Venture.Community

Diversity & Inclusion

New perspectives are the raw material of venture.

Every insight a founder builds on, and every outlier an investor backs, starts as a view nobody else held. Our job is to make sure everyone who holds one belongs here.

Our Approach

Belonging, by design.

Most organisations try to fix diversity by trying to fix people. The research says that rarely works. We design the society so that the fair path is the easy path, and then we trust our Members to walk it.

We champion diversity because it is the work.

Venture rewards the insight everyone else missed. Insight comes from new perspectives, and new perspectives come from people with different paths and places. Diversity is how venture works.

We pledge away bias.

Bias lives in all of us, so every Full Member makes the same promise to set it aside, in themselves and in how they see others. The promise is written into the pledge they sign.

Members are known by what they build.

We do not use disadvantaged characteristics to describe each other. Nobody here is introduced as a category. You are met on your character, your contribution and your potential, the three things the pledge names, and on what you are building.

Mechanics over committees.

A committee needs agreement, and agreement filters out the unusual. Our mechanics work the other way. One Fellow who believes in a founder can champion them and stand beside them. Members back companies individually, with their own judgement and their own money. The society runs on one member, one vote. Bias has fewer places to hide when no single room decides.

A peer in the profession.

Our aim is for every Member to truly belong, and to believe in themselves as a founder and as a professional venture entrepreneur. Every Member is a peer in the profession of company building.

“I pledge to recognise and set aside the biases and stereotypes I carry, in myself and in how I see others, so that equality, equity and solidarity are delivered in practice and not merely professed. I will keep widening who I count as one of us, meeting every member and entrepreneur on their character, contribution and potential alone.”
Full Member Pledge, point 13

This approach is researched and open to challenge. The evidence follows, with every source, so you can test it for yourself.

The Evidence

Why we built it this way.

Our approach draws on venture finance, social psychology and behavioural economics. Five findings shape it. Each is set out below with what the research found and what we do with it. Numbers in brackets link to the full references.

1. Perspective is the asset

Different perspectives make better decisions, and better returns.

Diverse groups get stuck in fewer places

Lu Hong and Scott Page modelled teams solving hard problems. A group of varied problem solvers could outperform a group made of the individually best performers, because people who think alike tend to get stuck in the same places, and varied heuristics carry each other past them. [1]

Investors who think alike earn less

Paul Gompers and Silpa Kovvali studied the track records of venture capital partners. When co-investing partners shared a school background, the success rate of acquisitions and IPOs was 11.5% lower. When they shared an ethnicity, it fell by 26.4% to 32.2%. Firms that raised their share of female partner hires by 10% saw fund returns rise by 1.5% a year and had 9.7% more profitable exits. [2]

The effect is causal

Sophie Calder-Wang and Gompers used a natural experiment: senior partners who happened to have daughters rather than sons hired more women. Replacing one son with a daughter raised the probability of hiring a woman by 25%, and the more diverse firms that resulted performed better. [2, 3]

Angels pay for their bias

Michael Ewens and Richard Townsend observed private investor interest on AngelList. Male investors showed less interest in female founders than in comparable male founders. The male-led startups those investors preferred underperformed the female-led startups they also liked. [4]

What we do with it

Diversity pays. A room that thinks alike shares the same blind spots, and in venture the blind spots are where the returns were. So every company here draws on many independent perspectives: Fellows and Specialists from different fields, and Members who each make their own call.

2. Bias arrives early

Bias is measurable, and it lands before the pitch is judged.

Identical pitch, different voice, different verdict

Alison Wood Brooks, Laura Huang, Sarah Wood Kearney and Fiona Murray played 521 people the same investment pitch, word for word, narrated by a male or a female voice. 68% chose to fund the venture pitched by the male voice, and 32% the venture pitched by the female voice. Nothing about the business had changed. [5]

The questions decide the round

Dana Kanze and colleagues analysed investor Q&A at TechCrunch Disrupt New York. Investors tended to ask male founders promotion questions, about gains and growth, and female founders prevention questions, about losses and risk. The type of question explained much of a fivefold funding gap. In a follow-up experiment, founders asked promotion questions raised twice as much. Founders who answered a prevention question with a promotion answer raised more. [6, 7]

The picture of a "founder" does the damage

Alice Eagly and Steven Karau showed that prejudice arises when the traits people expect of a group clash with the traits they expect of a role. Leaders are expected to be agentic. When someone does not match the stereotype of the role, their leadership is rated less favourably, even when the behaviour is the same. [8]

The cost is visible in UK capital

The British Business Bank found that for every £1 of UK venture capital investment, all-female founding teams received less than 1p, all-male teams 89p and mixed teams 10p. [9]

What we do with it

Bias is what fast judgement produces under uncertainty, and uncertainty is the condition early-stage investing runs on. Good intentions do not remove it. That is why the conduct of investors towards founders is held to the same standard as everything else in the society, and why we design the places where judgement happens.

3. Labels are frames

What you say about a person before they speak changes what is heard.

