Most founders of venture-backed startups say that diversity is important to their companies, but when it comes to their bottom line, very few founders believe that diversity makes an impact, according to a report released Monday.
Only 23 percent of startup founders believe that diversity leads to improved financial performance, according to Lawless Research, a market research firm. The findings reflect the tech industry's current attitude toward diversity: Many say it is important, a priority, and a good thing to have, but they fail to recognize the business advantages of having diversity.
"In innovation, you're trying to create something from nothing. To have a diverse set of perspectives and backgrounds enables you to understand the market at large much more effectively," says David Cohen, the co-CEO of Techstars, a startup accelerator. Techstars, along with Chase for Business, commissioned the survey by Lawless Research. "If everybody has the same background, you end up creating an innovation that maybe makes sense for your friends but doesn't change the world in the way that you had hoped."
Lawless Research surveyed nearly 700 founders and executives of tech companies that are less than seven years old. Most of those founders--72 percent--said that building diversity in their companies was very or extremely important to them. Most also said that diversity leads to improved creativity and innovation as well as better problem solving, but few believe that diversity makes an impact when it comes to revenue and profit.
This is in direct contrast to past research, which has shown that diversity is linked to financial success.
A 2015 study by McKinsey & Company, for example, found that companies with greater gender diversity are 15 percent more likely to have financial returns that are above the national medians of their industry. Companies with more ethnic diversity, meanwhile, are 35 percent more likely to have financial returns that surpass their industry medians.
"In the United States, there is a linear relationship between racial and ethnic diversity and better financial performance," the McKinsey report said. "For every 10 percent increase in racial and ethnic diversity on the senior-executive team, earnings before interest and taxes rise 0.8 percent."
The Lawless Research report is representative of the tech startup community, but the majority of the founders who partook in the survey were alums of the Techstars accelerator. Cohen said he hopes that the founders in his network will change their views toward diversity so that their companies can benefit from it. To help steer that change, Cohen said that diversity will be a major focus point at FounderCon, Techstar's annual founder's conference that will be held next month in Cincinnati.
Techstars launched its diversity initiative a year ago by committing to doubling the number of women and underrepresented minorities accepted into its accelerator program over a four-year period. Cohen said that by taking action to improve its own diversity, Techstars can serve as an example of how diversity benefits a business.
"People look up to Techstars because they get funded by Techstars, they go through the accelerator," Cohen says. "What we do impacts what they do. What we care about we hope has a meta impact on those entrepreneurs and how they think about the world. We're talking about [diversity]. We're changing ourselves. We're doing, not talking."