4 Ways to Hard-Code Diversity in Startup Accelerators
We know diversity improves outcomes; no better place than accelerators to establish it
John Greathouse, a partner at Rincon Venture Partners and professor at UC Santa Barbara became the subject of much outrage after writing “women may get further ahead professionally if they mask their gender initially” in a recent Wall Street Journal article. Greathouse’s article, compounded by studies highlighting a lack of diversity among incubators and accelerators, is addressing the need to disrupt diversity now more than ever. The hub where inclusivity can best thrive and sustain is the accelerator.
Accelerators are community-driven, fixed-term cohorts, that provide mentorship, programming, and access to funding which typically culminates in a public pitch event or demo day. Accelerators, however, don’t do a good job of providing value in diversity for startups. Accelerators should hard-code for diversity to build absolute and unchangeable values in a program. Hard-coding, a computer programming term, refers to embedding fixed formatting in a way that satisfies particular criteria for actionable results.
McKinsey has shown startups in the top quartile for gender diversity are 15 percent more likely to financially outperform those in the bottom quartile. Startups in the top quartile for racial and ethnic diversity are more likely to have financial returns above their national industry medians. If accelerators can codify parameters around diversity, then it will improve their ability to turn out diverse, fundable startups. Below are four strategies to increase the participation rates of women and minority entrepreneurs.
Actively Recruit And Connect Ecosystems
Creating a climate that encourages diversity and helps multicultural entrepreneurs thrive is imperative to economic sustainability. According to the ICIC report networking, education and capital challenges are most acute for women and minority tech entrepreneurs. Many minorities lack a network of executives, investors, and successful leaders. In result, minorities are discouraged from even applying to accelerators. Facilitating knowledge share in more productive settings for entrepreneurs to engage could only be more beneficial for all stakeholders involved.
Additionally, identifying data and reputable sources of information to innovate big data in hiring practices can help young entrepreneurs better understand what drives performance. Helping startups attract, actively recruit and retain a talented workforce at all levels of leadership moves startup ecosystems to a more inclusive climate. By designing programs targeting women and minority entrepreneurs, accelerators could do a better job adjusting the selection process to reflect these challenges.
Maximize Value Of Mentors
Accelerators enter and dig in with startups at the most difficult place in the value chain which is all the more reason why greater emphasis should be placed on mentoring, in particular, a diverse composition of mentors. Further selecting mentors of a certain mold continues to perpetuate the “People Like Us” theory — the idea that people are more likely to identify with and select those who look and act like themselves. This is a prime opportunity to break down perceptions of what successful tech founders look like.
Sourcing diverse mentors with deep domain expertise will also provide significant upside for the accelerator’s community. Mentors linked to key stakeholders can help startups develop winning strategies while also forming long-term relationships with industry leaders.
Scale up Research Through Partnerships
Partnerships are critical for proving out concepts and testing solutions. Accelerators are becoming increasingly relied on to leverage their networks on behalf of their cohorts. Those networks can be instrumental for improving both the accelerator’s diversity and its cohort’s chances at success.
The best way to realize diversity is through collaboration and partnerships between startups, established corporations, investors, non-profits and economic development arms that align with the same principles. Techstars recently released results of their diversity research project with Chase for Business. Through their partnership, Techstars and Chase for Business were able to uncover a few key takeaways after surveying 700 tech founders:
- 81 percent of founders say diversity enhances creativity and innovation
- 67 percent of founders say that diversity improves problem-solving
- 63 percent of founders say that a diverse workforce provides greater access to talent
- Developing networks with established strategic partners enables faster outcomes through purposeful research.
Create Alternative Funding Models
Exploring new funding models for access to capital is probably the most effective in reducing the venture capital gender bias. For example, Village Capital, started the Village Capital Peer-Selected Investment Model, where the entrepreneurs in the cohort make investment decisions by evaluating each other at the end of the program. About 36 percent of Village Capital’s investments using this model are in women-led companies, which is significantly higher than the national average of three percent.
Alternative mechanisms for funding not only help startups cross the chasm and produce measurable outcomes but also empower a new generation of entrepreneurs who may not resemble the typical tech founder as she is perceived by investors like John Greathouse.
Many startups’ needs vary and different types might be served in different ways with an accelerator experience. The accelerators of today shouldn’t be mass-produced, lacking the tools and awareness for the startups of tomorrow. Accelerators cultivate and connect ecosystems. When diversity isn’t at the forefront of its mission, then it’s time for the accelerator to re-evaluate the services it provides. Anything that deters forward momentum or access to opportunity is a distraction. Greater emphasis should be directed towards helping early-stage startups grow and scale with a special focus on entrepreneurship in underserved communities such as women and minorities. These are just a few areas I believe accelerators can provide value in diversity for startups.
Post originally appeared in DC Inno
