Startups Struggle with Diversity: How to Fix It

Startups often pride themselves on building innovative products and disrupting industries, but many still struggle with a crucial aspect, diversity. Despite good intentions, achieving a diverse workforce can be tough, especially for early-stage companies trying to grow quickly

 If you’re running a startup and find yourself facing similar issues, here’s what might be holding you back and some strategies to help fix it.

Diversity in Startups: Statistics and Insights

Many startups struggle to integrate diversity from the start, and the impact can be felt as they scale. Here are some key insights and statistics that highlight the importance of prioritizing diversity early on according to Builtin:

Prioritize Diversity Early

Wayne Sutton, co-founder and CTO of Change Catalyst, a D&I consulting group, stresses the importance of integrating diversity into a startup’s culture right from the start. He explains, “When you create a culture early on and don’t have D&I as part of that culture, you’re not creating those expectations and behaviors.”

He points out that when companies decide to focus on diversity later, it often means changing the mindset of a large team which is much more challenging.

His advice? Make diversity a priority from day one, rather than trying to “course correct” once your team is already well-established.

Higher Cash Flow for Diverse Teams

Companies with diverse teams achieve 2.5 times higher cash flow per employee compared to those with less diversity.

Diverse Management Teams Drive Better Results

Firms in the top quartile for women’s representation on executive teams are 18% more likely to outperform their competitors financially.

Additionally, those with a high level of ethnic diversity in their executive teams have a 27% higher likelihood of exceeding their peers’ performance.

Companies that achieve both gender and ethnic diversity in leadership are 9% more likely to financially outperform their competition.

Diverse Boards Lead to Greater Profitability

Companies in the top quartile for gender diversity on their executive boards are 27% more likely to achieve better financial results than those in the bottom quartile.

Similarly, companies with high ethnic diversity on their boards are 13% more likely to outperform their less-diverse counterparts.

These stats and insights make it clear that diversity isn’t just good for team morale but it directly impacts your startup’s bottom line and long-term potential.

Why Do Startups Struggle with Diversity?

Before we dive into solutions, let’s talk about why diversity is such a common pain point for startups. Here are some of the main challenges they face:

Limited Networks

Early-stage startups often rely heavily on referrals from their existing network to find talent. The problem? These networks tend to be cut from the same cloth.

If your founding team is predominantly male or from a specific background, the people they know (and refer) will likely be similar, making it harder to reach candidates from underrepresented groups.

Want to add more female engineers to your team?
How to Hire More Female Engineers

Pressure to Scale Fast

Startups are usually under intense pressure to scale quickly, which can make hiring speed a priority over building a balanced team. In the rush to fill roles, companies might focus more on getting someone or anyone through the door, rather than considering diverse perspectives that could strengthen the team in the long run.

Lack of Resources

Early-stage startups often lack dedicated HR teams or DEI (Diversity, Equity, and Inclusion) specialists, which is common in larger companies. The absence of structured support can make it challenging to create effective diversity initiatives or establish pipelines to attract diverse talent.

Unconscious Bias

Startups that haven’t yet set up formal hiring processes may unintentionally allow biases to creep in during interviews and candidate evaluations. This often happens when hiring decisions are made based on “gut feelings” or “cultural fit,” which can favor candidates who resemble the current team.

Unclear Employer Brand

Diversity is about more than hiring, it’s about creating an environment where people feel welcome and respected. Many startups haven’t fully articulated their values around inclusivity yet, which can make it tough to attract diverse talent. Candidates from underrepresented groups may wonder: “Will I really belong here?”

Focus on “Pedigree”

Many startups inadvertently prioritize educational background and past experiences from well-known companies, often overlooking equally qualified candidates from diverse or non-traditional backgrounds. This focus on “pedigree” can limit the talent pool and make things one-dimensional.

How to Fix It: Steps to Build a More Diverse Team

Now that we’ve outlined the struggles, let’s look at how you can overcome them and build a more inclusive and diverse team.

Expand Your Talent Pool

One common mistake is relying too much on a narrow network. To attract diverse candidates, partner with job boards and communities that focus on underrepresented groups (e.g., Women Who Code, Black Tech Pipeline, Out in Tech).

Also, revisit your job descriptions to ensure they’re not unintentionally discouraging diverse applicants by using gendered language or overly technical jargon.

Build an Inclusive Culture Early On

Startups shape their culture from Day 1, so make inclusivity a core value early on. Set up team-wide training on topics like unconscious bias and inclusive communication. Create spaces for employees to voice concerns or suggestions around diversity initiatives. Even small gestures, like inclusive language in Slack channels, can go a long way.

Leverage Intellectual Diversity

While demographic diversity is crucial, don’t overlook the value of having a team that thinks differently. Hire for varied professional backgrounds, not just traditional tech roles. Building cross-functional teams and encouraging open debate can lead to fresh perspectives and stronger solutions.

Read why Intellectual Diversity is important for Startups:
Intellectual Diversity in Engineering Teams: A Startup’s Secret Weapon

Measure and Hold Yourself Accountable

It’s hard to improve if you’re not tracking your progress. Set diversity goals, and regularly conduct audits to see where you stand. Share these metrics openly with your team and, if you’re comfortable, with the public.

This transparency will hold you accountable and show candidates you’re serious about making a change.

Offer Flexibility and Support for Different Needs

Make sure your benefits package is designed with a diverse team in mind. Offer flexible work arrangements, parental leave, and mental health support.

Creating a workplace that supports different needs will attract a wider range of candidates and keep them engaged once they join.

Provide Training on Unconscious Bias

Offer training for your hiring team to raise awareness about unconscious biases related to pedigree and how they can influence decision-making. Equip them with strategies to counteract these biases and focus on a candidate’s potential.

Learn how to recruit a diverse engineering team. Read all about it here:
How to Recruit a Diverse Engineering Team

Bringing It All Together

Improving diversity at your startup won’t happen overnight, but making it a priority early on can have a long-term impact. By expanding your hiring practices, fostering an inclusive culture, and embracing different ways of thinking, you’re setting your company up for greater success.

Remember, a diverse team isn’t just good for optics, it’s good for business.

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