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Enhancing variety within the know-how bubble

April
20, 2021

6 min read

The opinions expressed by the entrepreneur's contributors are their own.

It's no secret that workforce diversity is a major concern in tech companies. Between 2013 and 2017, only 1% of VC-supported entrepreneurs were black and 9.2% were women. This underrepresentation is repeated in all parts of the industry. Less than 6% of employees at Facebook, Google, Twitter and Microsoft identify as black. According to a 2018 study by Deloitte and NVCA, only 6% of all employees and 3% of partners at venture capital firms were black. Only 14% of venture capital partners are women.

Changes are still required.

If we think about the right place to begin this diversity, equity, and inclusion drive, some valuable ideas come from what I refer to as the "frontier" – startup founders operating outside of typical hubs like Silicon Valley . They offer unique strategies that can help transform the monoculture of so many mature startup ecosystems. Of course, there is no silver bullet, and these emerging market entrepreneurs haven't met the diversity challenge, but they offer some good starting points.

Related: The Importance of Diversity and Inclusion in Uncertain Times

Attitude based on skills

Diversity starts with attitude. The problem with Silicon Valley is that businesses and founders have deep networks and conventional wisdom to build their team from your early network, which unsurprisingly maintains a lack of diversity. Companies outside of typical technology centers often have difficulty recruiting such candidates for vacancies and have developed strategies to broaden their search. In this way, they identify applicants from a wider variety of backgrounds and judge them based on the results of their work rather than preconceived notions.

Hotels.ng is one such example. As the startup began to exhaust top talent in its hometown of Lagos, Nigeria, it expanded its search radius. Hotels.ng founder Mark Essien started the HNG internship – a virtual internship to screen potential applicants. The process sends candidates increasingly difficult technical issues through Slack. Over time, only the few interviewees at Hotels.ng, and a subset of them receive job offers. The program is only intended for evenings and is not intended for candidates who are likely to have other full-time assignments to do. Hotels.ng also wants to make sure that nobody is absent for financial reasons. They pay a scholarship to everyone in the pool as they progress in hopes of making the application process a process that rewards skills, not race, background, or economic situation. In the second grade, Hotels.ng had 4,000 applicants and finished hiring 25 people, mostly from outside Lagos and other major centers.

Many emerging market startups know that hiring is not just about finding the best individual talent, it's also about finding people who are right for the company. They form A-teams instead of just gathering A-players. And because they recruit by skills and behavior rather than résumés, they offer better access and ultimately encourage greater diversity.

Related: Why Diversity In The Workplace Is Essential

Talent pipeline development

Global entrepreneurs don't just look past the usual suspects – they often build the talent pipeline themselves. Shopify, the Canadian tech powerhouse, worked with Carleton University in Ottawa to develop the Dev Degree program, a de novo work-integrated academic degree. Over a four-year period, students work directly on Shopify for 25 hours per week during class. As long as students are doing an internship and completing their degree, Shopify pays every four academic years plus the hours worked for the company and reserves a job offer for the graduates.

Shopify promotes diversity by proactively developing the talent pipeline. In the youngest cohorts, 50% of candidates are women, compared with an average of less than 20% in computer science.

Related: Having a culturally diverse workforce can be a boon to your business

Remote work and diminishing bias

While the whole world has been forced to work remotely due to COVID-19, in many emerging startup ecosystems, a distributed team approach has been a standard practice from the start. When performing well, remote working can encourage diversity. A study by Remote.co found that shared work obscured preconceived notions of what a leader looks like, leading to a higher percentage of female founders, presidents and CEOs, among other things. Although the study focused on women, we hope that a similar study will be conducted on races.

There may also be more opportunities to change the nature of the “pitches” in the venture capital community in order to break down the prejudices that have traditionally plagued this process. Some VCs are increasingly relying on hard data rather than traditional methods that rely more on intangibles. Social capital, for example, pioneered an algorithmic approach to venture capital investment that it called Capital as a Service (CaaS). Of the more than 75 CaaS investments by Social Capital, 80% of founders were non-white and 30% were women, spread across twenty countries – statistics well above the traditional industry figures.

Appreciating diversity as a strategy

Entrepreneurs in emerging startup ecosystems understand the benefits of working with a diverse team. Companies in smaller countries often build more effective products and have to be born globally, scaling across multiple regions from the start. One-dimensional product, marketing, and operations teams will struggle to accommodate consumer needs and interests beyond a select group of people with similar backgrounds and interests.

That makes business sense. A BCG study found that improving diversity in a management team due to innovation resulted in a 19% increase in sales. Younger employees (the future of the workforce) also place much more emphasis on working in a company with different employees, which affects the place of work and the satisfaction of their employees. A healthy mix of talent from different races, genders, and backgrounds only benefits, which are increasingly supported by the data.

To truly unlock the world's entrepreneurial talent, we need an environment where all genders and people from different backgrounds can thrive. The momentum is on our side as the nation goes through waves of significant changes in terms of racial relations and the work model. Now is the time to take advantage of these opportunities and develop strategies to move the business forward. The examples I have listed above are not a panacea. But hopefully they offer classes on where this journey can begin.

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