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These Poverty-Fighting Startups Are Slaying Silicon Valley’s Sacred Cows

If you want to tackle one of society’s most intractable problems, you have to start by ignoring some of the tech industry’s most cherished mantras.

Fast Company

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“One of my ambitions is to help our users put more food on the table,” says Jimmy Chen, the founder of Propel. His company makes a mobile app called FreshEBT that helps people among the U.S.’s 43 million recipients of the electronic benefit transfer (EBT) service to stretch their food-stamp benefits as far as possible. In 2017, the company raised $4 million from the Omidyar Network, Andreessen Horowitz, and other investors.

“We serve low-income Americans who are too poor for most financial services,” says Chen. “They don’t qualify for payday loans because to get a payday loan, you have to have a payday. And 60% of our users don’t have jobs.”

FreshEBT was born during Chen’s fellowship at Blue Ridge Labs @ Robin Hood. The Robin Hood foundation is New York’s largest poverty-fighting organization. An incubator within Robin Hood, Blue Ridge Labs, has quietly been making high-impact tech products for low-income New Yorkers since 2014. (Full disclosure: I was one of the lab’s original fellows in its original incarnation, which was called Significance Labs.)

Chen’s path through this new sector of high technology for underserved consumers hasn’t been an easy one. Over the last four years, he lost both of his original cofounders, struggled to raise funding from bemused VCs and risk-averse foundations, and pivoted from helping food stamp recipients apply for benefits to assisting them with the the management of those benefits. “It’s one of those things where it just depends how it turns out,” says Chen. “If it turns out positively, it’s persistence. If it turns out badly, it’s stubbornness.”

Blue Ridge Labs @ Robin Hood could not exist without Silicon Valley—many of its tools and even people come from there. (Chen is a former Facebook product manager.) But FreshEBT isn’t a typical Silicon Valley product. It is, however, the type of product that many Americans need. Creating tech for a population largely invisible to the tech world is just one of the ways in which Blue Ridge Labs @ Robin Hood is turning some of the tech world’s received wisdom upside down.

FreshEBT App.

“Cater To The Affluent”

New York, one of the richest and most powerful cities in the world, has almost a million working residents who earn less than $20,000 per year. The official U.S. poverty line is $24,600 for a family of four. Almost 2 million New Yorkers receive food stamps. One in six residents relies on soup kitchens and food pantries every day.

Like most New Yorkers, people with low incomes are busy. Many juggle multiple jobs, and sometimes school, with family responsibilities. They often trade off time and convenience against cost. As one commenter on Hacker News put it, if you can use technology to give someone below the poverty line more time or information, it may not change their life for the better, but it can allow space for things that could make a difference.

“At least in the United States, the largest demographic is the low income demographic,” say Bill Cromie, one of the founders of Blue Ridge Labs @ Robin Hood. “It’s just that the sorts of apps that are being made by most folks are not well-suited to address the sorts of problems that low-income folks have.”

The lab has already spawned projects like Good Call, a hotline that connects New Yorkers who have just been arrested to a free lawyer. Yenko warns low-income college students when they are at risk of losing their aid package and helps them to create an action plan. JustFix helps New Yorkers get repairs on their homes by providing access to housing rights experts. This year, the lab’s five-month fellowship program focuses on creating products for older, low-income adults and their caregivers. The lab also runs Catalyst, a six-month program for social ventures that are at a slightly later stage.

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“Solve Your Own Problems”

One of Silicon Valley’s mantras is, Solve problems you have yourself. Most people in the tech business don’t experience the problems of poverty. “I have close friends of every race and gender identity, and from many different countries too, but I don’t really have low-income friends,” said former Blue Ridge Labs fellow Jonathan Stray in a blog post. “Fundamentally, I don’t understand poverty because I have very little occasion to talk to poor people.”

“We have companies that solve the problems of tech entrepreneurs, and that’s it,” says Chen. “If we had waited for somebody who was actively on food stamps to start this company, we might still be waiting, but at the same time, we now have three people in the company who were on food stamps at some point throughout their lives. We just hired a junior software engineer who was a user of the product when she joined the company.”

