Ross Baird, founder of Village Capital, believes that venture capital isn’t doing a good job of getting new ideas to society.

In his new book, The Innovation Blind Spot, Baird explains that the industry isn’t doing its best to spur innovation.

“We think that capital goes to the best ideas, no matter what. But, in reality, if you look at most entrepreneurs trying to build a business, it doesn’t work out that way,” said Baird.

“Less than two percent of startup financing goes to women. Less than one percent goes to African-Americans and Latinos. Nearly 80% goes to three states: New York, Massachusetts, California. And D.C., Maryland, and Virginia isn’t in that 80%, even though there are great ideas here,” he said.

Ideas that would be extremely helpful for society are passed up for ideas that end up failing horribly. “Real-world problems like getting people out of debt are much less likely to raise money than the $120 million that went into this company Juicero that made a $700 juicer for yuppies,” Baird said.

Baird’s firm hopes to remedy this problem. “We invest in companies… that are trying to build great businesses, and solve major problems in society,” he told What’s Working in Washington.

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“The businesses that create more value for society actually tend to perform better over the long run,” said Baird. “We have seen people over time, people who are solving real-world problems, they attract better employees, more loyal customers, and they grow.”

Of the more than 100 companies that Village Capital has funded, “the women-run businesses in our portfolio are outperforming by 30% the men-run businesses, and they’re raising 80% as much money,” said Baird.

“As innovative as the venture capital industry is, it hasn’t innovated itself in 200 years… you look at a lot of businesses, they tend to have a higher likelihood of success, maybe less likelihood of being a 10,000x-er, and the venture capital industry just can’t understand that,” he said.

“There are tens of thousands of businesses, family-run businesses, that are great, profitable, successful, that we just don’t have a construct for financing because we haven’t innovated.”

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