“There are not more than five primary colors, yet in combination they produce more hues than can ever be seen,” said Chinese military leader and philosopher, Sun Tzu, whose words from The Art of War resonate with wisdom and familiarity even after hundreds of years. When you combine colors, you can get as many results as there are drops in the ocean, but you cannot get anything else than yellow out of two yellows. It seems to be inevitable that diversity enriches society, science, art, and of course also the startup world. But then how come that success seems to be converging around like-minded individuals coming from very similar backgrounds?
CEU iLab found that according to Startup Heatmap's survey taken in 2020, only 15.5 percent of entrepreneurs in Europe are female, and it also shared how it is facing the challenge of finding more female entrepreneur talents. CEU iLab even started a Women’s Day Campaign to change 15 to 50 to ensure women are as equally represented in the startup ecosystem as their male colleagues.
However, it’s not only about women, it also comes down to ethnic, cultural, and economic backgrounds. Around 77 percent of founders in the United States are white or caucasian, according to a 2019 Crunchbase survey. Across Europe, the share is as high as 84 percent according to Atomico’s State of European Tech 2019 report. In that report, fewer than 1 percent of Europe’s tech founders self-identified as Black/African/Caribbean. Moreover, the report found that 82.3 percent of all founders reported having a university education, compared to just 35 percent of the EU-28 population aged 25-54 who have attained tertiary education or higher, according to Eurostat. Based on all this data, we can say that in 2022, a startup founder is still more likely to be a white/caucasian man with university education than anyone else.
The startup world’s diversity problem was flagged many years ago, but structural and cultural issues keep repeating the same patterns. For example, lately innovation tends to come from digital technologies or are internet-related: 7.1 percent of global startups operate in the Fintech industry, 6.8 percent in life sciences and healthcare, while AI takes up 5.0 percent, gaming 4.7 percent or Adtech 3.3 percent. At the same time, fewer than 20% of software developers are female. There needs to be a structural change in the STEM education model to attract more female developers, which would result in more aspiring female entrepreneurs.
On the other hand, the entire startup ecosystem, not only startuppers have the culture of navigating towards similar types of people. VCs, investors and mentors also tend to come from the same background with similar educational credits: In the US, only 8% of VC investors are women, and racial minorities are also underrepresented in the funder community: only about 2% of VC investors are Hispanic, and fewer than 1% are black. Such a disparity mirrors in investment decisions and in selecting prospective startuppers for mentoring. Thus, if the startup world wants change, it needs to start that at a deeper level: if an aspiring female startupper sees that there are female mentors, investors and senior women in her industry to look up to, their number will accelerate. The same is true for ethnicities and people from different parts of the world.
And why would we need diversity, you ask? “It is simple, without acknowledging diversity, biases, or even similarities there cannot be true equality. That’s why it is so important that startups, innovators highlight their own stories and define who they are trying to serve. Smaller companies can take advantage of the fact that they don’t have to satisfy the masses just a specific group of people and tailor their products to that group’s specific needs, habits and problems” - says Dóra Pelczer, Co-Founder of Alpha Femtech.
The startup has been developing ARTEMIS, a wearable smart clothing to reduce menstrual pain by micro-vibrations and by regulating heat release to the body. “For us, it is very important that ARTEMIS becomes a product that would change the attitude toward menstruation. We want to erase that after-taste of what you get when you look at your period calendar and you can see that you get your period in a few days. Period doesn’t have to be painful and it certainly doesn’t have to be shameful” - says Pelczer. Unfortunately, in a “man's world” in many parts of the globe, menstruation is still something unnatural, unnormal and regarded as shameful. For changing prevailing cultural norms that push minority group’s problems into the background, we need such innovation coupled with a diverse set of thought.
Not only does diversity foster change, key scientific findings also show that diverse team compositions seem to confer an advantage when it comes to generating a wider range of original and useful ideas. One of the most exciting examples is the appearance of the femtech market. While digital health companies have been thriving for more than ten years already, the term ‘femtech’ appeared as late as 2016 coined by Ida Tin, CEO of Clue to drive investment into the underfunded and basically invisible female technology market. Leaders of these companies are women, and they naturally pinned such problems on their flags which do not appear elsewhere but are serious issues for women ranging from general health troubles through menstruation pain until menopause.
Already the issue of selecting the problem area for a startup stems from the culture and background of the founders, thus many problems ethnic groups, women, or people coming from very different parts of the world face do not appear on the radar of the startup world. And this issue accompanies the startup during the design phase of the product and then they might only face negative repercussions, once their product or service is on the market. For example, Fitbit and Apple only issued menstruation trackers into their smartwatches when they realized that women are also part of their market. And one of the most powerful examples for design ignorance was when Lisa Gualtieri, professor of Tufts University, was asked the question by a man why would anyone need a smartwatch when they can track anything on their phones, and she replied that female clothing rarely has pockets so you cannot put the phone away. The problem here only stems from lack of diversity within the development team.
On the other hand, we need to treat diversity and creativity carefully. Experimental studies suggest that benefits of diversity disappear once the team is tasked with deciding which ideas to select and implement, presumably because manyfold thinking hinders consensus. But conflicts arising from diversity can be mitigated if teams are effectively led. Although that’s a difficult task and requires trust and openness from all parties involved. These two principles also presuppose creativity’s other assumption: the culture of knowledge sharing. If you don’t have that, it doesn’t matter how diverse the team is, you will not get any creative result. Well, any result in the long term, for that matter.
Moreover, creativity as a result of diversity also doesn’t ensure success. Orsolya Vásárhelyi, postdoctoral fellow at Warwick University researched how diversity, creativity and success link to each other in a video game development environment. On the one hand, she found that it is not easy to find the right team composition for fostering cooperation: teams that are very diverse, for example, the male-female ratio is 50-50, could behave in a very non-cooperative way and close their doors on each other. Here, effective leadership could also ease tensions and foster creative cooperation. On the other hand, while she actually found that more diverse teams thrived with new and creative ideas, success lagged behind. Why? The gamer community, mostly consisting of young, white males, did not appreciate those novel ways of thinking that were so different from theirs.
Thus, although the diverse team developed a very creative, new video game, the reviews were very negative and didn’t appreciate it at all. So, here - as with so many other areas - the main lesson is that we cannot make generalized assumptions about the connection between diversity and creativity, but we can say that combining more colors usually is a better idea than sticking to black and white.