The Valuable Role of Diversity in Venture, Part 2
Investors can help steer founders towards diversity by setting expectations early
Companies should begin their hiring efforts with a lens on diversity. Homebrew VC Partner, Hunter Walk, suggests that this be a consideration as early in the process as the first 20 hires. While his firm does not specifically include diversity in term sheets, his firm does have a diversity rider initiative, which promotes making a best effort to add diversity to the cap table. He cautions that trying to force a function in a term sheet sets a low bar, as the company may meet the minimum requirement and stop there – putting itself at the risk of tokenizing, an issue discussed in our prior post on the value of diversity. Instead, his firm works closely with companies to understand what diversity means to them and helps implement their ideas in practice for their first 20 hires.
VCs can do more to help drive diversity
As a company grows, independent board members are another very important consideration, but it’s more optimal if this isn’t the first time diversity has been part of the growth strategy. The best place to start is always the team, and hopefully, the founders. It’s important to keep in mind that the company can elevate its approach to solving problems by curating diverse opinions from a group of individuals with different experiences and backgrounds. Early-stage investors should provide resources and introductions to diverse candidates and create space for founders to build the teams they need, even if it might take longer to attract, qualify, and hire professionals that fit each role well.
Address gaps in experience with Independent Board Seat members
When seeking to fill board positions with diverse members, a company can move beyond simply trying to bring in a former CEO/leader. By taking an introspective look at what the strategic and operational needs are, board members can solve for critical gaps in experience.
According to data from Bolster, out of 40 board searches on their executive marketplace, the large majority were not for former CEOs. While CEO is a common background among independent directors, there are other go-to-market functions and leadership positions where a company might have gaps within its current executive team and board.
Companies should perform an analysis to identify the types of leaders who can fill in those gaps. For example, if the executive team is strong on product management experience, but no one has significant marketing expertise, then it would make sense to search for a marketing leader for that organization’s board of directors.
Everyone can be a good ally and ensure success
Ultimately, diversity is not just about bringing talent into the company-- it's also about making sure that each individual is set up for success and able to have a hand in shaping company culture. This includes all members, anywhere they may be on the diversity spectrum. The responsibility of the existing board members is to use their mentorship to help build an inclusive culture along with the value proposition that the boards are going to provide for the companies.
Building diverse pools of talent: 5 takeaways from our experts
Both the party recruiting talent and the individuals being recruited can contribute to the path to diversity. Our experts weigh in with their final thoughts and tips below:
Sharmila Kassam, Executive Director of the AIF Global Institute, on channeling the proper motivation when deciding whether to join a board:
The decision to join a company’s board should be an intentional and well-thought-out choice. The motivation to join a board may be a lucrative one, but it could also be a way to grow your network and think about what you have to offer the company and vice versa. This is particularly true when working with a startup that eventually may create opportunities to have some strong exits or public offerings.
Hunter Walk, Partner at Homebrew VC, on doing what’s right for the group as a whole:
Sometimes to let others step forward, you have to step back. The reason we step off the board at the series B is partly because it is what's right for the companies and for our own business model, but it also creates an opportunity for discussion about who should be replacing our seat. Transitioning a board seat is an opportunity to think about who the next right fit is for the company. As companies look for who should fill the open role it is also an opportunity for you as the outgoing board member to influence how to fill that position.
Matt Glotzbach, CEO at Quizlet, on believing in the mission to achieve results:
Number one is the need to believe that finding diverse talent is a business imperative because finding those unique hires can be harder. Number two: tap your networks and be candid and explicit in your needs. Let your network know you are specifically prioritizing diversity and why. Put yourself out of your comfort zone in that networking, as you may have to go several layers beyond your initial set of contacts. Number three: remember that this is an ongoing effort. Results won't present themselves initially, so you have to continually place time and energy into this effort.
Bethany Crystal, VP Portfolio Partnerships at Bolster, on being proactive about diversifying your network:
When you network, take note of who you're meeting week to week. Are you only meeting individuals who look and act like you? If so, make changes. The more you expand your network, the more your network will be open and diverse by the time you're looking to hire.
Finally, evolution to the way we work holds great promise. As the business world normalizes virtual board meetings, the potential pool of board member candidates broadens. The ideal member doesn't have to be based in San Francisco, New York, or Los Angeles, for example, or even have the ability to travel four times a year to the board meeting. Technology allows us to collaborate in real-time, across borders, to the benefit of everyone involved.
We invite you to enjoy the on-demand webinar to learn more.