One thing that the Blue Ridge Labs’ founders vastly underestimated in the early days was the importance of topic area expertise. The first cohort of fellows only included one subject-matter expert—Margo Wright, the founder of Yenko—who had already spent years helping low-income students complete college. The other fellows were product managers, developers, startup founders, and a tech journalist (me). None of us knew much about the problems of living below the poverty line in New York. With the help of the lab’s Design Insight Group, we learned fast. But understanding a problem is still not the same as living with a problem.

The lab recently added a new expert track. Experts are people who have lived with that issue at hand or are academics, practitioners, or researchers working in the field. “This year we’ve got a geriatric nurse, a social worker, and two women over the age of 70 in the class,” says Hannah Calhoon, director of Blue Ridge Labs. “The traditional startup team is a product manager, an engineer, and a designer. We tagged on a fourth person, and that fourth person is a topic-area expert.”

Ultimately, the people who best understand the tech problems of low-income consumers are those who are, or have been, on a low income. “The efforts that are under way by lots of wonderful organizations to try to dramatically diversify the demographics of the tech workforce are an important part of that story, ” says Calhoon. “The more paths for folks from underserved communities to get into those tech careers and build those skills, the more those solutions will come from people who see those problems.”

“Bypass Legacy Systems”

Startups traditionally try to demolish—or at least sidestep—old ways of doing things. Disruption is seen as a good thing. In contrast, most of the lab’s portfolio projects require some sort of collaboration with legacy systems, existing organizations, or regulatory schemes.

“There’s very little that you can do in that traditional Silicon Valley disrupt from the outside way without having any interaction and engagement with the pre-existing systems,” says Calhoon. One of the lab’s projects is surveying low-income pre-kindergarten kids, for example, which it’s doing in partnership with Head Start programs in preschools.

“As an entrepreneur, you can’t just go into something with your guns blazing and try to burn down the house,” says Chen. “Most of us don’t have the contacts or the reputation to be able to waltz into city hall and have an effective meeting. Now that we’ve understood that process and made contacts and started to build a reputation in this space, I think it provides a competitive advantage for us, because it’s hard for someone else to enter the market.”

One of the reasons that it’s important to work with existing systems and organizations in the low-income world is trust. Your target users won’t automatically trust a for-profit startup. They have good reasons not to. Working with organizations that are already trusted in the community can give you a head start.

“Move Fast and Break Things”

Many intractable systemic or human problems–and poverty is a very complex issue–cannot be solved by technology alone. Techies may be tempted to to jump in with a naive technical fix that can do more harm than good. And the stakes are high for people on a low income.

GoodCall provides a hotline with free legal advice to New Yorkers who have just been arrested. If they can’t get the right help at this critical moment—mobile phones are confiscated so it’s often very difficult for users to reach loved ones or lawyers—they can end up in jail for weeks without charge, and may even admit to crimes they didn’t commit. The service cannot afford to let its users down. As a result, the founders didn’t initially focus on scaling up. Instead, they spent a year making sure their process was bulletproof and getting partnerships in place with the right legal service providers. The service should be available citywide in the next few months.

“I think you can still launch the crappy, cheap, half-broken, super non-scalable version of the product, but you need to make sure you’re doing that in the way that you’re not going to leave people with subpar social outcomes because you’re still in the messy stage,” says Calhoon. “If because of me, you don’t have heat in your apartment for the winter (see another portfolio project, JustFix), that’s a really bad thing.”

JustFix. Photo courtesy of JustFix.

“Invest in Patterns”

Village Capital recently published research that showed that the lion’s share of VC funding goes to attractive white males who went to a top-ranked university in the Boston or San Francisco areas. Much as they like to deny it, VCs look for patterns in both people and products.

“When you’re Margo [Wright, founder of Yenko], and you’re a black female founder who wants to talk about how to help low-income, first-generation college students not drop out of community college, that’s about as far away from that pattern as you could possibly imagine,” says Calhoon. “But then when you talk about how much money Margo can make for these colleges, it’s an astounding amount,” adds Cromie.

