ARE YOUNG, INNOVATIVE STARTUPS AUTOMATICALLY MORE DIVERSE?

by David Braue

Innovation is the lifeblood of startup businesses, whose ambitious and often young founders grew up in a climate that prioritises diversity much more than in the past. But does that mean startups’ progressive culture of innovation automatically translates into diverse, innovative workplaces?

Not necessarily. People are people, after all, and cultural issues can be as difficult to overcome for growth-focused startup founders – who must navigate a range of corporate cultures as they try to win over early-stage investors – as they are in more established organisations.

“The system is basically stacked against you,” says Inez Murray, New York City-based CEO of the Financial Alliance for Women, a fierce advocate for diversity who has watched women fight to establish themselves in the early-stage investor “boys’ club”.

“It’s very hard for females to get into,” she told the recent VFF FinTech Forum. “One of the important things is to give [opportunities to] new VCs or young VCs with less of a track record. Waiting for the VCs themselves to embrace diversity is going to take a long time.”

Statistics confirm that the startup community, for all its potential to rebalance gender diversity, still has a ways to go on diversity measures: twothirds of startups have fewer than 20 per cent women in leadership roles, according to InnoVen Capital’s recent Startup Outlook Report 2023, which found the remainder have fewer than 10 per cent women leadership.

Whether they’re operating in finance, cybersecurity, IT or other domains, the culture established during those early days will set the tone for startups in the long run – so if women are already struggling to normalise diversity at the get-go, how can they possibly hope to carry diversity into their operational space?

One of the most important aspects to normalising an innovative, diverse startup culture is in setting the terms of that culture early on, notes Myrtle Dawes, a board member of the Scotland-based Technology Leadership Board and solution centre director with Scottish envirotech firm Net Zero Technology Centre.

“The issue really is around expectations,” she notes “You can’t have a situation where society is quite unfair, and then you walk into the workplace and all of a sudden everything is different. That isn’t realistic –and I think the reason some of these [initiatives] get lip service is because we expect companies to look different from the general society.”

That can pose issues in large companies where diversity, equity and inclusion (DEI) programs often get dropped onto the desk of employees who treat them less as a personal mission and more as just another KPI they have to meet.

“We have to address the societal issues, and not just put it on a few people who actually have hardly any overlap with us,” Dawes said. “All companies should have these expectations about the composition and inclusion of their teams. Diversity really does breed diversity.”

The benefits of a diverse culture can be amplified within small organisations, notes Tram Anh Nguyen, co-founder of the UK-based Centre for Finance, Technology and

Entrepreneurship – who notes growing demand for diversity training has rapidly expanded the organisation’s scope across all manner of other industry sectors.

“People in technology, and people that are entrepreneurs and marketers, have very, very unique diversity in terms of people,” Nguyen explains. “We are training them so that they can quickly and efficiently join this new world of finance and tech startups… we’re upskilling pretty much everyone.”

Overcoming Structural Obstacles

By introducing diverse training and operational modes early on, startups can set clear expectations around expected behaviours and cultural perceptions of diversity.

Yet many companies continue to align their internal structure in ways that work counter to the goals of diversity, points out Janelle Santa Maria, CEO of Benevity, who told a recent IWD panel that many companies implement diversity, equity and inclusion (DEI) initiatives as an HR function while corporate social responsibility (CSR) ends up as a corporate communications or marketing issue.

Co-ordinating the activities of the two is important in companies of any size, she said, because they address employees’ desire to work at a company that shares their personal values.

“Employees want to know that the company they work for lives and aligns to their purpose, values, lives, and passions,” Santa Maria explained, citing company involvement in areas such as community groups, employee giving as a great example of the way these various goals can be brought together.

“Working for a company, and being part of an employee resource group that allows [employees] to give back to the community from a CSR standpoint is a great brand story for any company,” she explained.

It can also be particularly beneficial for startups, whose relatively limited resources may see them struggling to match larger competitors on a perk-by-perk basis – but who can compensate by normalising innovative staff attraction and retention benefits like flexible work, generous parental leave, and so on.

“There doesn’t have to be that tension or fighting for budget,” Santa Maria said. “They really can serve to complement one another, and to drive the goals that each of those particular areas or teams has, in a very strategic way.”

“It doesn’t need to be as blatant as having a formal DEI program; just think of inclusion and what it means in terms of your policies, procedures, and practices – and how you are casting as wide a net as possible to involve all of your employees and to really be inclusive.”

Nurturing Innovation Through Diversity

Working in a startup or small business often feeds a sense of community and common purpose that can be harder to find in larger companies – and with employees happier and more innovative, it’s a good idea for startup founders to put extra effort into that part of their company culture.

“What’s really been most inspiring, from what we’ve seen so far, is the community that has been built between the founders themselves,” Kate Wendt, vice president of strategy, transformation, and sustainability with REI Group, which in 2021 established a Path Ahead Ventures Fund and hopes to support 300 founders of colour by 2030.

“They go through as a cohort together,” she said during a recent CES 2023 panel discussion, “and I think they’re getting as much inspiration and guidance and support from each other, and how that can amplify their efforts, as they are from our supporting them in the program.”

Many women are put off by perceptions that startups aren’t welcome spaces for them, according to recent research that found “women, but not men, are sensitive to information about organizational gender composition, especially for startups signaling diversity debt” – and warned that startups which don’t hire women in their early days typically struggle to attract them later on.

If innovation and community aren’t maintained, it’s easy for companies to feel isolated, noted Jacqui Loustau, founder and CEO of the Australian Women in Security Network (AWSN) during an IWD fireside chat with RMIT University leadership academic Dr Lena Wang, who is co-director of that institution’s Centre for People, Organisation, and Work.

“That’s one thing that has been really great as an organic kind of community that we’ve really tried to build,” said Loustau, who has worked with her team “to make sure that everyone is on the same philosophy of trying to help others and to be inclusive of all types of people.”

The organisation recently overhauled its Cadet program, renaming it as the Explorer Program in recognition of its stronger focus on inclusion as a harbinger of more effective innovation.

“We wanted to provide a space where they could ask questions without feeling like they were being judged,” Loustau said. “It is so powerful when leaders start to recognise [unconscious bias] and then actively do things to change that.”

“We all have a responsibility in this for this whole new generation of cybersecurity and security professionals. From government to leaders to industry associations, to educational institutions – all of us can play a part in this to really change things.”

Wang agreed: “we don’t expect leaders to get every single policy right,” she said, “but if we actually take the collective wisdom of our employees, it just allows them the opportunity to voice if something isn’t working for them.”

Whether in large businesses or small, innovative startups, “we can collectively create a culture where people feel safe to say ‘I need to go pick up my kids’.” Wang continued. “Just simply asking and being supportive as a leader, is often the most powerful thing.”