Like so many of the world’s innovators, when Janica Alvarez became fed up with a terrible product, she invented a better one, in this case a breast pump. Her smart pump enables faster, more comfortable pumping, and allows mothers to track their output. Breast pumps hadn’t been improved in years, and there was strong demand for a better product. Yet Janica struggled to obtain the funding needed to grow her business.
Sadly, many people like Janica face steep barriers to entry into the world of tech entrepreneurship. Just 1-3% of venture capital funding goes to Black and Latino founders, and only 9% goes to women of any background. The lack of diversity in the tech-based entrepreneurial world across gender, race, orientation, and socio-economic status stems from unequal opportunity driven by biases and systemic racism. In our own new initiative, Ventures for Shared Prosperity, we aim to attract entrepreneurs who can reflect their lived experience in the products they develop, and who might not normally have the opportunities to do so because of exclusion from networks or resources. We’ve developed a thoughtful approach to recruiting, informed by behavioral science, that can be easily adopted by others.
As is the case in other sectors, those who decide who gets opportunities often claim that lack of diversity is driven by a lack of qualified talent. It’s a phenomenon John Rice has labeled “the Third Degree of Racism”, where the victim is essentially blamed for the structural systems reinforcing lack of opportunity in society. These existing structural barriers are significant and rooted in a long history of public policies. Additionally, most decisions about hiring and funding are made by humans, and we know from behavioral science that all humans have unintentional and unconscious biases. Those biases are at play in the common processes used to recruit, hire, promote, and fund.
Beyond limiting opportunities for innovators from underrepresented groups, the lack of diversity in entrepreneurship also creates a world that is designed for the few instead of the many. For better or worse, startup founders and entrepreneurs are responsible for many of the products, tools, apps, and resources we use in our day-to-day lives, and if they’re all inventing solutions to problems from a limited perspective, many problems go unsolved, and indeed many solutions on the market fail to work for many.
It’s no secret that entrepreneurs usually address problems that they directly understand or are facing themselves. It’s why Janica Alvarez created the Naya Smart Breast Pump. It’s why when Garrett Camp and Travis Kalanick created Uber, it wasn’t because they wanted to revolutionize transportation, it was because they wanted to make it easier to get a taxi in San Francisco, something they found frustrating in their own lives. The solution is simple–if we want businesses and services that solve different types of problems, we need to recruit and fund people who understand and have experience with different types of problems.
The onus is on those offering opportunities to innovators to make sure they design efforts to find, support, and unleash the untapped talent that exists. It is also on those offering opportunities to both measure how they perform in such efforts, and hold themselves accountable to the outcomes. The ultimate aim is to adapt the entrepreneurship pipeline to fit new people, not reshape people to fit the pipeline.
With Ventures for Shared Prosperity, we’re seeking a cohort of entrepreneurs to build socially impactful software businesses that reduce the many excess costs faced by people with low incomes. Central to this work is an effort to recruit individuals typically shut out of the world of tech entrepreneurship, with program features designed specifically to support them. We know there are many talented people with innovative ideas or a passion for solving problems in their communities who are currently outside the world of tech entrepreneurship, facing complex barriers to accessing resources and opportunities.
We recognize that this statement stands in stark contrast to recent comments made by the CEO of our funder, Wells Fargo, around diversity and hiring. The goal of Ventures for Shared Prosperity is and has always been to improve lives and to de-bias unfair processes. It is simply the way we believe the problem needs to be solved. We hope our funder is also ready to do this same work internally, and to tackle the barriers that exist for underrepresented groups during hiring processes. A summary of Wells Fargo’s recent efforts around diversity and inclusion can be found here.
Drawing from research on bias in hiring, and building on the work done to improve our own recruiting efforts at ideas42 through a behavioral science lens, our aim in designing a bespoke approach to cohort recruitment is to cast a wider net at the outreach stage, de-bias the application process and establish structures that make participation possible for people of all backgrounds, and set concrete diversity goals for ourselves.
We’re sharing the barriers and strategies we’ve identified both to take our own recommendation to make our recruitment process more transparent, and in the hopes that others can use them in their own efforts. Following the onboarding of our first cohort of entrepreneurs, we’ll be sharing an update on what we’ve learned from this approach.
