As a white male who had an upper-middle class upbringing, I try to not wade too deep into diversity discussions (but here we go). I strongly believe in the value of diversity to any organization, but generally feel like my role should be as more of a silent supporter as opposed to really being outspoken about it.
Optics and all.
Last week, I listened to Reid Hoffman’s interview with Sallie Krawcheck which really got me thinking about the value that diversity brings to companies. The interview is excellent and I highly recommend it to anyone interested in learning about one of the most kick-ass women in Fintech today.
Reid’s discussion of intellectual diversity really resonated with me. He discusses diversity through the lense of blind spots. We each have our own blind spots based upon our experiences and upbringing. If you hire too many people whose experiences and upbringing are too similar, their blind spots will overlap and you will become an organization that has huge holes in its view of the landscape.
We see this a lot today.
I’d argue that tech, finance, and media are just a few examples of sectors where these sort of overlapping blind spots from a lack of diversity occur. The solution is intellectual diversity.
Ensuring that your team is built from the ground up with people who have different experiences and backgrounds ensures that your blind spots are covered by someone else’s experiences and vice versa. And yes, I do believe that aspects like ethnicity, sexual orientation, and socio-economic status are all factors in ensuring that you have intellectual diversity.
I think this is one of many excellent cases for diversity. A lot has been written about all the reasons why diversity is important for any organization and research has confirmed the fact that more diverse organizations perform better than less diverse ones.
But I want to present a reason specific to venture capital arguing for investing in diverse founders. Again, I don’t think this is the only reason this should be done (among the reasons, it’s just the right thing to do), but this is an argument that I have not seen get much discussion and I think it is important to consider when designing your firm’s deal-flow pipeline to ensure that you see startups founded by diverse founders.
So to start, we need to make some assumptions.
Assumption #1 - People of diverse backgrounds face personal, professional, and institutional biases
Ok, I don’t think this one is exactly rocket surgery. I would hope that it can be widely agreed upon that people who come from diverse backgrounds experience prejudice and bias at some level or another. The type and level of that prejudice is a topic for someone else to tackle, I just want to agree to the assumption that it is more than zero.
Assumption #2 - People who experience prejudice and biases need to overcome more to get to the same place as people who have more privileged backgrounds
Real cutting edge stuff here Erik. I know, I know, just stick with me here. Again, this one is so obvious that it is basically a tautology. If you start at point A and someone else starts at point B, you logically need to do more to get to point C. Not trying to dismiss or diminish accomplishments of people from more privileged backgrounds, just trying to again set the assumption that on-average, diverse people need to overcome more than privileged people do.
Assumption #3 - Grit is one of the most important attributes in successful entrepreneurs
Grit is defined as a positive, non-cognitive trait based on an individual's perseverance of effort combined with the passion for a particular long-term goal or end state (Yes, I just used Wikipedia as a primary source. If you want to dig into the footnotes, be my guest. To all my middle school english teachers, I am sorry). Basically grit is someone’s ability to overcome difficulty and continue to work towards a goal.
I believe grit is the most important trait to look for in successful entrepreneurs. Grit is what allows them to work through the tough times and continue to build their businesses. Grit is what allows them to say, “the entire world agrees on this assumption, but I think they are wrong and I am going to go prove it.”
Grit is absolutely fundamental to the entrepreneurial journey and I would wager it is an even greater indication of future success than any other trait VCs would otherwise look for in entrepreneurs. You may disagree on whether grit is the most important trait, but I think it is pretty difficult to argue that it is not, at the very least, among the most important traits for entrepreneurs.
Given these assumptions, I argue that diverse founders are more likely to exhibit grit, and therefore should be favored for investment, over non-diverse founders when the opportunities they represent are of similar quality
If we accept that grit is one of the most important attributes in the entrepreneurial journey, and that people of diversity are more likely to exhibit grit given the prejudice and biases that they have overcome, then I believe we must conclude that given any two opportunities of similar quality, holding all other variables constant other than one founder being diverse, the correct investment decision is to invest in the diverse founder.
Grit is one of the most important forward-looking indicators for success.
And diversity is one of the best signals of founder grit.
Therefore, investing in diverse founders is one of the most surefire ways to ensure that you are backing entrepreneurs who have grit. Now, to be clear, I am not saying prejudice is in any way, shape, or form positive since it leads to founder grit. It is my sincere hope that one day we live in a society where people from diverse backgrounds won’t need to overcome more than others. But until that day, overcoming societal biases and prejudices could give diverse founders an edge.
Now Erik, that is a fine point, but you are not exactly going out on a limb here by presenting a scenario where all variables are held constant except founder diversity.
Fair enough. Though this is a fairly specific example, I would argue that the existence of this example proves that diverse founders should be given some preference when being considered for investment decisions. Now this does not mean that you should back a diverse founder with a bad idea over a non-diverse founder with a good idea. But if the ideas are of similar quality, I believe that the choice is clear.
Ok that makes sense, but if you claim that diverse people face prejudice and bias, won’t diverse founders continue to face prejudice and bias after your investment?
I think this is the best critique of my argument. If I am saying diverse founders have had to overcome more to get here than non-diverse founders, I am also implying that they will need to continue to overcome more in the future. I hope one day that won’t be true, but today it unfortunately is.
Who knows what the future holds? Entrepreneurship is so brutally hard as it is, I would still rather take the person with more grit, even if their journey might be even tougher. I know that isn’t the best answer in the world. But it’s the answer I’ve got.
I have been thinking about this argument for some time and I appreciate you taking the time to read through it as I chart it out. I don’t think it is the only reason to invest in diverse founders. I wouldn’t even argue that it is necessarily the best reason to invest in diverse founders.
But I do believe that it is a reason. And a merit-based reason at that. I am hoping that by adding an additional weight to the scales in the argument on why diversity is important, I can help to make it even more compelling than it already is. My hope is that by increasing investment into diverse founders, we can start to combat some of the institutional causes for the very bias and prejudice diverse founders face every day.
I am proud to work for a company that has a huge focus on investing in diverse entrepreneurs. One of our goals for 2019 is to have half of our portfolio companies include at least one person of a diverse background on the management team or as the inventor of technology. I hope that others place the same focus on diversity we have and that we as an industry start moving towards more accessibility and equality.
Because we need to do better.
If you are wondering why this post picture is a picture of skyscrapers, you are not alone. I used up all my bravery just writing and publishing this and I did not want to wade into the treacherous territory of trying to select an appropriate and non-offensive picture to represent organizational diversity. So you get skyscrapers. Because I love skyscrapers. I find them very aspirational. Increased diversity is something we should be be aspiring towards. There. Tied it all together.