Innovation Blog

The Startup Diversity Dilemma


The elephant in the industry

Studies by the Kauffman Foundation show that in 2014, around 37% of new entrepreneurs were female and around 41% were non-white. Another report by the Initiative for a Competitive Inner City (ICIC) stated that from a survey of eight high-tech accelerators and incubators, only 20% of businesses were owned by women and 23% by minorities. This indicates that entrepreneurs are significantly less likely to enroll in an accelerator if they are women or people of color. Furthermore, according to a Babson College study, only 15% of businesses receiving venture capital investments between 2011 and 2013 had a woman on the executive team. Less than 3% of these business had a female CEO.

To add some personal testimony to these statistics, Forbes Magazine published an article where THINX and Daybreaker co-founder Radha Agrawal opened up about being a woman in the boardroom. Agrawal relates that they (the male board members) think I cant handle a conversation about business when Im the CEO of the company.

What can we do?

It would appear that the startup industrys diversity problem is self-reinforcing; since the industry is dominated by white men, it is hard for women and minority entrepreneurs to establish themselves, which in turn causes the industry to continue to be dominated by white men.

Those in the industry know that things need to change, but how?

First, accelerators and investors must go out of their way to promote women and minorities. Think of this as a sort of affirmative action for startups. This would involve creating more diverse panels of judges and mentors, and making a greater effort to connect with and receive applications from more diverse startups. The goal is to create a startup ecosystem that includes people from all backgrounds.

Several Boston-area accelerators are taking steps in this direction. A recent article in the Boston Globe highlighted several of these. Accelerate Boston, run by the nonprofit Future Boston Alliance, offers itself to minority-run startups that may be turned down by accelerators looking for the next Uber. Recently, the Startup Institute offered a scholarship for minority entrepreneurs. MassChallenge has been working to diversify its rosters of judges and publishes its own diversity data. EforAll is trying to reach out and accelerate innovation in economically depressed mill towns such as Lowell and Lynn MA.

Earlier, I mentioned that the processes limiting diversity among startups are self-perpetuating. The flipside of that is it means we can turn those negative cycles into positive cycles. As more women and minorities get involved in startups, others will feel more empowered to do the same. As some of those entrepreneurs go on to become judges and mentors, more diverse startups will be able to flourish. If we can accomplish that, we will have more bright ideas and more opportunities for all people to realize their dreams. But in order to get the wheel rolling in the right direction, we need accelerators and incubators to step in and give it a spin. Learn more about accelerators vs incubators.

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