1. Financial risk and insecurity
Entrepreneurship is inherently risky. It takes significant time and resources (when founders aren’t necessarily earning income) to generate a business idea. Individuals with personal wealth or with access to wealthy networks are among the few who have typically been able to take this type of risk. Such barriers likely prevent many people from entering, and perhaps even considering, tech entrepreneurship.
To create more diversity in our cohort, the first step we took with Ventures for Shared Prosperity was to mitigate these risks. Individuals engaged in Venture for Shared Prosperity will receive a full salary and health benefits for the first 18 months of the program, in addition to (and distinct from) startup capital. The program also includes time for ideation (as opposed to requiring a fully developed product idea at the application stage), and no specific tech skills are required. Cohort members will receive ample support from business advisors, software developers, and behavioral scientists to help with design, customer insights, and UX. Such support can make tech entrepreneurship more feasible for more people.
2. Networks skewed toward privilege
Tech is a small world. Funding tends to be spread through the same networks, among those with similar backgrounds and even in similar locations. This skews application pools toward more privileged individuals. A RateMyInvestor report found that over 25% of invested capital goes to founders who attended Ivy League schools (while by contrast fewer than 1% of 2019 college graduates overall obtained a degree from an Ivy League school), and 42% of VC-backed startups are physically located in Silicon Valley. In the U.S., 18.3% of the population is Black and 18.5% is Latino, and yet less than 3% of VC firms have Black or Latino investment partners.
That’s why it’s important to broadcast new opportunities beyond the typical networks and channels. In addition to a public launch at the Prosperity Now conference, we’re prioritizing outreach to community-based organizations and groups that specifically work to support diverse communities, rather than just to players already involved with existing tech and financial services networks.
3. Language that excludes
Language and framing in job postings can be, among other things, gendered, and perceptions of being qualified for an opportunity can differ by gender. In one study, the removal of qualifications that were optional and “superfluous adjectives” resulted in more qualified women applying for jobs. Of course, language can carry signifiers that exclude based on a wide range of identities and group membership including class, race, national origin, and ability.
While not a panacea, the gender decoder for job ads is a valuable tool for anyone designing outreach programs or hiring processes. We used it to improve sections of the Ventures for Shared Prosperity site and informational materials. Additionally, standard criteria for assessing candidates for more traditional jobs doesn’t necessarily translate to entrepreneurial success, so our materials emphasize a wider range of applicable skill sets, including lived and personal experiences outside a work environment.
4. Not enough transparency in evaluation processes
When seeking funding or other opportunities in the world of entrepreneurship, “the rules of the game seem opaque,” especially for underrepresented applicants. How do applicants know the process is fair?
To increase transparency, applications should provide an explanation about why every question is being asked, and how it corresponds to the evaluation process. These explanations might seem obvious to those who created the questions, but not to the applicants themselves. In our application, we’re also explaining how we see the questions connecting back to entrepreneurship by using short blurbs that help frame the questions. For instance, in questions where we ask about what motivates the candidate, we provide a link to information about our area of focus and explicitly ask candidates to connect their motivation to the topic area.
5. Implicit bias in screening applications
Women receive different types of questions from venture capital firms than men, and underrepresented minorities are more likely to receive additional probes during interviews than others.
Equalizing the evaluation process is crucial. Developing a set of fixed interview questions and scoring criteria that will be applied to all applicants reduces the potential for evaluators to default to unconscious biases when assessing candidates. Screening candidates in a slate, or comparing an individual’s qualifications to those of the other applicants rather than making judgement calls about each applicant individually, can also help to de-bias screening.
With Ventures for Shared Prosperity, to ensure that we’re incorporating a diversity of perspectives, multiple reviewers will evaluate each candidate independently. We will also track metrics around who is, and who is not, making it through each stage of our application process in order to further investigate whether there are features of our application process that unintentionally remain biased. At each stage we can then see if there are inequities before narrowing the candidate pool.
Where we go from here
After our first cohort of entrepreneurs has been selected, we’ll share what we’ve learned from this process in the hope that others find the insights useful. What worked? What was the experience like for applicants? What would we do differently? If widely adopted, insights like these can pave the way for innovative changes that make entrepreneurship (and hiring overall) more inclusive and support the development of groundbreaking products and services with the potential to drastically improve many lives, not just a few.
Interested in learning more about our approach to de-biasing recruitment and outreach? Get in touch at email@example.com.