A label can lower performance

Claude Steele and Joshua Aronson found that reminding people of a group identity tied to a negative stereotype impaired their performance. In one study, simply asking Black students to record their race on a questionnaire before a test lowered their scores. Later work found the effect smaller and more dependent on context than early studies suggested, but it points the same way. [10, 11]

Tokens become symbols

Rosabeth Moss Kanter studied people who make up a small minority of a group. They become highly visible, so every mistake is magnified. Their differences from the majority get exaggerated. And they are pushed into stereotyped roles rather than seen as individuals. Labelling someone by their minority status feeds all three. [12]

The frame is set before the message

Robert Cialdini calls it pre-suasion: what an audience has in mind just before a message decides the lens through which they read it. A descriptor attached to a founder before they pitch is exactly that kind of opening frame. [13]

Fast judgement goes first

Amos Tversky and Daniel Kahneman showed that two logically identical descriptions of the same choice can produce opposite decisions, depending only on how they are framed. Kahneman later described the fast, intuitive judgements that arrive before slow, deliberate analysis. A demographic label invites the fast judgement first. [14, 15]

What we do with it

This is why we do not use disadvantaged characteristics to describe each other. A label placed in front of a founder is a frame. It invites the stereotype before the analysis and turns a person into a symbol. People here are introduced by what they are building and what they bring.

4. Design beats sermons

Change the system and behaviour follows.

De-bias the organisation

Iris Bohnet reviewed the evidence on what reduces bias at work. Changing how people think proved hard. Changing the way decisions are made, by structuring evaluations, removing irrelevant cues and resetting defaults, worked far more reliably. [16]

Mandates backfire, contact works

Frank Dobbin and Alexandra Kalev tracked hundreds of US firms over decades. Five years after introducing mandatory diversity training for managers, firms saw no improvement for most groups, and the share of Black women in management fell by 9%. Mentoring programmes did the opposite, raising the representation of several under-represented groups in management by 9% to 24%. [17]

Make the good path the easy path

Richard Thaler and Cass Sunstein showed that the way choices are laid out, the choice architecture, shapes what people do, without removing anyone’s freedom to choose otherwise. [18]

Consensus filters out the outlier

Andrey Malenko, Ramana Nanda, Matthew Rhodes-Kropf and Savitar Sundaresan found that the investment committees of major venture firms let one partner championing an early-stage deal be enough to invest, to “catch outliers”. They use majority voting only for later stages. When outcomes are as heavy-tailed as early-stage venture, a champion rule beats consensus. [19]

What we do with it

Fairness here is the path of least resistance, built into the mechanics. A single Fellow who believes in a founder can champion them, and stands beside them as their mentor. Members back companies individually, each with their own judgement and their own money, so no single room has to agree. The society itself is run on one member, one vote.

5. Widen the “us”

Widen who counts as one of us, and belonging follows.

Shared identity opens minds

Cialdini’s principle of unity: people are most open to those they experience as “one of us”, a shared identity rather than mere similarity. [13]

Recategorise “them” as “we”

Samuel Gaertner and John Dovidio showed that when members of different groups come to see themselves as one larger group, bias between them falls. They called it the common ingroup identity. [20]

Contact on equal terms reduces prejudice

Thomas Pettigrew and Linda Tropp’s meta-analysis of 515 studies found that contact between groups reliably reduces prejudice, most of all under the conditions Gordon Allport set out: equal status, common goals, co-operation, and the support of the institution. [21, 22]

Belonging changes outcomes

Gregory Walton and Geoffrey Cohen gave first-year university students a one-hour exercise showing that worries about belonging are common and pass with time. Over three years it improved the grades and health of students from the groups most likely to doubt they belonged. [23]

Belief in yourself is a founder’s capability

Albert Bandura showed that self-efficacy, a person’s belief in their capability, shapes the effort and persistence they bring. Chen, Greene and Crick found that entrepreneurial self-efficacy distinguishes founders from managers. [24, 25]

What we do with it

Every Full Member pledges to keep widening who they count as one of us. Members meet as equals, around a shared goal, inside a co-operative built to support that contact: Allport’s conditions, by design. And we hold the standard high on purpose. A Founder here is a professional venture entrepreneur, and is treated as one.

What the evidence does not say

Evidence moves, and we would rather show our working than oversell it. Most of the venture studies above use US data. Some laboratory effects, stereotype threat among them, have proved smaller in replication than first reported, and the Hong–Page model has mathematical critics. None of this changes the direction of the evidence, and our approach does not rest on any single study. Where better evidence arrives, we will change what we do. [11, 26]

