The Impact of Diversity: A VC Perspective
Our belief is the world benefits most when diverse groups and individuals come together in bold and ambitious goals. We fundamentally believe the biggest technology companies are built by great teams that represent a world view. The venture capital industry has just begun to address systemic issues that have either inhibited diversity or outright came at cross purposes to it. While the tech industry has succeeded in many areas, one thing it has failed in is creating and maintaining a diverse workforce. This is a multi-faceted and complex problem that we believe can be addressed holistically. We at Framework understand that we have a part to play.
To us, diversity is about empowering people by respecting and appreciating what makes them unique, in terms of age, gender, ethnicity, religion, disability, sexual orientation, education, and national origin. The ultimate goal of Framework and our portfolio companies is to create opportunity and add value to achieve the best possible outcome while overcoming any challenges we face. To do this, we need diverse team members that will look at a situation from different perspectives. We understand that these perspectives are developed through individual experiences that vary by race, socio-economic status, and upbringing. We believe that diversity in thought leads to creative solutions, and by natural extension, successful businesses.
Diversity is important as it directly impacts all levels of an organization as well as decision-making processes within a business. A series of studies by McKinsey has shown that firms in the top quartile of ethnic and gender diversity on their executive teams were 25% more likely to have above-average profitability than those in the fourth quartile. McKinsey’s studies, completed in 2014, 2017, and 2019 conclude that ethnic diversity trickles down into the likelihood of better financial performance. It’s a win-win situation but one that is systematically difficult to implement. Tech companies are faced with the challenge of finding equally represented and ethnically diverse candidates, simply because these individuals are underrepresented in the applicant pool. Taking a step back, this is a direct result of fewer Women, Black and Indigenous persons graduating with STEM degrees (specifically computer science) or even choosing to study it in the first place. The lack of diversity in graduates is therefore a structural problem that urgently needs to be solved. Aside from the long term issues, we believe there are tangible things we can do now. We aim to build this diversity of thought internally and encourage it in each of our portfolio companies.
At Framework, we take a two-pronged approach to ensure diversity by tackling it both internally and through our influence on our portfolio companies to become part of the solution. Internally, our hiring process ensures we interview 50/50 gender diverse candidates for all full time, advisory and internship roles. A direct result of this is our well-rounded team which is a diverse mix of age, gender, ethnicity, religion, and education. Specifically, our full-time investment team of 8 has 3 individuals who identify as women and 4 visible minorities. Leading by example, we encourage our portfolio companies to do the same during their talent acquisition process and help provide the right strategies and tools to do so. This is a data-driven approach and enables our teams to make educated hiring decisions while training their staff on unconscious bias and other diversity and inclusion initiatives.
As an investor in the technology ecosystem, it is also critical that Framework sources and considers a diverse set of investment candidates with highly diverse management teams. As a fund, we actively pursue a large number of non-traditional sourcing methods as we look to develop a pipeline of highly diverse founders. We’re proud of our partnerships with diversity-focused venture funds like the BDC Women in Technology Fund and Sandpiper Ventures and we’re excited about our pipeline and portfolio of early but exciting startups led by diverse teams across Canada and the US.
The path to a diverse executive team and workforce is fundamental to an organization’s success. We at Framework realize the responsibility we have as investors and as a firm. We will continue to internally improve our approach to this problem and encourage our portfolio companies to do the same.
