In Defense of Diverse Founding Teams

Article provided courtesy of Adam Pisoni and Abl Schools.

I co-founded Yammer in 2008 with an all white, all male team. Like most startups, at the beginning we were more focused on product market fit than on diversity and inclusion (D&I). Only later would I realize that by not focusing on D&I from the start, we would be guaranteeing an uphill battle later once we did make it a priority. I’m also convinced that we missed opportunities to build an even better company from the start. I vowed never to make that mistake again. A year ago I started a new company called Abl which gave me the chance to explore the opportunities and challenges of focusing on D&I from day 1.

Some background

Why I wrote this article
I am not an expert on diversity and inclusion. I’m still learning about it, my biases, and the challenges that many underrepresented groups face in the tech industry. To be honest, I was hesitant to publish this piece because regardless of my positive intent, I know there will be critics who will disagree with my perspective or advice. I decided to write this anyway because I felt my journey might be helpful to others. More specifically I’m writing this for three reasons:

• I want to share my experience with other founders who might be unaware of the opportunities they are missing by not focusing on D&I from the start. I also want to help founders become more aware of the problems they may be creating at their companies as well as in the industry at large by waiting. I hope other founders can learn from my mistakes and observations.
• I believe diverse founding teams can produce better outcomes. A team of white men can come up with good ideas. But I believe a diverse team can come up with better ones. Selfishly I also want more women and underrepresented minorities to consider founding or joining startups like Abl.
• One of the reasons founders don’t focus on D&I from the start, even when they may want to, is that they are afraid their funders will view it as a distraction. While funders are beginning to talk a lot more about D&I, I’m not sure they understand how much power they have to accelerate or impede progress. If you are a funder, I hope you recognize the influence you have over whether your portfolio of companies focuses on D&I from the start or not.

What this article covers and does not cover
These are my personal experiences, not the views of an expert. I’m not going to talk about why D&I is important at a meta level. It will cover the reasons why D&I is particularly important in early stage startups (e.g. first 15 people) as well as some of the observations I’ve made building Abl. It will not cover the challenges of building diverse teams at later-stage companies, or the challenges that underrepresented groups face trying to raise capital and start companies.

What I mean by diversity
You may have your own definitions of who is in the majority group and who is underrepresented. I want to define these terms up front for the sake of this article. In the US there are certain groups of people whose privilege gives them advantages such as access to quality education, economic security, safety, easier access to capital, and positive stereotyping. These advantages help those people get highly desirable jobs, such as those in tech, at higher rates. It may also help them get more senior roles with higher pay. In tech, this group is predominantly made up of straight, cisgender men who are white or Asian. In this article, I’ll refer to this group as the majority group.

When I refer to groups that are underrepresented I am referring to groups who, despite their high levels of representation in the US population, are currently severely underrepresented in tech roles. For example, underrepresented groups include women and people of color.

About Abl
Abl builds software for K-12 school leaders that helps them fundamentally change how they design, measure and improve their schools. After a year of extensive research, I identified the K-12 sector as the area where I could affect the most change in solving inequity and unequal opportunity. By giving school leaders the tools to reimagine the school day for their students, we’re helping to improve opportunities for all students, especially those who need it most. I believe there is a clear relationship between having a more diverse and inclusive team at Abl and our mission to improve quality and equality within schools. Read more about why I started Abl here

Why D&I Matters at Early Stage Companies

First I want to talk about some of the reasons D&I is so important in early stage startups.

Reason 1: Breaking Dynastic Privilege
Most companies are founded by people in the majority group friends. This leads to dynastic privilege. I believe dynastic privilege is one of the major contributors to the lack of diversity in tech.

Many entrepreneurs recommend founders build their early stage team by hiring experienced people they already know and trust. It’s easier to convince people in your network to take on the risk of a startup than it is to try and convince strangers (See Observation #4 ). It’s also helpful to have people who already trust each other and get along. Their rationale is, “why risk unproven people potentially slowing you down or influencing your startup’s culture in negative ways?”

