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If You're Serious About Faster Startup Growth Get Serio…

Turning a startup into a successful high-growth business is a constant race against time. The entrepreneur is driving to achieve the milestones that make the company profitable as investors and board members seek levers to help the company scale. Everyone knows that superior execution depends on the creativity, tenacity and experience of the startup team.

That’s why greater diversity of all types holds so much potential for entrepreneurs and investors.

Diverse companies exceed industry standards. Racially and ethnically diverse companies are 35 percent more likely to outperform industry norms, and gender-diverse companies are 15 percent more likely to outperform.

Here’s a jaw-dropping stat from McKinsey & Company’s Why Diversity Matters: For every 10 percent increase in racial and ethnic diversity on a senior executive team in the U.S., earnings before interest and taxes rise 0.8 percent. Why wouldn’t startups and VCs want to take advantage of that?

Diversity also brings a competitive advantage to sales. Scaling a startup is all about breaking into new markets and signing up new customers. A team member who shares a client’s ethnicity is 150 percent more likely to understand that client. Maybe that’s why companies with the highest levels of racial diversity bring in nearly 15X more sales revenue than companies at the lowest levels.

Greater diversity can make a difference in deal flow, too. Women own about one-third of the businesses in the U.S., but they usually account for less than 10 percent of the founders of high-growth firms. The number of minority-owned firms is growing faster than non-minority firms, but most of the business are Main Street. Imagine the impact if we could attract more of that energy and talent into starting and scaling up high-growth companies?

Diversity isn’t limited to gender and race. It’s about experience, ethnicity and much more. Consider veterans, a diverse population in so many respects. A quarter of vets want to start or buy their own companies; since 2007, half the veteran-owned businesses formed are owned by women and minorities.

Both entrepreneurs and investors need to be on board and engaged to benefit from the impact of diversity. Here are five tips to help move the needle faster.

1. Embrace diversity as a competitive strategy.

Diversity drives revenue. Listen, really listen, to what the data is telling the industry; Use what you learn to impact your bottom line or ROI.

Related: Scale Culture Alongside Growth Through Diversity

2. Expand access through inclusion partners.

Why is there a lack of women and minorities creating and building high-tech companies? The reason may be simpler than you would think. Women and minorities are not in the networks that typically fuel startups. They just don’t have the same contacts and connections.

If you’re a company founder who recognizes diversity as strategy to outperform your competitors, or if you are an investor searching out the best deals, go where the people you are looking for already are. Tap into minority and women grassroot organizations and initiatives that exist in your own backyard. They are there. Look for organizations like these:

  • i.c. stars: a rigorous, technology-based, workforce development leadership training that educates low-income adults in information technology and helps them start new careers in IT.

The impact: More diverse coders.

  • The Ohio State University’s REACH program: increases female faculty recruitment and advancement in academic STEM science, encouraging commercialization leadership among female researchers and inventors at the University.

The impact: More women spinning out research-based technologies.

  • Venture for America (VFA): A fellowship program (now in 18 cities and growing) that matches the country’s best and brightest college grads with startups. VFA is committed to a diversified cohort, providing women and people of color an on-ramp to careers in technology and entrepreneurship.

The impact: Since 2014, 20 percent of VFA alum have started their own companies; fellows have raised $14MM+ in seed funding.

Related: This Question Reveals the Truth About Workplace Diversity

3. Expand the scope of diversity.

Reach into the melting pot that is the U.S. military by adding veterans to your pipeline or to your founding team. Vets are trained to be leaders. Many cities and regions across the country boast veteran-based groups with initiatives that support vet-entrepreneurship.

Related: 5 Ways to Recruit Rock-Star Employees on a Budget

4. Boldly showcase the success of diverse founders

Success begets success. Share the results of your hard work via social channels, public relations plans and networking events. As the community recognizes the impact, new opportunities to tie into diverse groups will pop up.

Take a cue from the NVCA and start measuring and reporting the representation of women and minorities to drive more business success. For entrepreneurs, put the data in your reports to investors. For venture capitalists — report your own diversity stats and require that your portfolio companies do the same.

Related: 3 Key Ways to Evolve Workplace Diversity

5. Investors play a role in fueling startup diversity.

Venture capitalists and angel investors can help eliminate selection bias that often seeps into the deal flow process by making market validation the cornerstone of every deal. Create a streamlined, repeatable and transparent method for selecting companies for due diligence.

Rather than a subjective process that is influenced by who you know or who you look like,  create a transparent, data-driven process that lets the market speak. Assess startups and entrepreneurs based on their success at validating their ideas with potential customers.

A more inclusive, high-growth startup community and ecosystem doesn’t happen from the top down. A committed and concerted, grassroots effort by the entrepreneurs and investors who have the most to gain by drawing in and motivating under-represented talent can have an incredible impact at every point along the startup path.

Diverse companies exceed industry standards. Racially and ethnically diverse companies are 35 percent more likely to outperform industry norms, and gender-diverse companies are 15 percent more likely to outperform.


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