SFG6: Diversity and inclusion
Why is this important? Copy link
Did you know? Historically, diverse founding teams deliver higher cash returns to investors at exit, earning 30% higher median realised multiple on IPOs and acquisitions.
Diversity
- Diversity describes the range of human differences within a group of people. Many studies have shown how businesses that have diverse workforces and management outperform their peers in almost every business metric.
- As much as it feels like a no-brainer, diversity is hard in practice. It requires deliberate intent and effort from day one. Unconscious bias, pre-existing structural barriers in the education and job markets, and tokenism are all common challenges facing organisations.
- There is a myriad of diversity lenses such as gender, ethnicity, sexual orientation, disability, age, and socio-economic background, to name a few. Not all differences are visible and even less quantifiable.
- It takes mindsets, skills, and behaviours to take diversity deeper than a simplistic (and dangerous) box-ticking exercise, and no better time to do it than early on to shape the culture and practices of the organisation.
Inclusion
- In terms of the workplace, inclusion involves people’s well-being at work, safeguarding people’s mental and physical resources, and championing rights and cultural differences all of which collectively help people to succeed at work.
- An inclusive environment allows individual contribution to matter and employees are able to perform to their full potential, no matter their background, identity and circumstances.
- For all businesses with a web presence, and more acutely for software businesses, digital accessibility is another key dimension of inclusion. Digital accessibility allows all users to access content without difficulty, including people with disabilities and using specialised software or hardware.
Gender diversity
2022 saw the roll-out of a new EU law introducing gender balance targets on company boards. By 2026, companies will need to have 40% of the underrepresented sex among non-executive directors or 33% among all directors. The UK’s FCA meanwhile introduced multiple diversity targets for listed companies including at least 40% of the board to be women; at least one member of the board to be from a non-white ethnic minority background; and at least one of the senior board positions to be a woman.
Hiring persons with disabilities
In many EU countries, organisations of 20 or more employees are subject to hiring quotas for people with disabilities (4-6% depending on the country). Countries operate different types of penalties if quotas aren’t met, from monthly penalties to annual contributions to a fund for the vocational integration of people with disabilities. See here for more detail by country.
Digital accessibility
Web Content Accessibility Guidelines (WCAG) explains how to make web content more accessible to people with disabilities. WCAG covers websites, applications, and other digital content. It is developed by the World Wide Web Consortium (W3C) Web Accessibility Initiative (WAI). WCAG is an international standard, with many organisations expected to meet Level AA Conformance
Where to start Copy link
Pre-seed/Seed Copy link
- Build as diverse a team as possible, focusing on gender, ethnic and other diversity lenses, to achieve diversity of thought, perspective and experience.
- Don’t just surround yourself with people in your immediate network and beware of affinity bias.
- Make diversity part of your company’s values
Series A Copy link
- Publish a diversity policy
- Conduct a D&I audit to understand where you are and what to focus on
- Continue driving for diversity in recruitment
- Include diversity and inclusion statements in job descriptions
- Check job descriptions for use of inclusive language using free available tools
- Introduce a referral bonus scheme for underrepresented employees
- Codify the interview process to follow an identical approach for all applicants
- Work with organisations promoting diversity in VC
- Create an inclusive culture
- Flexible working arrangements
- Internal events celebrating different cultures and traditions
- Promote a culture where all employees have a voice
- Not tolerating any micro-aggressions
- Encourage Employee Resource Groups and employee-run communities (e.g. Bookclub, Runclub)
Series B onwards Copy link
On Diversity:
- Put diversity front of mind of building your team from day one.
- This should include your leadership team and Board. Many companies focus initially on gender diversity, while hiring from different cultural backgrounds and nationalities will also be enriching for your company.
- Formalise this in a Diversity policy.
- This should articulate why you value diversity as an organisation, what measures you are putting in place to promote diversity, equity and inclusion, and avoid discrimination, and how you create an inclusive working culture from day one. Remember that your employee population is the biggest testament to your commitment.
- Recruitment is a key window of opportunity to shape a diverse team.
- Make sure you go the extra mile to source female and other diverse candidates. The diversity of your initial candidate pool matters - studies have shown that when there’s just one woman in the finalist pool, their chances of being hired are statistically zero. When there are at least two women in the final pool - the odds are 194 times greater. Have your teams run regular sourcing sessions to help diversity and help recruiting, and focus your attention towards organisations or communities that actively increase access to jobs for diverse candidates. Early talent development activities such as internships and apprenticeships can also be a powerful source of diversity. Include diversity and inclusion statements in job descriptions and use of inclusive language in job postings which can be tested with some of the free tools to assess bias within job descriptions, for example here.
