Editor’s note: Veteran entrepreneur and investor Donald Thompson writes a weekly column for WRAL TechWire. It’s published on Wednesdays.
RESEARCH TRIANGLE PARK – Diversity, equity, and inclusion (DEI) is often overlooked in the startup community, since startup teams are usually small and almost always strapped for time and money. But DEI isn’t only for big business, and frankly, it might be the biggest key to unlocking a highly-productive, innovative, collaborative culture and securing investment so you can scale.
In brief, DEI creates competitive advantage. It gives your startup a stronger footing, year after year, making your business more sustainable. As society grows increasingly diverse, you want your business to be able to compete and win in the market. Strategic DEI not only helps you attract more competitive, diverse talent but also attract a wider range of clients and customers.
The business case for DEI grows stronger every year, but too often, we see strategic DEI enacted only in major organizations. That’s a huge missed opportunity for both people and profit. In fact, according to the SBA and Embroker’s “106 Must-Know Startup Statistics for 2021”, 99% of U.S. businesses are considered “small,” showing the tremendous impact that DEI can make on the national workforce, culture and GDP if integrated into the startup ecosystem.
Moreover, as Entrepreneur Magazine points out in their “20 Factors That Predict Startup Failure”, the number two, three, and four reasons that startups fail are “lack of cash,” an “inappropriate team” and “strong competition.” DEI helps solve each of those problems by tapping into a wider talent pool, cultivating a more productive and innovative work environment, and making your startup more attractive to investors. (The number one reason why startups fail? “No market need,” which means you need to do your research.)
In fact, as Morgan Stanley’s second annual survey of venture capitalists revealed, 36% of VC firms hold their portfolio companies accountable for achieving and maintaining diversity and inclusion, and another 12% say that their firm is willing to reduce its investment in a portfolio company because it is insufficiently diverse.
As you may know if you follow this column, I’m an entrepreneur and startup founder myself, and I love the scrappy, resourceful energy of working in small businesses. I’m also a Certified Diversity Executive, and so, my C-suite and entrepreneur friends often ask me to give my perspective on how they can get started with DEI.
I’ll share a little of my best advice here, and if you want to learn more, it’s a topic I’m discussing on the Winning with Diversity podcast and in my DEI for Startups webinar, next Thursday, June 3rd at 12:00 noon. In the webinar, we plan to cover common questions and misconceptions about DEI, top strategies for integrating DEI at startups, and best practices for diversifying your investment portfolio. I hope you can join me.
In the meantime, here are the top 5 questions I typically hear regarding DEI for startups.
- Why should DEI matter to startups?
As a startup leader, you have limited time, limited money and limited attention. So, you really need to look at the business reasoning for everything you do, independent of how you feel about it personally. DEI is a strong component of building a winning culture.
- What does it mean to build a winning culture?
Building a winning culture means you’re recruiting, rewarding, and retaining top flight talent. One bad hire can be devastating to a startup. You want to be sure you’re hiring and leading with active and intentional inclusion, so you can find the very best candidates and keep them on board. That means, your recruiting has to have a DEI lens.
When we think about building a winning culture — building a business from the ground up — DEI offers a competitive advantage by helping you make better choices early and often. Remember that phrase from Peter Drucker? “Culture eats strategy for lunch.” Well, some key aspects of great culture are that your team can be their full selves at work, that your turnover is low and that your retention and productivity are high. You want to create an organization that can sell to the market and communicate with a broad range of audiences and clients, so you need to understand the language of inclusion. It sounds simple to say, but people can’t be fully productive when they don’t feel fully accepted.
- What is the biggest misconception that startup founders have about DEI?
Most people — not just startup founders — hear “diversity and inclusion” and think only about the big three dimensions of diversity: race, gender, and sexual orientation. But diversity is so much more than that. It extends to generational diversity, to neurodiversity, to disabilities, to acquired experiences, backgrounds and perspectives. When we broaden the construct of what diversity is, it allows us to more clearly see how those dimensions of identity impact the way we work. Let me give a very specific example.
Let’s say we’re having a meeting. All 10-15 people in the company are attending, and you send the agenda 15 minutes beforehand. When you get there, people who are comfortable talking to think — those who feel comfortable moving quickly through multiple topics — are going to be just fine with the meeting.
But, there are lots of people who need to process information ahead of time. They need time to get their thoughts together and do a bit more research. When they can do that, they can be just as productive and valuable to the conversation, but if you send the agenda right before the meeting, they feel like they can’t keep up. So, they’re going to be naturally less engaged. That’s just one example of how accounting for diversity, and acting inclusively, can help your team be more productive.
- I already have a great team, but we’re pretty homogeneous. What can I do to increase diversity if I can’t hire anyone else right now?
First, start building a diverse talent pipeline so those great, diverse candidates can be waiting in the wings whenever you are ready to hire. Also, I’d encourage you to think more broadly about who comprises your team. It’s not just your employee base; it’s all of the people — internal and external — who support your business’s growth. What about your investors, advisors, service providers, contractors, marketing firm, lawyers, accountants, and more? How can you use those connections and services to support more diverse and underrepresented people and communities?
- What’s the number one takeaway for startup founders?
DEI is not as hard as you might think. It doesn’t need to be a big undertaking or an organization-wide strategic initiative to be impactful. Just start small. Start with what feels achievable for where you are right now at this moment. Emphasize progress over perfection, and commit yourself to continuous improvement. It’s ok if you don’t do everything all at once so long as you are committed to moving forward.
About the Author
Donald Thompson is an entrepreneur, public speaker, author, podcaster, and executive coach, recently named one of “Forbes’ Next 1000: Upstart Entrepreneurs Redefining the American Dream.” He is currently CEO of Walk West, an award-winning digital marketing firm, and co-founder / CEO of The Diversity Movement, a technology-driven consultancy with a diversity, equity and inclusion lens. He is also a board member for several organizations in healthcare, banking, technology, marketing, and sports, a Certified Diversity Executive (CDE), and a thought leader on goal achievement and influencing company culture.
Join Donald next Thursday, June 3rd at 12:00 noon for a free webinar on DEI for Startups and listen to more of his advice to founders, executives, and entrepreneurs on the Winning with Diversity podcast. You can connect with Donald on LinkedIn and at donaldthompson.com.