- Diverse workplaces are well-poised for innovative problem solving.
- Many diversity gaps exist in tech start-ups, stifling opportunity.
- Fewer than 1% of Europe’s tech founders identified as Black/African/Caribbean last year.
- Only 43% of companies have at least one female C-suite executive.
Diverse companies enjoy a range of advantages thanks to a wide-ranging pool of talent and ideas. For instance, such companies are often more innovative and successful. According to the Boston Consulting Group, diverse firms report almost 20% higher innovation revenues, or proceeds from recently-launched products and services.
Have you read?
Diverse firms also more likely to retain staff, to spot risks, and to be more profitable, according to the World Economic Forum’s Diversity, Equity and Inclusion 4.0 toolkit.
Despite these advantages, diversity gaps still exist, especially in the tech startup ecosystem. These gaps manifest in a variety of ways, from venture capital funding, to board composition, and even to the implementation of programmes to boost company diversity.
These five charts provide a snapshot of the challenges tech startups face in 2020 - and the many opportunities for change and growth.
1. There's a lack of diversity among founders - and it leads to stubborn patterns
Diversity among founders is a challenge in many parts of the world. Around 77% of US founders are white or caucasian, according to a 2019 Crunchbase survey. Across Europe, the share is as high as 84% according to Atomico’s State of European Tech 2019 report. In that report, fewer than 1% of Europe’s tech founders self-identified as Black/African/Caribbean.
Since diversity plagues funders as well, stubborn patterns can emerge and even cross borders. Most funders hail from North America and very little capital is invested in emerging markets. In many parts of Africa, foreigners - not locals - snag the biggest funding deals. In fact, according to one 2017 study, only 10% of all funding in the east African region went to local founders.
2. Male-founded start-ups draw the greatest share of deals and dollars
2019 closed with only 3% of seed, venture and corporate dollar investments going to female-only founded start-ups – down 5% from the previous year, according to the annual Crunchbase Diversity Report.
That said, there are some signs of change. At the end of 2019, that same Crunchbase report found that 20% of start-ups raising their first round of funding had a female leader – double the number a decade earlier.
3. Few start-ups are actively trying to boost diversity
Only a quarter of start-ups (26%) are actively trying to increase diversity within their leadership teams, according to Silicon Valley Bank.
For its 2020 Global Startup Outlook report, it asked start-ups in Canada, the United States and the United Kingdom about the programmes in place to increase diversity.
Less than half (43%) said they had company-wide promotion and hiring goals, while fewer than one-in-five had these goals for executive positions (the C-suite).
4. Lack of diverse representation in C-suite
For the first time this year, Silicon Valley Bank asked start-ups in the US, UK and Canada about the ethnic and racial minorities in their C-suites and on their board.
In both cases, less than half of the companies had at least one member of their leadership teams who was ethnically or racially diverse.
5. The gender gap in leadership persists
There is slow, but positive progress towards gender parity in leadership positions, as the World Economic Forum’s Global Gender Gap Report 2020 found. But only 55% of adult women are in the labour market, compared to 78% of men.
What's the World Economic Forum doing about diversity, equity and inclusion?
The COVID-19 pandemic and recent social and political unrest have created a profound sense of urgency for companies to actively work to tackle racial injustice and inequality. In response, the Forum's Platform for Shaping the Future of the New Economy and Society has established a high-level community of Chief Diversity and Inclusion Officers. The community will develop a vision, strategies and tools to proactively embed equity into the post-pandemic recovery and shape long-term inclusive change in our economies and societies.
As businesses emerge from the COVID-19 crisis, they have a unique opportunity to ensure that equity, inclusion and justice define the "new normal" and tackle exclusion, bias and discrimination related to race, gender, ability, sexual orientation and all other forms of human diversity. It is increasingly clear that new workplace technologies and practices can be leveraged to significantly improve diversity, equity and inclusion outcomes.
The World Economic Forum has developed a Diversity, Equity and Inclusion Toolkit, to outline the practical opportunities that this new technology represents for diversity, equity and inclusion efforts, while describing the challenges that come with it.
The toolkit explores how technology can help reduce bias from recruitment processes, diversify talent pools and benchmark diversity and inclusion across organisations. The toolkit also cites research that suggests well-managed diverse teams significantly outperform homogenous ones over time, across profitability, innovation, decision-making and employee engagement.
The Diversity, Equity, and Inclusion Toolkit is available here.
And the gender gap persists in the C-suite and on the board among tech start-ups, with 43% of companies having at least one female C-suite exec and 42% having at least one female board member.