Why Diversity Is Bad For Startups

Editor’s note: The following is a guest post by Penelope Trunk, writer and founder of Brazen Careerist.

In a meeting last week one of our investors, fed up with a recent pivot, said, “Guys, this is not a science project.”

Everyone in the meeting who actually works at the company said, “Yes, it is.”

Because a startup is a science project.  A startup is not just a smaller version of a big business. A startup is a company that doesn’t know what business it’s in. A startup is doing something so big, reaching so far outside the box, that the people running the company are not totally sure what they are doing.

This is why diversity is bad in a very early-stage startup – when there are fewer than five people at the company.

Diversity in this case—the diversity you do not want in your start-up–is a diverse frame of reference. Diversity means having such different reference points that reaching consensus is a challenge. (Racial diversity is an antiquated idea and I won’t address it here.)

I know a lot about diversity because I grew up as a rich Jewish kid just north of Chicago, and I married a Born-Again Christian farmer in rural Wisconsin. We were both 40 when we married. I had lived in Chicago, Boston, LA and New York. He had lived with his parents for nearly his whole life.

We learn from each other constantly, because we approach problems so differently. We constantly have to rethink why we do everything, because our partner asks us constantly: Why?

You do not want this in a startup. In a startup, during the fragile time between when you think of the idea and when you get to the A round, you are likely to go under. You are likely to not move fast enough and therefore run out of money.

A startup at the very beginning is about time and money. You need to get time in order to be able to do the company, but if you take too much time, you will run out of money.

There’s a lot written about what is the best amount of money for a startup to have. And there is widespread agreement that a startup needs to be under time pressure and money pressure because the best ideas come from that combination. So investors, who generally have way more money than they are putting into the company, ensure that they put in enough so the company can move forward, but not so much that people don’t have to move fast.

During the beginning of a company, the possibilities are infinite. It’s a science project, but you are figuring out which rules to break. There are infinite rules, and there are infinite ways to break them. The more diversity you have in the company at this point, the more ways you can think of to approach the question.

But that’s a problem. Because you don’t need more possibilities. You need to go with one so you can move fast, and if that doesn’t work, go with another. And another. The process of going fast, then pivoting, then going fast again, is not a process in which anyone has shown that diversity is helpful.

In fact, diversity is a hindrance in very small teams because it prevents people from getting anything done, according to Frans Johansson, author of The Medici Effect: What Elephants and Epidemics Can Tell Us About Innovation. Johansson says that for nascent ideas, the naysayer and challengers are likely to keep the idea from getting off the ground.

Look at those studies about how diverse boards increase shareholder earnings. You can be sure they are not talking about angel round funding. Look at the studies about diverse teams coming up with a wider range of ideas. Those are studies designed to show companies like Proctor and Gamble how to find new products. Those big companies are slow and set in their ways. Diversity shakes them up and forces them to think in new ways.

The definition of a startup is that it’s already thinking in new ways.

In a study from the Darden School of Business, Saras Sarasvathy looked at what personality traits might make entrepreneurs successful. She found that while there is not one, single type of personality that makes an entrepreneur, they are all uncommonly great at mitigating risk for themselves.

Yes, they come up with crazy, harebrained ideas, but then they look for ways to make the idea less risky. For example, successful entrepreneurs are great at surrounding themselves with people who compensate for their weaknesses.

One of the best things an entrepreneur can do at the very start of the startup is to partner with people who have diverse skill sets, but not diverse backgrounds. A startup is fragile, it is unlikely to get funded, and it is unlikely to stay on track long enough to make it to an A round.

Once there is money in the bank, and some sort of vision of where things are going, diversity is not so insanely risky to a startup.

So this all begs the question: Why do we worry so much that there are so few women in startups? I have argued before that the vast majority of women do not want to run startups. This seems clear, from the statistics. While less than 3% of all funded startups are founded by women, VCs report that of the women who pitch, a higher percentage of women get funded than men.

So it’s not that investors discriminate against women, it’s that women don’t want to start companies. There is a wide range of reasons for this, but I think it boils down to the fact that women care more about their personal life than men do.

Regardless, it serves no one’s interest to harp on the fact that there are so few women in startups. Because women don’t like startups as much as men do, and, anyway, women are likely to bring diversity to a male founding team, and that’s not what founding teams need.

For those of you who aren’t convinced, here are some soapboxes you might consider: Men are underrepresented among stay-at-home parents. I don’t see anyone asking why that is. It’s pretty obvious. Men don’t want to stay home as much as women do. So what? Is the world clamoring for more diversity among stay-at-home parents? No. The world is clamoring for more opportunities for people to do what they want to be doing.

Image: horiavarlan