Addressing the issue of diversity in startups: Why so homogenous?
Diversity is a widely tossed around word within any current medium. It is in the rhetoric surrounding liberal politics, it is there in entertainment and daily life, social media is also swamped with comments about inclusiveness and misrepresentation. So it is no wonder that it also rises as an issue that startups need to deal with. The fact that it is a socially and politically right approach sometimes gets in the way of another truth — it is also a financially better decision.
Our first example for this would be a 2018 report published by Boston Consulting Group: “Startups founded and co-founded by women are significantly better financial investments. For every dollar of funding, these startups generated 78 cents, while male-founded startups generated less than half that — just 31 cents” (Abouzahr et. al., 2018). MIT’s Center for Collective Intelligence, on the other hand, puts it more bluntly by stating that the collective intelligence of a group rises when there are women involved in that group. Then there is the issue of creative decision-making, and it is also no different since diverse leadership boosts innovation by 20% (Lorenzo et. al., 2018). If these statistics come as a surprise, you should really change your perception of, and attitude towards the world; maybe not hang out with your white male friends that much.
As a venture running in 2019, it is very likely that your customers will also be comprised of a diverse group and it is vital for your team to precisely understand the needs of that group. Therefore diversity would also be more than likely to result in improved customer satisfaction. The number of same-sex households and the buying power of LGBTQ consumers has been on a gradual rise in the past two decades, marking a 80% increase (Krejcova, 2015). Krejcova also mentions a national survey by Harris Interactive while referring to the brand loyalty of the LGBTQ community. “Nearly nine out of ten (87%) LGBT adults said they are likely to consider a brand providing equal workplace benefits. 23% of LGBT adults have switched products or services because a different company was supportive of the LGBT community, even if a brand was costlier or less convenient.”
The world of tomorrow requires improved approaches and reflexes. Artificial Intelligence (AI) is a reality that we have already found ourselves a part of and that will affect our future decisions one way or another, whether it is in the form of robots in the workforce or algorithms used in the social media pages we use. Yet when we take a look at where the AI receives its data from, a similar concerning picture rises to the surface. Let us give an example. For visual object recognition software research, a large visual database called ImageNet is used. 45% of the ImageNet data comes from the US, which represents 4% of the global population, while China and India together only provide 3% of the data even though they represent 36% of the global population. (Krishnamurthy, 2019). This leads to examples of racist and sexist AI and algorithms, carrying the same problem to a world of higher technology.
All that being said, there is one thing we need to address as the devil’s advocate. Implementing diversity from day one is not easy. When starting a venture, you most likely have a low budget, therefore are unable to attract talent, and even when you do, your employees are not available for a long-term commitment to your firm. Yet it is also worth noting that diversity helps to decrease turnover (Dillon, n. d.).
Then there is another troubling fact: “Diversity is important to 72% of founders, but only 10% are taking action” (Techstars, n.d.). This results in “diversity debt” (Pope, 2018), much like “engineering debt” where you skip lines of code, for instance, to meet a deadline, only for the end product to come with glitches and other sorts of troubles.
You may choose to avoid the reality of diversity, but it will most certainly cost you; both socially and financially. Diversity is not a liberal lie or an issue worth dipping your toes in to seem politically correct; it is a huge criterion for success and an absolute necessity. Change will come eventually, and it will mostly be for your benefit if it comes through you.
Addressing the issue of diversity in startups: Why so homogenous?
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