As an example, most white males have mostly white male professional networks. Since many founders are white and male, this often leads to white male early hires. Founders who take this path of least resistance run the alternative risk of never being able to build diverse teams, because it becomes extremely difficult to retrofit inclusive cultures onto homogenous teams.

Early employees of successful startups have a much easier time raising capital for the next generation of startups. Those second-generation founders then go on to hire from the pool of early employees from their last startup, perpetuating the majority group’s dynastic privilege. This is how we end up with startup dynasties.

For example, I am a product of the “PayPal Mafia” dynasty. I co-founded Yammer with one of the original PayPal Mafia members. Yammer had an easier time raising capital because of our PayPal connection. Because Yammer had a successful exit, I had an easier time raising capital for Abl. Other early Yammer employees were also able to use the story of Yammer's success to convince investors to back their post-Yammer ventures. Employee 5 at Yammer had a much easier time raising capital than employee 50.

As long as well funded startup teams continue to be mostly made up of people in the majority group, those people will continue to have a significantly advantage in Silicon Valley.

There’s another major problem this situation has created. As long as startups remain largely homogenous, Silicon Valley will likely continue to miss opportunities to create innovative products and services that appeal to more diverse audiences. Much has been written about silicon valley’s lack of empathy. Silicon valley companies tend to solve a narrow set of problems which are most visible to the narrow set of people who start those companies.

Reason 2: The founding team sets the culture
When you start a new startup, it is critical to build your foundation with a seasoned technical team, comprised of experienced, senior employees. They will end up with many of the same responsibilities that you, the founder, have. They need to be able to find and hire other senior people, work independently, collaborate effectively and scale into leadership as the company grows. They also help shape the culture of the company which will inevitably be a reflection of that founding team.

If your founding team is homogenous, it will likely develop a narrow culture which is well suited for that narrow group of people. That culture won’t be as self aware of the lack of inclusion in the culture, but will feel inclusive for everyone within the tight knit founding team. As new employees with different backgrounds join, they will be more likely to reject or be rejected from the culture than to add to it. While you may be celebrating how strong a culture and tight a team you have, you may be unaware of all the ways you will be showing that new employee they don’t belong.

There may be many tactics to improve diversity at different stages of your company, but inclusiveness is a muscle each of your employees must develop and strengthen. Once you have a critical mass of employees who haven’t been continuously focusing on strengthening that muscle, it becomes incredibly difficult to build later.

Reason 3: Diverse teams attract diverse groups of people
It is more difficult to find, hire and retain people whose backgrounds are not presently represented at your company. For example, if you have 10 employees who are all men, you will find it far more difficult to find, hire and retain women. Women who interview with you will be skeptical about how inclusive your company is when there is little evidence to support it.

This becomes a self-perpetuating problem: the longer companies wait to retrofit, the more difficult it becomes. Even if it is more difficult to hire a diverse team to begin with, the long-term benefits outweigh any short-term costs.

5 obstacles I faced starting Abl

Below are some of the obstacles I encountered while focusing on D&I at Abl from day 1.

Obstacle 1: My network wasn’t that diverse
When I started Abl, it became obvious to me that my network of senior-level engineers and product designers was not that diverse. I now know that this was due to a failure on my part to make more of an effort to expand my network.

If you are thinking about starting a company someday, I highly recommend being more aware of your network now.

Start by acknowledging to your network that you care about this issue. Join a company that values diversity. Talk about it on Facebook and Twitter. Start bringing it up with your friends and colleagues, and not just your “diverse” friends, either. You should also get involved with organizations focused on D&I (See link to resources at the end). Figure out how you can contribute to those communities. Become a mentor, attend conferences, offer to help. Be really open with everyone you meet about your goals and don’t be afraid to offer or ask for help. This isn’t about finding a token minority friend either. If you approach people with humility and sincerity, you will find many people will go out of their way to help you. By putting in continuous extra effort to meet new people, I’ve greatly diversified my network.

