The First Things You Need to Know to Pay Off Your Startup’s Diversity Debt

Arianne Price
Sep 10, 2020 · 7 min read

Startups are often founded by friends and staffed by people in the founders’ networks, so it’s not a surprise that many early stage companies are staffed by people who look the same and come from similar backgrounds. That’s a problem for a number of reasons — it furthers inequities in our industry and country, it fosters groupthink and inhibits creativity, and it weakens companies’ ability to draw on different experiences and perspectives to solve big problems.

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We also know that our portfolio companies, and many startup founders, want to improve their company’s diversity metrics and create an inclusive culture, but they don’t know how to translate that commitment into practical action.

In this list we’ve collected top resources from founders, investors, researchers and diversity, equity, and inclusion experts on best practices for recruiting underrepresented talent and enacting DEI efforts at startups that actually work.

Understand Diversity Debt and Start Paying It Down

Founders know about tech debt — the cost of making cheap decisions on code today that will result in expensive rebuilds in the future — the same principle applies with diversity debt. When you fail to invest in creating a diverse team early on, you pay the price later on.

It’s much harder to attract the first woman or person of color to hire when you’ve got twenty employees than it would have been when you were a team of five — harder for you to find the candidates and harder to convince someone that it’s a work environment they want to be a part of when they’re going to be the only one like them.

The earlier you can bring on a quality CTO to build out your software the right way instead of outsourcing or hacking it together, the better — the same is true for hiring. End the compounding interest on your diversity debt by committing to making a real effort today.

On the financial benefits of a diverse team — and the costs of not having one:

On why you should start paying down your diversity debt today:

Collect Data and Explain Why

Progress begins with an honest assessment of where you are today. Best practice is to start by compiling self-identification information from all your employees. It’s important that this come from employees and applicants themselves — not managers filling it out on their behalf or worse, a founder guessing. You’ll also want to start collecting this information from applicants for jobs and use it to track what percentage of applicants, interviewees, and final round contenders are from underrepresented groups. At Squadra, we’ve started requesting the same information from prospective portfolio companies in our investment diligence process, feel free to adapt here’s our low-tech template.

In both cases, this request for data should be accompanied by an explanation of why you’re asking for the data and what you plan to do with that. With your current team, this is a chance to explain to the whole staff your commitment to recruiting diverse applicant pools and creating an inclusive culture, and can spark an open conversation. Including a D&I statement on your website serves as an explanation of why you’re asking for the data and offers you a chance to demonstrate your values. If your team is pretty homogenous, this signals to potential hires that you are taking action to change.

On starting with the data:

Why your diversity statement matters, and how to write it:

Set Real, Measurable Goals and Hold Yourself to Them

Once you’ve collected the data on your existing team and included it in your applications, you’ll see clearly which groups are underrepresented and where you need to focus your recruitment and inclusion efforts. We’ve all read articles and Twitter threads about large and small organizations that made vague commitments to a “multicultural workforce” and “valuing diverse perspectives” but failed to live up those promises.

The way to ensure your good intentions are accompanied by concrete action is to set specific metrics and frequently hold up your progress against them. For a hiring search, commit to interviewing a group that is at least 50% women, people of color, or other underrepresented groups at your company. Commit that in the next year, you’ll improve the representation within your team by at least 10%. In terms of equity within your existing team, commit to ensuring that men and women are paid equally when controlling for factors like role and years of experience, then conduct a salary audit and make necessary adjustments.

Create accountability by calling on board members and advisors to hold you to these goals, too. A founder with very limited time will be more likely to dedicate attention to recruiting a more diverse team when she knows she’ll be asked about it at her quarterly board meetings. Seek out investors who share your commitment who can hold you accountable to hitting your goals and help you do it.

On how (and how not) to set specific diversity goals:

On how VCs can help startups improve their diversity:

Expand Your Reach and Your Expectations

As you seek to source candidates who belong to groups underrepresented within your current team, you’ll need to look beyond your own network. The people you have access to on LinkedIn and alma mater listservs are likely to be pretty similar to you in terms of demographics, background, and perspective. We recommend our companies post job descriptions on job boards targeting specific underrepresented groups — here’s our recommended list of job boards for equitable hiring. For high level searches, it’s worth it to invest in a recruiter that will prioritize reaching a wider and deeper audience.

In addition to diversifying the audience you’re reaching, you’ll also need to rethink what you require of candidates. It’s common for founders to be impressed by big names or reassured by recognizable experiences. But looking for things you recognize can cause you to miss out on candidates with winding paths or different backgrounds. Remember, you’re hiring someone for what they can do, not for where they went to school or what sticks out on their resume.

On crafting an inclusive hiring process and reaching talent outside your network:

On looking beyond traditional markers of a strong candidate:

Invest in the Process

In many ways, early-stage founders are well positioned to make these changes — they have small teams and low diversity debt, the ability to make changes quickly without running things up a large hierarchical chain, and a willingness to shake things up and test out hypotheses.

However, we know that making changes to the way your company hires and operates isn’t about just caring about the issue — it requires putting your money where your mouth is. Founders need to prepare to invest their capital, manpower, and time into this process. They’ll spend more time reflecting on their company cultures, discussing diversity with their teams, and crafting job descriptions that describe ability and not accomplishments. They’ll interview more candidates, and those interviews will include more of their employees. They’ll be signing off on additional expenses, ranging from a couple hundred dollars for a job board posting to spending a significant percentage of a new hire’s salary on a recruiter.

Investing in diversity and inclusion is a big, bold, strategic, worthwhile decision.

Just like hiring a great tech leader early on is worth it in the long term savings on tech debt, just like bringing in an outsourced CFO is worth it instead of a founder trying to keep the books themselves — rapid growth and success as a venture-backed startup requires big, bold, strategic, worthwhile investments.

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Welcome to the Squadra Blog. We will be sharing advice, stories, and how we make hard decisions as we work with our portfolio companies to build extraordinary teams and companies.
Have a question for us? Send it to margaret@squadra.vc. Know a team we should meet? Share it with mike@squadra.vc.

Arianne Price

Written by

Political staffer turned MBA student. Interests include startups, feminism, cats.

Squadra Ventures

Squadra Ventures is an early-stage venture capital firm led by founder-operators that invests in enterprise software that drives value — efficiency, security, top-line revenue. By applying significant resources beyond the check, we are creating a growth engine for startups.

Arianne Price

Written by

Political staffer turned MBA student. Interests include startups, feminism, cats.

Squadra Ventures

Squadra Ventures is an early-stage venture capital firm led by founder-operators that invests in enterprise software that drives value — efficiency, security, top-line revenue. By applying significant resources beyond the check, we are creating a growth engine for startups.

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