There is a myth in Silicon Valley that issues like work culture, openness, and diversity are second-tier issues that can be effectively addressed at a later stage in a startup's lifecycle. The unspoken implication of this myth is that these issues can safely be ignored without repercussions during the 'bro' stage of a startup's growth, when it's all go, all the time, without consequences.

This myth is wrong.

In fact, new, widespread research is shedding light on some important new facts.

1) More diverse management teams increase bottom-line profitability

2) Boardroom diversity increases openness of discussion and challenges to majority viewpoints, which helps raise potentially problematic issues earlier, so they can be addressed before they case existential problems later on

3) More open and diverse workplace cultures are more desirable, enhancing a startup's recruiting capabilities

When I look at my own portfolio, I see a story that backs up this data. Many of my best high-growth startups, including standouts like ThinkCerca and MPowerd, are run by women. My own syndicate Gaingels, seeing the importance of overall diversity both to our own mission and in the performance data, has funded over 50% startups with at least one female senior leader (and over 80% with an LGBT senior leader) and puts a priority on identifying diverse candidates for the boards of our startups. I believe very clearly that this emphasis has a clear corollary to our healthy ongoing portfolio performance.

Companies that don't address this early pay a price, and Uber is today's case in point. Last valued right around $70 billion, startups don't get bigger than Uber. But the company has, to date, never taken serious steps to address it's board's back of diversity, the centrality of its decision-making at the CEO level, and a sexual harrassment culture within middle management.

That lack of action on this issue starting a couple years ago, when reports started to surface, is beginning to cost Uber. At least three top-ten leaders at the company have left in the past six months, and the company hasn't replaced them. The CEO has been forced to publicly apologize yet, aside from commissioning an internal inquiry, has made no notable changes.

Diversity matters. Not just as a bumper sticker issue to handle later, but as a critical performance indicator as well. The best startups should ensure not to neglect it.

Published on: May 3, 2017