Diverse Edtech Teams Outperform
Evidence is mounting that diverse teams outperform their counterparts in the workforce. Gender diversity is one area where the performance advantage goes to more diverse teams. A study by Credit Suisse found that companies with at least one female board member outperform their all-male counterparts. Another study led by Vivek Wadhwa and Lesa Mitchell found that women-led technology startups outperformed male-led tech startups in critical measures such as capital efficiency, return on investment, and revenue generation.
Other studies point out that ethnic diversity is an advantage as well. A McKinsey & Company report showed that among hundreds of public companies, those in the top quartile of ethnic and racial diversity for their cohort financially outperformed others. Additionally, a study by Boston Consulting Group found that above average diversity leads to more innovation and profit.
Even Shark Tank’s Kevin O’Leary noted the advantages of investing in diverse companies. In a Forbes article in 2015, he was quoted as saying that of the 27 companies in his portfolio, he doesn’t “have a single company run by a man right now that’s outperformed the ones run by women.”
My experience as an edtech investor is no different. I’ve backed 15 seed stage edtech startups to date and the companies with diverse teams are outperforming the rest by a wide margin. Of my investments that have advanced to Series A and beyond, all but one have a woman in at least one senior leadership role with many having a female CEO. Many have ethnic diversity among their senior leadership as well. On the other hand, the two companies I backed that folded had all white male leadership teams. I don’t think it’s a coincidence that my experience with diverse teams outperforming their all white male counterparts mirrors these studies.
So why is it that diverse teams perform better? There are a number of reasons. First, creating diverse leadership teams helps keep biases in check and leads the teams to ask more questions about their assumptions. Diverse teams have diverse minds that bring a more varied set of approaches to solving problems. A more varied set of approaches allows the team to see problems from multiple angles, which usually results in a stronger, more well-rounded solution. Second, diverse teams are more socially sensitive. Instead of being forced to assimilate to a set of norms imposed by a homogeneous team, diverse teams are curious and more socially aware, and a more curious and socially aware set of employees translates to more relationship awareness and care with customers, which improves the bottom line.
In my direct experience, another reason diverse teams outperform is that they often identify and address under-resourced problems in underserved markets. I’m attracted to entrepreneurs who focus on under-resourced problems because the markets usually have more room for innovation with fewer teams tackling the problem. When there’s more room for innovation and fewer teams competing to solve a problem, all other things being equal, there’s more opportunity for a team to succeed.
The recent announcement of Denver-based Guild Education becoming the latest edtech unicorn is fantastic news for our Colorado edtech ecosystem. Guild is a remarkable success story in edtech and it’s especially sweet that the co-founders are female. Their $157MM Series D is a huge accomplishment and makes a significant dent in this year’s gap in edtech venture capital raised by white men vs everyone else. But it’s certainly not enough. I hope we see more investments like this in deserving, diverse leadership teams. It’s past time that more capital flows towards diverse teams. That may not happen until we get more diversity among venture capitalists. That’s a topic for another blogpost. It’s not just that it’s morally right to invest in diverse teams, it’s about making better business decisions.
Thanks for reading and I welcome your thoughts. Do your experiences match mine regarding diverse teams?
