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.
Why the Voices Around Your Boardroom Table Matter
Image credit: Shannon Fagan | Getty Images

Free Book Preview: Unstoppable

Get a glimpse of how to overcome the mental and physical fatigue that is standing between you and your full potential.
Entrepreneur Leadership Network VIP
Founder and Managing Partner
5 min read
Opinions expressed by Entrepreneur contributors are their own.

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

More from Entrepreneur
Our Franchise Advisors are here to help you throughout the entire process of building your franchise organization!
  1. Schedule a FREE one-on-one session with a Franchise Advisor
  2. Choose one of our programs that matches your needs, budget, and timeline
  3. Launch your new franchise organization
Discover the franchise that’s right for you by answering some quick questions about
  • Which industry you’re interested in
  • Why you want to buy a franchise
  • What your financial needs are
  • Where you’re located
  • And more
Whether you want to learn something new, be more productive, or make more money, the Entrepreneur Store has something for everyone:
  • Software
  • Gadgets
  • Online Courses
  • Travel Essentials
  • Housewares
  • Fitness & Health Devices
  • And More

Latest on Entrepreneur