madori Davis reported recently with updated 2023 numbers.
But it seems that pitch competitions often bring more harm than good: While some pitch competitions are hosted by accelerators and VC funds, most aren’t, which means it’s not necessarily a bad thing for orgs to try to make a difference in leveling the playing field, even if they can’t be as direct as an investor.
“I think the pitch competitions are one of the many tools that we need to use to increase the accessibility of VC funding and accessibility of the industry overall,” Savolainen said. “However, pitch competitions are not, and cannot, be the only solution for increasing the accessibility. It’s a very good tool.”