By Elizabeth Shaw, below, founder, 1000 Black Voices
As society continues to navigate the ongoing challenges of systemic inequality and discrimination, we wanted to offerof 1000 Black Voices, for interview. Elizabeth believes it is more important than ever to prioritise diversity and inclusion in all aspects of business, including entrepreneurship. This belief culminated in her founding 1000 Black Voices, an organisation dedicated to advancing equitable inclusion and empowering underrepresented individuals and communities across the UK.
Diversity and inclusion provide financial gain and hockey stick growth. Startups with a Black founder generate higher returns than all White founding teams. In addition to diversity generating higher revenue, it also encourages innovation.
True innovation and strategic value are found in ‘Diversity vision’ – the capacity to translate difference into inclusive reality. Diversity in tech is important as a range of diverse perspectives at all levels is critical for greater creativity and delivering solutions that meet the needs of a diverse group of stakeholders including employees and customers. Ethnic diversity is key to business success and ethnically diverse businesses are 36% more likely to have above-average profitability than peers.
Within the tech industry an ethos that focuses on celebrating difference, promotes individuality and values the unique qualities each individual can bring into the industry enabling everyone to thrive at work. This in turn delivers increased employee engagement and performance. Diversity is treated more positively when industries and companies position it as an asset.
There is much-untapped potential from diverse perspectives that can be brought into addressing the challenges business and society face. With diversity and inclusion set out and acted on as important, a stronger foundation can be built for bringing to life the future of our society – how we communicate, develop, and use products and services.
People are increasingly looking for businesses that embrace diversity. Working in an inclusive workplace is one of the top priorities for employees. How robustly a business champions diversity and inclusion will also have an impact on its reputation and ultimately access to the benefits of a diverse workforce.
The Challenges
There are critical challenges to be tackled. Prioritising diverse founders is not only a matter of social justice but also a key to unlocking untapped potential and fostering innovation. Historically Black founders have had limited access to business capital. In both the US and UK, the tech sector is overwhelmingly White. In the US tech space, White workers represent 68.5% while Black workers represent only 7.4%. A more granular examination reveals that representation in the US is lower than this in certain IT jobs. For example, Black workers make up only 6% and White workers 68.4% of computer programmers in the US. For web developers 4.6% are Black and 84.7% White. In the UK, Black people account for 2.93% of workers in the technology industry whereas White people represent 81.66% according to the Office of National Statistics (ONS) for the period July 2020-June 2021.
When it comes to the challenges, it is a red flag. It has been well documented that despite the financial and wider benefits of diversity and inclusion, the investment in Black founders is distressingly low and on the decline. With just 1% of venture capital (VC) funding going to Black founders in 2022, and only 3% of U.K. VCs Black-led, there is a deep systemic problem (here).
Beyond the funding bias, limited networks and a lack of representation in leadership positions and more specifically, within the investment community pose a significant problem for aspiring entrepreneurs. One reason such a small percent of funding goes to Black founders: Just about 9 percent of partners at VC firms are Black with only 1% of the investor pool identifying as Black females Three quarters of U.S. venture firms don’t have any Black partners at all.
The Impact of Inequality
Popular culture is influenced by Black culture. With the lack of investment in Black founders, this is being underestimated in the investment community. This is a damaging lack of inclusive perspective for a community that is driving societal change. In the UK specifically, the presence of systemic inequalities and the lack of access to funding is causing the loss of innovative and diverse founders. These founders often relocate to other countries such as the US to secure funding.
There is still a long way to go to achieve authentic inclusion within the startup ecosystem. This situation is widespread. Founder or employee, Black women are severely disadvantaged. There is a corporate exodus occurring due to bias and an imposed glass ceiling for Black women leading to loss of talent in corporate. Black women are seeking to make their own decisions about the value of their talent and moving into the startup ecosystem. There is a wealth of innovative and game-changing diverse founders that would provide outsized returns on investment – this is a missed opportunity. The situation invariably needs to change.
