Why the Voices Around Your Boardroom Table Matter It's painfully obvious that the startup community is still challenged by the task of creating board of director representation that reflects a diverse and inclusive membership.

By Rudina Seseri

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

Shannon Fagan | Getty Images

From the moment you start your business, each decision you make will affect your future board composition. From selecting co-founders, to first key hires, to investors, to independent board members, it is easy to gravitate to those in your network, and that network can often be homogeneous. The familiarity of shared experiences and educational backgrounds has a dangerous trickle-down effect. It discourages partnerships with someone unknown, outside the network, different than you – and in effect – excludes the very voices who can bring fresh, new and innovative perspectives to your startup.

Related: VCs Consider This Trait Most Important When Choosing Entrepreneurs to Invest In

Why is it important to have diversity on a startup board?

A diverse company board changes the dynamic of the entire startup. It creates more equitable standards and lessens communication gaps. More importantly, it eliminates group think in the decision-making process, because it brings together people who have different experiences. It offers the opportunity to push boundaries and go down paths that a homogeneous board would otherwise forego.

Boards of VC-based startups comprise founders and members of the executive team, investors and often independent members who are sourced from the collective networks of the board. A study conducted by CrunchBase, Him For Her and Kellogg School of Management, reveals that 56 percent of board seats in venture-backed startups are made up of investors, and 24 percent are made up by founders and executive directors. Today, these positions are still usually held by men. If the board has a female member, she is most likely to fill an independent board position.

A direct correlation often exists between the demographics of the board of directors and the demographics of the company. Not only does the absence of women and minority employees become more visible, but diverse board members can also positively influence leadership toward hiring from a broader network and expanded talent pool. For instance, a firm with more women investors (who tend to be connected to a broader network), might ultimately hire a greater number of women executives and employees. At my company Glasswing, which is a women-majority investment firm, we ensure that our portfolio companies are mindful in their hiring practices by enacting policies and term-sheet provisions that encourage diversity.

This type of mindfulness can reverse the unconscious bias historically found in startup culture that can lead to different sets of metrics between men and women, as well as between people of different ethnicities.

According to Harvard Business Review, bias "occurs when two groups of people act identically but are treated differently. . . that gender differences may lie not in how women act but in how people perceive their actions." Although men and women might have the same opportunities and the same networks, the perception is that men are naturally qualified. Similarly, women, people of color and other minority groups are expected to prove their worth in ways that white men aren't.

With the current status quo that exists in tech startups and tech hubs across the U.S. and the world at large, achieving board diversity is certainly not without its challenges. Though there is notable improvement today in comparison to years past, the majority of startup founders and VC general partners don't make up an especially diverse collective. According to 2019 Pitchbook data, when it comes to decision-makers in U.S. VC firms, only 12 percent are female. In addition, the proportion of VC deals with at least one female founder is only about 14 percent.

Startup boards made up of similar-thinking and similar-looking members are missing out on innovation and even possibly the next great idea, because they do not recognize a need or cannot perceive of different markets. A more diverse board opens a window and offers more insight into addressable markets and needs that otherwise might never be conceived of.

Related: When Negotiating Term Sheets, How Much Is Too Much?

How do you ensure the voices around your boardroom table are diverse?

  • From co-founders, to researchers, to investors, create a diverse ecosystem to draw from, and build a broad network. Recognize that unconscious biases might be hindering diversity.
  • Network outside of your usual events and talk to people outside your sphere of influence to broaden perspectives and tap the multitude of qualified people and funds out there.
  • When considering an independent board member, avoid quotas that artificially meet diversity goals but are not actually putting people in place who are the best fit for the position.
  • Consider junior board observers, especially in tech startups, who bring new perspectives as well as knowledge of frontier tech solutions and quickly changing markets.
  • Look to bring on more women and black, indigenous and people of color (BIPOC) investors as part of your initiative to create a more inclusive, diverse organization.

Board diversity — or the lack thereof — is a symptom of a larger problem. Startups with diverse founders too often struggle to get the funding they need, because there is a lack of diverse investors. Encouraging diversity early on builds a culture not only for the board of directors but for the entire startup ecosystem as well.

Isn't it time to make sure the voices around your boardroom are not just the echoes of your own voice?

Related: 5 Ways This Crisis Is Changing Venture Capital Investment Strategy

Rudina Seseri

Founder and Managing Partner

Rudina Seseri is founder and managing partner of Glasswing Ventures, an early-stage venture capital firm dedicated to investing in enterprise, platform and security startups that harness the power of AI and frontier technologies to transform markets and revolutionize industries.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Leadership

5 Trailblazing Black Women Entrepreneurs Share How They're Breaking Barriers — And How You Can Too

52,374. That's how many Black women-owned businesses there were in the U.S. in 2020. Although this number might seem insignificant, their impact can be felt. According to J.P. Morgan, Black women are the fastest-growing group of entrepreneurs, and there's no end in sight.

Side Hustle

This Gen Zer's Stylish Side Hustle Earns About $20,000 a Month and Paid Off His Parents' $200,000 Debt: 'I Enjoy the Hands-Off Nature'

Ray Cao went from working as a barista for $8 an hour to being a successful seller on online marketplace StockX.

Business News

'A Lobstrosity': Social Media Is Losing It Over Martha Stewart's Latest Meal Posting

The 82-year-old caused quite a stir on Instagram this week.

Business News

This Retailer Is the Latest to Remove a Major Feature From Its Stores Due to Rising Theft

Five Below CEO Joel Anderson addressed the company's plans to combat theft in an earnings call earlier this week.

Business News

Make $177,566 With No Experience in 3 Months: A Popular Online 'Side Hustle' Course Is Under Investigation After Customers Complain About Its Deceptive Claims

"All you need is a phone, a laptop, wi-fi and one to three hours a day," one affiliate marketer said in a video posted to social media.

Leadership

2 Phrases I Learned From a Senior CIA Officer That Changed My Leadership Style

There are two things you should learn from modern covert operations and espionage. Use them wisely.