- Set up compliant internal data collection processes:
- This should always be on a voluntary self-identification basis (asking employees to fill in a survey at the point of joining and/or on an annual basis.This can be done on an anonymous basis). The geography/ies you operate in will have specific laws with regard to personal demographic information.
- Consider doing a D&I audit: and/or commission a diversity audit, for example with The Allyance. Such audits can help reveal unconscious biases in recruitment and identify particular areas to focus your efforts on.
On Inclusion:
- Foster an inclusive culture, for example through;
- Flexible working arrangements
- Internal events celebrating different cultures and minorities
- Workshops or speaker events on the topic of unconscious bias/ conscious inclusion
- Ensuring all employees (especially groups that may be under-represented in your workforce) have a voice.
- Zero tolerance for micro-aggressions.
- Encourage Employee Resource Groups to advocate for inclusion based on gender, sexual orientation, ethnicity and other forms of diversity. They play a significant part in achieving inclusive representation, developing workplace culture, and providing employees with support.
- Choose an inclusive and accessible built environment, e.g. disabled access, unisex toilets, breastfeeding and faith rooms. Include a reasonable accommodation policy inside your D&I policy.
- Put digital accessibility at the heart of dev work. Ensure that your key product and tech leaders have basic accessibility awareness training.
- Ensure at least two non-majority candidates are interviewed
- Follow identical interview process for every candidate
- Use multi-selection methods rather than just interviews eg. ability tests, case studies, to open up variety of assessment and minimise risk of biassed decisions
- Use several assessors across a range of stages, use individual assessors rather than interview panels. Collect individual feedback before gathering the team to lower chances of correlated errors and prevent conformity that reduces judgement quality
- Offer referral bonus for underrepresented employees
- In referencing, find out what they are like in a working environment, whether they will help preserve or improve the culture of your business, and what is important to them?
- Ask promotion and prevention focused companies equally to all kinds of founders
- Follow up with those who got offers and those who didn't and ask what could have gone better about the process. Examples included in DiversityVC toolkit
Data collection Copy link
Data collection on diversity should always be carried out carefully as it constitutes sensitive personal information. Make sure to seek advice on the specific parameters demanded by your jurisdiction to collect diversity data legally and sensitively. Typical parameters include consent, data storage, anonymity, and collection/storage by third parties.
- Gender data is rapidly becoming a table stake and, in some jurisdictions, a regulatory requirement.
- Gender data in leadership, Board and overall organisation will often be asked by growth and buyout investors.
- Disability employment data (%)
- Compliance levels for digital accessibility
Useful resources and further reading Copy link
On diversity and inclusion
- Diversity & Inclusion in Tech: A Practical Guidebook for Entrepreneurs - Diversity VC & Atomico
- 11 ways to build diverse, equitable and inclusive start-ups - Founders Factory
- Why diversity isn’t just a trend, but truly a real asset - Forbes
On digital accessability and inclusion
- Building more-inclusive technology - HBR
- Digital Accessibility Report - Contentsquare
Examples and testimonials Copy link
Hear from our portfolio company Toucan on why start-ups should make diversity a top priority
At Toucan many of our first employees were women, which helped us to hire more women as we grew. We weren’t as quick to hire people of colour, though, and we’re still playing catch-up when it comes to increasing ethnic and racial diversity. So pay attention to your first few hires: they set the stage for everything that follows.” Charles Miglietti, Co-Founder and CEO at Toucan.
See GoCardless’ inaugural Diversity report reporting on the company’s diversity make-up, including gender, ethnicity, orientation, disability and neurodiversity and age, and sharing all the initiatives in place to continue driving diversity and inclusion forward, from W, to X Y Z
“As a company, we build simple and secure bank payment solutions for people and businesses everywhere. For this to work, we need to reflect the customers we are serving. Through greater diversity and inclusion, we will be more attuned to our customers' needs, build better products and services, and make higher-quality decisions as a business... As we continue to scale quickly and internationally, attracting a diverse workforce and creating an inclusive environment where employees from all walks of life can thrive is key to our success.” Eva Ducruezet, Chief People Officer at GoCardless.
Check out how LoveCrafts got shortlisted for the Culture Pioneers 2022 Inclusion Award, with judges applauding “a number of commendable DEI initiatives across the organisation. It's clear that creating a more diverse and inclusive workplace for all is at the heart of what LoveCrafts does.”
“LoveCrafts has weaved diversity and inclusion (D&I) into the heart of what we do – appreciating its importance for both our customers and our employees. Our D&I committee is a revolving membership made up of employees across all teams and all levels of the organisation, with buy-in from the executive and c-suite to ensure that initiatives are fully supported. It is not regarded as one person’s job but part of everyone’s job.” Hannah Winter, General Counsel at Lovecraft.