Obstacle 2: The Seniority Gap
Historically, those in the majority group are more likely to have senior titles and occupy senior roles. For example, for every 100 women promoted to manager, 130 men are promoted. Men are also more likely to be part of founding teams. While they tend to be more aggressive in asking for promotions, they also often benefit from unconscious bias in their white male managers.

When you’re evaluating candidates, it's important to distinguish seniority from title. Title is just one crude proxy for experience. Many people with less senior titles are actually more experienced than those with more senior titles. A candidate with a Senior Engineering title may have just as much experience and expertise as a Director of Engineering at the same company. You will have to develop other heuristics.

At Abl, we look at what you've done and the skills that you bring, instead of relying on title as a proxy. This also means we’re more thoughtful about who we bring in at the top of the funnel, as opposed to ruling people out based on their resumes alone. My first senior product hire was a woman who did not have a senior product title, but had a diverse body of work that demonstrated her level of skill.

We also don’t want the only people from underrepresented groups we hire to be jr.
You could easily end up with a team which was diverse overall, but where members from underrepresented groups are always subordinate to members from the majority group. This can easily happen if you only leverage channels which have predominantly less experienced talent.

Another way Abl tackled an issue with D&I was to create a standard offer compensation formula to ensure we’re paying people equitably and not basing compensation on their negotiation skills or past privilege. Women and URM have statistically been hurt by compensation packages that are based on negotiations or offers based on previous salaries. We give candidates choice with regard to how to structure their offer, but we do not negotiate individually with people.

Obstacle 3: There are few channels to find highly experienced candidates from underrepresented groups
While there are many efforts to improve the pipeline of underrepresented groups today, most of these efforts focus on entry-level talent who are usually not experienced enough to be your first hires. There are an increasing number of channels to reach diverse groups of entry-level candidates, but there are far fewer channels for senior candidates.

After many months searching for candidates on LinkedIn, I've observed that 2013 was really the year startups started taking D&I seriously. In 2013, you see a dramatic rise in the number of graduates from coding academies as well as many more people from underrepresented groups starting at tech companies. This happens to coincide with when tech companies started releasing their diversity stats. As a result, there are fewer underrepresented candidates with more than 3 years of experience and they are even less represented in senior roles.

Even though few D&I focused organizations focus on senior talent, I still recommend attending events and getting involved in these organizations (SEE BELOW). While they may not have a robust pipeline of experienced candidates, it’s a good way to give back and getting involved is probably the best way of expanding your network. If you want to find more female engineers, it helps to know more female engineers. I’ve also found that these events are a great way to continue to educate yourself on grow in your own understanding of these issues. I also recommending bringing on advisors and board members from underrepresented groups.

Obstacle 4: The risks of startups aren’t seen equally by everyone
If someone is a white male engineer they have a lot of reasons to believe they won’t have a hard time finding work in the future. They’ve probably seen people who look like them quit their well paying jobs to join a risky startup. They’ve also seen how even if that startup failed, those people were able to take their, now inflated, title and find an even better job. Because they’ve seen this play out so many times, when an experienced entrepreneur asks them to leave their comfortable job for a startup, they know the risks are actually quite low. Worst case scenario, they can probably get their old job back if it doesn’t pan out.

On the other hand, if someone is an underrepresented minority with a senior title at a respected company, they’ve likely had a different journey than their white male counterparts. They may be the only woman or person of color at their rank on their team. They may not have had the same opportunities and may have had to work harder than their white male colleagues to earn the same rewards they did. They may not want to trade a guaranteed higher salary for speculative equity. They may have a harder time picking up where they left off if that enticing startup goes bust. Backward or lateral moves in their resume may call into question their fitness to take on a bigger challenge in the future.