Strategies for Supporting Founders and the Benefits
To address these issues, investors and businesses need to focus on three key things:
- Building inclusive ecosystems and making access to capital more inclusive
Support ecosystem builders and emerging diverse fund managers providing access to capital for deployment. To achieve outstanding returns, investors need to widen their pool of what they see as the best companies to invest in building diverse and inclusive networks. Investors are currently looking at a small proportion of the opportunities available to them. By embracing diversity and investing in a wider range of founders, investors can tap into new markets, create new products and services, and drive innovation.
Support for the work of organisations working at the intersection of investment and social change in the UK with close ties to the Black community needs more support than has historically been awarded. A fund to finance these drivers for change would help move the dial towards a more inclusive startup ecosystem. Note too that it is one thing to gain investment, it’s quite another to grow. These organisations provide the growth mechanism for founders providing a roadmap for high returns on investment. In addition, in support of growth and promoting equity in access, corporate supplier diversity and reduced cost of compliance are paramount.
It is also important to note that success rests upon a coalition of investors, organisations, governments and founders to be accountable and responsible for creating and maintaining an inclusive startup ecosystem.
2. Education and Awareness
To tackle this, VCs and companies need to get comfortable normalising and opening up conversations about race and diversity. Only with direct and quantitative action to understand the current culture and values of their employees can VCs and businesses truly achieve diversity. Framing these discussions in a positive light is one way to tackle negative and potentially awkward conversations and interviews. However, this can be complex to implement and a delicate process that needs to be handled in the right way with a detailed strategy and approach.
Measurement is important. There needs to be a zeroing in on metrics. To do this investors need to adopt a greater focus on the transparent analysis of all processes and implement tools, including an internal dashboard that captures demographic metrics including ethnicity data, diversity ratio, gender, disability, sexual orientation, pay equity progression and hiring data. Getting a view on these insights can help ensure a level playing field and address any biases and systemic racism on a micro-level.
The VC sector can be quite closed. Transparency and an increased understanding of language and approach would help diverse founders negotiate their value. Likewise, more accessible education of emerging managers and angels, who are generally the first check-in.
3. Policy and Advocacy
It will take the role of parliamentary accountability and policy changes In order to achieve true equity for diverse founders. There is huge potential to work with investors to direct more capital to diverse founders by creating a pathway for policy changes that lower barriers:
The government has an opportunity to set policy to mobilise investment towards diverse founders through blended finance initiatives combining public and private investment. The government and various political parties are looking to zero in on the bank to support their priorities.
Increase investment initiatives from the British Business Bank which has a huge part to play in supporting emerging investors and diverse founders. A fund-of-funds would provide a breakthrough in increasing the percentage of funds to flow through to diverse founders.
Transparency of metrics in diverse investing will lift the cloak and imbue trust in fair and ethical investment practices within the UK.
The Black community is excluded from the investment landscape. Only 1% of the investor pool are Black females. More opportunities need to be given through the implementation of Government policy that works for diverse investors. Lowering the barriers to angel investing would support access to investing. Becoming an angel investor is one possible route into VC, PE and LP investing.
Success stories
Tommie Edwards FRSA, the CEO and cofounder of Tech1M (Techstars ‘23) is one of the Top 100 Most Influential Leaders in Tech in the UK by the Financial Times and Inclusive Boards. Following the 1000 Black Voices trade mission to New York in 2022, Tommie was selected to join the first Techstars New York City (March 2023) accelerator, placing us in the top 1% of all applicants. The Tech1M mission is to revolutionise the global workplace by simplifying the talent recruitment and retention process for hiring managers while staying aligned with ESG principles.
Tommie Edwards is a success. However, stories like Tommie’s are few and far between. We need to do more to champion diversity within the start-up ecosystem. The current path the UK Government is moving forward brings high uncertainty for investment into startups, particularly with the global economic challenges facing the world. We have a collective responsibility to foster a more inclusive startup ecosystem. Investors, entrepreneurs and governments must prioritise diversity and inclusion from start-up to exit.