Most of Blue Ridge Labs’ projects don’t fit the VC patterns, and that means that raising funding is a daunting challenge. “Serving low-income Americans hurt us specifically in fundraising in the sense that it made us feel super, super risky,” says Chen. “We just didn’t have comparables. It was like, ‘Name another company that’s built a huge business with technology for this user base?’ There’s not really one.”

Even when sources of money are more interested in social good than profit, the metrics just don’t exist yet for these projects. Philanthropic funds don’t know how to deal with a for-profit company, and funding an early-stage startup is a terrifying prospect for organizations that rely on donations. Even impact investment funds tend to invest in later stage social ventures.

“Finding people who want to support this early a stage of innovation where the risks are so high and the outcomes are so uncertain is really difficult,” says Calhoon. “It’s new, and we’re like, ‘And, by the way, maybe 80% of the stuff we fund isn’t going to work. And we’re not going to make a billion dollars if it does work, because we’re not taking any equity and half the portfolio is nonprofit.'”

Then again, the fact that FreshEBT provider Propel raised a $4 million funding round this year from a combination of impact investors and traditional VC funding from Andreessen Horowitz may be an indication that new patterns are being created. “Once we started to show the signs that actually, we could be the first or certainly we could be a unique player in an unusual market, I think that was one of the things that helped us to raise money,” says Chen. “Our pitch started to become more credible.”

“Business Good, Government Bad”

Not every problem can be tackled by business—or at least by a for-profit business. This is something of a heresy in Silicon Valley.

“I think that I came into this with a naïve mind-set that if you solve a problem for a large enough group of people, you can figure out how to make a business off of it,” says Chen of Propel’s original plan to help people sign up as EBT recipients. “We had this assumption that we could build a business by enrolling people in benefits. I no longer believe that it’s a business. It’s a big pain point, but one that’s probably best addressed by the nonprofits and other groups that have different funding streams and different methods of approaching the problem.”

Even with its new focus on benefit management, Propel’s whole business model depends on the government and other organizations providing a safety net. The company just wants to make that safety net more user-friendly. In fact, for-profit companies are often regarded with suspicion by low-income populations accustomed to dealing with outfits such as providers of cash checking and payday loan services.

“Historically, the perception was that for-profit companies can’t be trusted,” says Chen. “They don’t have morals. They’re just trying to make money. And if you look at how they interact with the low-income population, it’s largely on a predatory basis.”

That dynamic may be starting to change. With its current strategy, Chen sees Propel as one of an emerging set of companies that can become big businesses while also having a positive impact on the overall physical and financial health of their low-income users.

“Move to Silicon Valley”

Startup founders are often told that they have to move to Silicon Valley, but even startups that make it to the Bay Area don’t tend to become deeply embedded in the local community beyond the tech elite. Blue Ridge Labs, and many of its projects, has a very local focus.

“In the early days, I thought that I wanted to move the company back to the Bay Area,” says Chen. “But now I actually think Brooklyn is a fantastic place for this company because we get a lot of the value of being in a huge city—which is access to services, capital, people—along with being outside of a technology bubble. New York has a diversity that I think is hard to match anywhere else in the country, and that diversity helps to remind us that we’re building for all sorts of different people.”

Since 2014, Blue Ridge Labs has built up a design insight group of over 800 people living on a low income in New York. This group is now one of the lab’s greatest resources. Each fellowship team has at least 100 conversations with members of the design insight group over the course of the fellowship.

“I think our hyper-local focus is a real benefit because it’s allowed us to build relationships,” says Calhoon. “It’s important to stay with communities long enough that you build enough trust that they’ll actually tell you what they think. We never could have done that if we did one 12-week fellowship in a different city every year. It’s part of being invested. “

Lapsed software developer, tech journalist, wannabe data scientist. Ciara has a B.Sc. in Computer Science and and M.Sc in Artificial Intelligence.

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This post originally appeared on Fast Company and was published January 5, 2018. This article is republished here with permission.

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