As a result, I’ve found it's much harder to convince senior engineers from underrepresented groups to join as one of the first employees at an early startup. This is especially true when there is no prior relationship, or when you are asking them to take a pay cut in exchange for equity. To help address this, Abl has tried giving new hires the option to take more salary and less equity to reduce the risk.

All of this reinforces how important it is to get involved with more diverse communities and widen your network. Friends of friends will see you as less risky than strangers. It is also important to make sure your website, job descriptions and any other public representations of your company are saying things that are reassuring and appealing to people from underrepresented groups. You can start by using tools like Textio and Joblint to make sure you don’t have exclusionary language in your job descriptions. But that’s just the start. You should be evaluating all of your messaging to understanding how the people you are trying to attract will read it. How risky does it make you sound? All startups have risks, which is why I also recommend addressing those perceived risks when you first start talking to candidates rather than later.

Obstacle 5: You only have one chance to hire your founding team
You have only one opportunity to hire a diverse founding team. There’s no way to hire your way out of the problem once you’ve hired your first 10-20 people. You may be able to increase the diversity of your team over time, but your founding team will forever be homogenous.

The problem is, given all of the obstacles mentioned above, it is very likely your hiring funnel will initially be mostly people in the majority group. And if those people are entering the hiring funnel faster than any other group, you will likely hire them at a faster rate. At Abl, even as our efforts to source candidates from diverse groups has improved, the top of our hiring funnel has remained overwhelmingly white and male.

It isn't that people from underrepresented groups are less qualified or talented. There are just less of them in tech at the moment. As an example, imagine you have to interview 20 people on average to make 1 hire. If only 10% of senior engineers are underrepresented minorities or women then, without changing how you source, the first 18 of 20 people will be white/asian men. If you want to wait until you have also seen 20 URM before making that hiring decision, that means it will take 9 times longer to get that many UR people through the door. You can speed this up by focusing your top-of-the-funnel efforts and specifically recruiting underrepresented groups, but it's still gonna take longer to get the same number of candidates through the door.

This dilemma raises uncomfortable and controversial questions for founders and funders that value diversity. If you suddenly found a group of 10 highly qualified white male candidates, would you not hire them all? What if the rate at which qualified white men are being referred to you exceeds the rate at which you are finding qualified candidates from diverse backgrounds? Would you throttle the rate at which certain groups are entering the top of the funnel to make sure you have the time to find and consider qualified candidates from other groups?

We’re still wrestling with these questions. My guess is that larger companies that find they are not improving their company's diversity fast enough will end up facing similar ones.

Where do we go from here?

The default exit for any startup is failure. Pressure from investors and competitors alike makes it hard to prioritize anything that might slow you down in the short run. I can understand why some founders feel hiring a diverse founding team is too much of a burden to take on. Even though I'm confident our diverse team will translate to long-term gains, it has come at a real short-term cost. There are plenty of qualified people from underrepresented groups, but they are harder to find at the same rate. We've hired more slowly than we would have otherwise, but I’m glad we made these trade-off as we are already beginning to reap the benefits.

If you are a founder, I hope I helped you see the value of prioritizing D&I from day 1, even if it means making trade-offs. If you are a funder I hope you recognize that without your support, founders are less likely to make those tradeoffs. Finally, if you are an underrepresented minority in tech, I hope you’ll consider joining or starting your own company.

Abl is fortunate to be well funded by investors who actively support our goals. Our commitment to diversity began even before the company was formally founded, and I'm so proud of the talented team we've built. Our diverse backgrounds and points of view are alreading creating a more effective, inclusive, supportive and resilient company. It has also made me a better leader and continues to open my eyes to areas I was less aware of in the past. We still have much to learn and welcome your ideas.

And, if you know anyone who’s looking to join, Abl is hiring!
If you have other ideas, drop me a line.

For more thoughts on diversity and inclusion at startups I recommend reading Diversity at Startups by the folks at Homebrew. It contains a wealth of information as well as valuable resources such as organizations, events and publications.

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