Investing Away the Inequalities of the Ecosystem
An appeal to investors, investment managers and partners
Who will use their power for good?
Out of the 45 unicorn founders in the Nordics, not a single one is a woman.
At SSE Business Lab, we believe that investors and resource providers play a crucial role in changing that.
Although we don’t make any cash investments of our own, we invest time and resources in students and alumni of Stockholm School och Economics as they venture out to build their startups. By doing that, we decide who gets the opportunity to succeed or not. Imagine that power. Then multiply it.
That’s the power of investment funds.
“Capital gives you the power to grow as a startup. But when 93% of the capital raised goes to all-male founded teams, women don’t get that same opportunity to grow. We need to change who gets access to that power because it will be directly correlated with how many succeed.”
— Donna Hanafi, coach at SSE Business Lab, during the WIT conference 2019.
Clearly, investment funds could do a much better job attracting, sourcing and investing in teams consisting of not only male founders.
In January 2019, we decided to add a criterion for diversity to our incubation program. The criterion meant that we ask for the teams to be diverse (gender or ethnic identity foremost) or by other means include the perspectives they are missing (in their board, advisory board, mentors/coaches, ambassadors, etc.).
It’s been one year, and I wanted to share the recommendations we made to investors, investment managers and partners at venture capital funds. They base off our learnings in attracting a more diverse group of people, from trying and failing and trying again. If you are in the position to decide who gets the power to grow, you can use this checklist to distribute your funds equitably.
The Invest in Diversity checklist
for investors, investment managers and partners
1. Change comes from the top
- a. Lead by example
2. Inclusive communication
- a. Be inclusive in words and language
- b. Be inclusive in pictures and role models
3. Counteract bias in sourcing prospects
- a. Actively look for new sources of deal flow
4. Counteract bias in the decision-making process
- a. Have clear selection criteria
- b. Treat women and men equal, for example;
- Promotion questions vs. prevention questions
- Perceived potential vs. experience
5. Measure and set goals
- a. Measure to follow up
- b. Set goals that push you to action
The criterion for team diversity was only the first step for us. We wouldn’t be a good incubator if we didn’t practice what we preached — so we made a few changes ourselves.
Changes at the SSE Business Lab
1a. Leading by example
Diversity was important to the leadership of SSE Business Lab, but at the time, the board of directors consisted of four men.
This board was not only male-dominated, but it didn’t reflect the University’s interest and competence in entrepreneurship.
In the end, we recruited two Professors in entrepreneurship (two women) and the CEO of the University’s organization for entrepreneurial education (a man). The board now consists of four professors in entrepreneurship and innovation (previously only one), of which two of them are women, and the CFO of the University.
Some venture capital funds are re-designing their investment committees to include not only partners or investment managers but also their legal counsel and external expertise. Including more perspectives is a great way to make decision making less biased and broaden your view of what potential looks like.
2a. Be inclusive in words and language
As we were recruiting two new positions last fall, we looked at the language needed to perform the job well. We have previously had an all-Swedish team but ended up scrapping the requirements of speaking Swedish for half of the positions we were recruiting. That resulted in the hire of our Marketing Manager, Carmen Beltran, formerly from Colombia.
It required some changes in how we worked on our end as many documents and resources were not in English, but it was worth all the effort.
For the communication around the program applications, we also changed our copy. Beyond asking for ideas to be scalable, we also ask for them to be sustainable, to complement the otherwise male-coded word.
2b. Be inclusive in pictures and role models
We have found that it is a challenge to keep an inclusive and balanced social media feed with a portfolio of mostly male-founded teams such as ours. Yet, there’s tremendous opportunity to share inclusive content, beyond the success of your portfolio companies.
Since recruiting our Marketing Manager, we’ve been able to put more effort into the content we share in our external channels.
Currently, we’re running ads for applications to join our Activate program with two different images. Both images go out to the same target audience, but they perform differently with women and men.
(Results from the first few days show that the ad with the image of a man attracts 56% men and the image with the woman attracts 51% women. Both ads have around 2000 impressions each, so it might be too early to make any conclusions).
We also share content like this article, images and learnings from events we host with a diverse group of people and speakers. When we can, we put the spotlight on a more varied group of people. They include the female workshop leaders, the teams making a difference to marginalized groups and books by authors we love.
For inclusive texts, I’ve previously recommended the gender-filter for job ads, which works excellent for all copy and its list of word suggestions to use instead.
4a. Having clear selection criteria
Since last year, we’ve also added unambiguous selection criteria to the incubation and acceleration programs we run. Startup potential is difficult to measure, and I would be writing a very different blog post if I had figured that out.
Yet, there’s tremendous value in deciding what you stand for, being it with organizational values or future strategy. We did just that and incorporated it into our selection criteria.
Our values are; a passion for community, courage to be bold and diversity & inclusion. We turned those values into selection criteria that are now three out of the eight criteria that we base admissions on.
I know that the venture capital firm Alfvén & Didrikson also have selection criteria tightly knit to their values and their view on potential. Not only does transparency with selection criteria attract a more diverse group of people, but it also helps you keep yourself accountable — and everyone aligned.
Other initiatives we did:
- We added a requirement that investment funds needed to have at least one female partner or woman in the investment committee to become a “preferred investor.” All preferred investors get access to exclusive events with our startups and are premiered by us.
- We were a part of The Yes Way, an initiative by Ideon Innovation, which works for an equal and inclusive entrepreneur and innovation support system. Through the initiative, we implemented a diversity & inclusion policy, mapped our investment landscape and created processes for inclusive recruiting.
- We recruited a man to the operational team (we were only two women previously, and had the opposite problem in the core team).
What our initiatives resulted in
Between 2018 and 2019, the new ideas we met at least once (“deal flow”) had an increase of mixed teams by 95%. Mixed teams are teams with at least one female and one male co-founder. Female-founded teams don’t count as diverse in our definition.
The mixed teams admitted to any of our programs increased by 205%.
These results come from one year’s work in a team of two people (at the time). We did this at the same time as we were running incubation and acceleration programs for 18 startups. If we could do that, so can you.
Will you help lead the change?
We understand the incredible opportunity we have, and that many investors have, in changing the inequality of our ecosystem. By giving access to this power to grow to a diverse group of people, not only including women but all underrepresented groups in our industry, we can change the course of the future.
Will you dare to decide to only invest in teams with female founders? To have a requirement of at least one woman in executive management before investing? To say no to exceptional cases who don’t value diversity?
You’ll do the ecosystem a favor, but most of all, your LPs will thank you in 15 years when your portfolio overperforms the rest of them.
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Julia Delin is the CEO of SSE Business Lab — the venture incubator at Stockholm School of Economics, one of the leading business schools in Europe. SSE Business Lab has been around since 2001 and graduated over 180 companies, among them one of Sweden’s six unicorns — Klarna. Its mission is to strengthen the competitiveness of Sweden and to enable Swedish startups further to succeed.
