Recent tragedies in our country have brought increased attention to issues around diversity, equity, and inclusion in the VC community and for good reason. We recognize that the venture landscape is largely homogenous, and there is much work to be done to increase representation and funding at all stages. We also acknowledge that we’re not perfect and we don’t have all the answers, but DE&I is a topic that we’re deeply committed to, both for us and all our portfolio companies.
Embracing DE&I is not just the right thing to do, it’s also a crucial foundational component of organizational success. Organizations with diverse workforces have access to broader perspectives, increased innovation, expanded market share, improved product development, and a wider pool of talent.
One of the things I’m most passionate about in my role as Partner and Head of Talent at M13 is helping to ensure that our early stage founders understand the importance of DE&I in their own endeavors. There are extraordinary qualitative and quantitative benefits to a diverse and inclusive culture, many of which we’ll explore in this article. The intention of this piece is to help guide startup leaders in creating that culture, and getting the most out of your colleagues and teams.
What’s the business case for DE&I?
According to a recent Deloitte comprehensive study, organizations with diverse and inclusive cultures are found to be two times as likely to meet or exceed financial targets. There are many, many studies emerging that prove companies with diverse leadership teams have measurably better financial outcomes. If you have diverse teams, you have by definition a variety of perspectives and decision-makers. You take a broader, more inclusive look at the products and services you’re building. You have access to hear more dissenting voices, which leads to better decision-making.
Leaders who create inclusive environments and inclusive hiring practices increase the range of great talent to build their organizations. This approach helps leaders attract a greater, more diverse talent pool, allowing people to feel like they’re doing the work that will let them be their best selves and giving them the opportunity to grow. That’s how the best companies get to retain this talent, make better products, make better decisions, all of which lend themselves to financial gains.
Why consider DE&I at an early stage when there’s already so much to do and so little bandwidth?
My fellow panelist Jay Bendett used the analogy of a cruise ship versus tugboat. Steering something as large as a cruise ship takes a lot more people and moves at a much slower speed, whereas steering a tugboat only requires one or two people and can be done instantaneously. Incorporating DE&I at the start is not only the easiest time but the most impactful time to do it. This is when you’re building the foundation of your business. You’re establishing the culture and creating an environment from scratch, one that will attract the best talent for your needs.
If one of your metrics is to hire people from underrepresented backgrounds and you’re already starting with a homogeneous environment, it will feel challenging for that first person to feel represented. Creating a space of diversity and inclusivity early makes it easier to build an organization where new potential hires can see people who look like them and think like them and makes them feel represented, no matter what background they come from.
How do we break the pattern of homogenous hiring?
A seismic shift that will help to disrupt homogenous work environments is on the horizon. As more and more talented people value and recognize the importance of diversity, systemic change will happen as the flywheel spins. There are many talented people out there, and even today, the best have lots of choices when it comes to where to work. They will select organizations that align with their values. More leadership teams who may not value diversity in the same way will have to eventually recognize that.
Meanwhile, there are ways to break this pattern today.
- Seek out educational activities that help you further learn and understand why maintaining a diverse workforce and talent pool is important. Whether that’s a (digital) event, partnering with a DE&I-focused business (like ThinkHuman and Peoplism), or engaging in e-learning, there are also several fantastic articles and podcasts out there on this very topic. Check out a few of our recommendations at the bottom of this article.
- Choose to actively diversify your talent pool. Analyze and understand how your talent pool is currently being built, and look to shift the ways in which you attract talent. This will likely require expanding your own (or your team’s) network. To do so, create a list of individuals from underrepresented groups in your industry who you’d like to connect with. There’s no harm in sending a LinkedIn message or a cold email if it’s done authentically with positive intent. Build those relationships so they can refer you to contacts within their own networks, who are more likely to come from heterogeneous backgrounds.
- Try to hire for potential over experience wherever possible. This is one of the hardest yet most impactful conversations I’ve had with founding teams. There’s a natural bias to want someone who has done the job before. But that often counterintuitively makes it harder to hire because people don’t always want to do the same job twice. It also can be a recipe for replicating in the same processes that other companies have done before. If you try to disrupt your own process and do things differently, then by definition you’ll want to seek people who think differently.
Hiring for potential over experience changes the aperture and opens up all sorts of new talent. It’s the most important thing you can do to open your pipeline and make better decisions.
How do you deal with leaders who believe they’re championing diversity but are missing out equity and inclusion?
It comes down to authenticity. You want to avoid being that person who just creates a scorecard or dashboard just so they can say that they are “doing the work.” When championing diversity comes from a place of authenticity, it can be powerful. Having leadership drive these efforts is important, but it’s equally important to examine with humility if you’re really as informed as you can be about these decisions. There are likely people who are much more closely impacted by these issues that you can invite to have a seat at the table. Get their perspectives without making them feel like they have to drive it, or they’re solely responsible for your organizational efforts as additional uncompensated work.
How do venture firms integrate DE&I?
M13 aims to cultivate an inclusive culture that fosters growth, collaboration, and acceptance, where we celebrate the diverse voices and perspectives of M13 team members and founding teams, and where these groups feel empowered to bring their full, authentic selves to work.
We care deeply about creating environments where people can do the best work of their lives. This means feeling engaged in their work. This means feeling that they're learning, growing, and getting access to stretch opportunities. This means that they're performing at their best. We spend so much of our time at work if you're not creating an environment where people feel motivated and inspired and passionate about what they do, you're not going to get the best out of them.
On our end, M13 has hosted internal workshops and training on unconscious bias, covering, microaggressions, and intersectionality for our own team, as well as Launchpad and portfolio companies. We’ve become a member of PledgeLA in an effort to make a positive social impact on LA and expand the next generation of tech and VC. We’ve expanded these efforts to our broader community through events such as our DE&I panel (in partnership with ThinkHuman) and Women in Tech happy hour. We look forward to convening again in real life to continue exploring these important issues and learn with our community.
Resources we love
- Using Inclusive Leadership to Create High-Performance Teams: Discover the six qualities of an inclusive leader. [Bunch.AI]
- Employ Black People. Fund Black Entrepreneurs. Do SOMEthing: Read the Blavity CEO’s thoughts on “fighting a pandemic within a pandemic.” [dot.LA]
- Board Diversity: “One of the many problems with boards that aren’t diverse is that they are not well connected to diverse candidates,” writes Fred Wilson, Co-founder of Union Square Ventures [AVC.com]
- How and Where Diversity Drives Financial Performance: A Boston Consulting Group survey found that “companies with above-average total diversity had both 19% higher innovation revenues and 9% higher EBIT margins, on average.” [Harvard Business Review]
- Reflections on Being a Female Founder: As PlanGrid Co-founder Tracy Young writes, “[w]omen have different lived experiences than men, and not acknowledging this would be a disservice to humanity.” [Tracy.Posthaven.com]
- Inspiring Role Models Who Motivate Us to Fight for Lasting Change: Get inspired by this list of changemakers. [Thrive Global]
- Disrupting Inequity with Darnisa Amante-Jackson: The co-founder of DEEP—the Disruptive Equity Education Project—explains how to do this hard work with love. [Hello Monday podcast with Jessi Hempel]