References

  1. 1.Hong, L. & Page, S. E. (2004). Groups of diverse problem solvers can outperform groups of high-ability problem solvers. Proceedings of the National Academy of Sciences, 101(46), 16385–16389. doi.org/10.1073/pnas.0403723101
  2. 2.Gompers, P. & Kovvali, S. (2018). The other diversity dividend. Harvard Business Review, 96(4), 72–77. hbr.org/2018/07/the-other-diversity-dividend
  3. 3.Calder-Wang, S. & Gompers, P. A. (2021). And the children shall lead: Gender diversity and performance in venture capital. Journal of Financial Economics, 142(1), 1–22. doi.org/10.1016/j.jfineco.2020.06.026
  4. 4.Ewens, M. & Townsend, R. R. (2020). Are early stage investors biased against women? Journal of Financial Economics, 135(3), 653–677. doi.org/10.1016/j.jfineco.2019.07.002
  5. 5.Brooks, A. W., Huang, L., Kearney, S. W. & Murray, F. E. (2014). Investors prefer entrepreneurial ventures pitched by attractive men. Proceedings of the National Academy of Sciences, 111(12), 4427–4431. doi.org/10.1073/pnas.1321202111
  6. 6.Kanze, D., Huang, L., Conley, M. A. & Higgins, E. T. (2018). We ask men to win and women not to lose: Closing the gender gap in startup funding. Academy of Management Journal, 61(2), 586–614. doi.org/10.5465/amj.2016.1215
  7. 7.Kanze, D., Huang, L., Conley, M. A. & Higgins, E. T. (2017). Male and female entrepreneurs get asked different questions by VCs, and it affects how much funding they get. Harvard Business Review. hbr.org/2017/06/male-and-female-entrepreneurs-get-asked-different-questions-by-vcs-and-it-affects-how-much-funding-they-get
  8. 8.Eagly, A. H. & Karau, S. J. (2002). Role congruity theory of prejudice toward female leaders. Psychological Review, 109(3), 573–598. doi.org/10.1037/0033-295X.109.3.573
  9. 9.British Business Bank (2019). UK VC & Female Founders. British Business Bank, Sheffield.
  10. 10.Steele, C. M. & Aronson, J. (1995). Stereotype threat and the intellectual test performance of African Americans. Journal of Personality and Social Psychology, 69(5), 797–811. doi.org/10.1037/0022-3514.69.5.797
  11. 11.Flore, P. C. & Wicherts, J. M. (2015). Does stereotype threat influence performance of girls in stereotyped domains? A meta-analysis. Journal of School Psychology, 53(1), 25–44. doi.org/10.1016/j.jsp.2014.10.002
  12. 12.Kanter, R. M. (1977). Some effects of proportions on group life: Skewed sex ratios and responses to token women. American Journal of Sociology, 82(5), 965–990. See also Men and Women of the Corporation (Basic Books, 1977). doi.org/10.1086/226425
  13. 13.Cialdini, R. B. (2016). Pre-Suasion: A Revolutionary Way to Influence and Persuade. Simon & Schuster.
  14. 14.Tversky, A. & Kahneman, D. (1981). The framing of decisions and the psychology of choice. Science, 211(4481), 453–458. doi.org/10.1126/science.7455683
  15. 15.Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux.
  16. 16.Bohnet, I. (2016). What Works: Gender Equality by Design. Belknap Press of Harvard University Press.
  17. 17.Dobbin, F. & Kalev, A. (2016). Why diversity programs fail. Harvard Business Review, 94(7). hbr.org/2016/07/why-diversity-programs-fail
  18. 18.Thaler, R. H. & Sunstein, C. R. (2008). Nudge: Improving Decisions About Health, Wealth, and Happiness. Yale University Press.
  19. 19.Malenko, A., Nanda, R., Rhodes-Kropf, M. & Sundaresan, S. (2023). Catching outliers: Committee voting and the limits of consensus when financing innovation. Harvard Business School Working Paper 21-131; forthcoming, Journal of Finance. www.hbs.edu/faculty/Pages/item.aspx?num=66586
  20. 20.Gaertner, S. L. & Dovidio, J. F. (2000). Reducing Intergroup Bias: The Common Ingroup Identity Model. Psychology Press.
  21. 21.Pettigrew, T. F. & Tropp, L. R. (2006). A meta-analytic test of intergroup contact theory. Journal of Personality and Social Psychology, 90(5), 751–783. doi.org/10.1037/0022-3514.90.5.751
  22. 22.Allport, G. W. (1954). The Nature of Prejudice. Addison-Wesley.
  23. 23.Walton, G. M. & Cohen, G. L. (2011). A brief social-belonging intervention improves academic and health outcomes of minority students. Science, 331(6023), 1447–1451. doi.org/10.1126/science.1198364
  24. 24.Bandura, A. (1977). Self-efficacy: Toward a unifying theory of behavioral change. Psychological Review, 84(2), 191–215. doi.org/10.1037/0033-295X.84.2.191
  25. 25.Chen, C. C., Greene, P. G. & Crick, A. (1998). Does entrepreneurial self-efficacy distinguish entrepreneurs from managers? Journal of Business Venturing, 13(4), 295–316. doi.org/10.1016/S0883-9026(97)00029-3
  26. 26.Thompson, A. (2014). Does diversity trump ability? An example of the misuse of mathematics in the social sciences. Notices of the American Mathematical Society, 61(9), 1024–1030. doi.org/10.1090/noti1163
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