4 Tips Every Investor and Startup Can Use to Create Inclusive Entrepreneurship
Inclusive entrepreneurship was top of mind at the State Science and Technology Institute’s (SSTI) 2019 Annual Conference. From the plenary opening session to hallway conversations to the breakout session where I spoke about our experiences in Ohio, people from across the country are seeking ways to move the needle of inclusion.
The good news is that, unlike three years ago, we are finally at the point where most of us aren’t asking what the problem is.
We don’t have to educate people about the funding gap between men and women, or the under-representation of minorities in venture capitalists’ portfolios. Instead, we can talk and be transparent about the challenges while we seek out best practices and lessons learned to overcome the barriers to action.
Still, we know we have a long way to go. Here are four tips that can move the needle.
1. Inclusion Starts at Home. Diverse teams deliver better financial results.
For Entrepreneurs: Focus on your team. How did you meet? Are you all from the same schools? Are your outside activities all the same? Look at the staff page on your web site from three years ago and for today. Have things changed? Does everyone look alike? Looking from the outside in, does your company seem to be a place a woman or person of color would want to work or do business with?
For Investors: About one-third of VC firms have a diversity or inclusion strategy. If your firm has one, double down. If not, develop and commit to a strategy. Effective diversity strategies likely will require increased internal training. Many VCs became investors after successful careers. Diversity strategies will likely require increased internal training, an investment that creates an army of diversity over time. Firms with D&I strategies reported that 20 percent of their investment partners were women compared to just 11 percent at firms without either plan.
“Studies have shown that hiring more female investment professionals is correlated to enhanced returns, better recruiting, and talent retention, as well as more profitable exits and overall improved financial health of funds,” said Heather Gates, National Managing Director, Emerging Growth Company practice, Deloitte & Touche LLP.
(See Second Edition of NVCA-Deloitte Human Capital Survey.)
2. Identify Implicit Bias. Accept the fact that every program and every person has implicit bias.
For Investors: Let the market determine whether an entrepreneur’s business idea is a good one or not. Investors may have an opinion about whether they like or don’t like an entrepreneur’s concept. Instead of filtering clients according to opinions, follow a rigorous, independent, data-driven process of market validation.
For Entrepreneurs: Diversifying a team comes from a concerted effort to seek out diverse candidates throughout the hiring process. Build inclusion and diversity into a startup’s hiring strategy and process from day one. From resumes to final interviews, be deliberate. Engage multiple women and multiple diverse candidates at every stage of the hiring pipeline for every single job.
For Both: Begin with business areas where you already suspect implicit bias exists and remove it. Collect data, survey, and report. Establish and publish benchmarks. Measure and report progress against those goals. Make this a regular area of employee training; there are many tools and experts available to help.
3. Diversify Your Networks for Talent and Deals.
For Entrepreneurs: It takes commitment and deep work to identify enough female and minority candidates to fill a pipeline of qualified candidates. If you are talking only to your own networks, you are not talking to people who are not like you. Reach out into grassroots organizations and other associations that have density in women and/or minorities. Walk the talk.
For Investors: Analyze the diversity of your existing portfolio. Set some goals. Make inclusion an intentional part of due diligence. Syndicate with venture capitalists who specialize in women-led or minority-led investments. Diversity breeds diversity. Investors want to know that the companies that they invest in share their commitment to diversity and inclusion as a means to better financial results.
At Rev1, after more than two years of a focused commitment to inclusion and diversity, our client companies have gone from 15 percent diverse (with a woman, minority, or veteran at the C-level) to more than 50 percent diverse.
4. Get Creative About De-risking Entrepreneurship.
For Investors, Entrepreneurs, and Innovation Support Organizations: The typical person who can take a year or two and not get paid or have health insurance is a 50-year-old male. Inclusive entrepreneurship demands a new model of innovation infrastructure with creative, new sources of compensation and lower-cost benefits.
Inclusive entrepreneurship starts with each of us personally and grows as we expand our networks, call out and remove implicit bias, and then build the infrastructure and programs that help attract diverse founders and teams.