April 8, 2021

So you've realised you have a diversity problem at your accelerator: here's what you need to do

Proactively source underrepresented founders, hook them up with your rich or well-connected pals and offer financial support.

Danielle Loftus

The lack of diversity in tech is acute — in the UK, for example, minority ethnic-only founding teams received just 1.6% of all venture capital funding between 2009-2019. 

This isn’t just a problem for diverse founders themselves, or simply a reflection of our society. It impacts the growth potential of the entire sector. 

In the US, diverse founders who receive funding drive higher returns on average — generating 3.3x realised multiples on exit compared to only 2.5x generated by their counterparts. Similarly, women-led startups generate 78 cents in revenue per dollar — more than twice as much as the 31 cents that male-led startups return.


Some of that is because diverse entrepreneurs have to be stronger to break in, or the businesses they are building speak to large, underserved markets. “Diversifying the funnel is not just the right thing to do socially — it’s good for business,” says serial entrepreneur Brent Hoberman.

So what can we do?

To understand what needs to change at startup accelerators in particular, we looked back on our work creating and running accelerators for BP Launchpad, Facebook and ITV, and had conversations with 27 founders and investors. We also worked closely with the SoftBank Vision Fund team to learn from their experience starting the Emerge Accelerator programme for underrepresented founders. 

Among many challenges, we identified three key investor blindspots:

  • Cloudy vision. When tasked with finding the next unicorn, VCs often pattern-match, using personal networks as the filter, which creates self-replicating systems that — in reality — do not result in better investments. The ‘entrepreneurial success metric,’ for example, where VCs view prior entrepreneurial experience as a marker of future success, misses the fact that investments in repeat founders do not perform significantly better than investments in first-timers, primarily because the initial valuations tend to be over 50% higher.
The ‘entrepreneurial success metric’... misses the fact that investments in repeat founders do not perform significantly better than investments in first-timers.
  • Investor-founder fit. Investors with non-diverse teams tend to create mirror-tocracies leading to a trillion-dollar blind spot. Laura Stebbing, co-CEO of accelerateHER, says: “Investors are often uncomfortable funding things they do not use, understand or personally value.” For example, when approaching investors, Tania Boler, CEO and cofounder of Elvie, was told that “women’s health products were too ‘niche’”. In 2019, Elvie successfully raised $42m in what was the largest ever investment for a femtech at the time.
  • Diverse isn’t one thing. Diversity takes many forms: gender, ethnicity, sexual orientation, socio-economic background, age, neurodiversity and more. Underrepresented founders are often spoken of as a singular ‘community,’ but their challenges cannot be solved with a one-size-fits-all solution. A specific and transparent focus for a fund or accelerator makes fundraising easier, enables pipelines to flourish and networks to develop. 

Some recommendations

These are complex issues and there is no silver bullet solution, but our analysis uncovered several recommendations to help the industry progress:

  1. Proactively source underrepresented founders. Identify yourself as an active champion of underrepresented founders and integrate transparency, data and metrics into your sourcing. Set internal targets for D&I and share your commitments. If you think it is hard to find underrepresented founders, think about what you could do to be a part of the solution. Consider whether your processes, public image or internal makeup make these founders unaware of your firm or unwilling to approach it. Build strong bonds between founders in your accelerator or fund and nurture a genuine, safe environment to create ongoing network effects for them (and you).
Empower founders with social capital through real connections that convert into anchor clients and early-stage investments.
  1. Be the rich (and connected) aunt or uncle. Empower founders with social capital through real connections that convert into anchor clients and early-stage investments. Ezechi Britton, investor at ImpactX Capital, told us: "The social capital of privileged founders means that you simply don't have the same struggle to tide the business over in the early stages.” For underrepresented founders, getting the first clients that prove traction to investors is often a bigger issue than developing the technology. Use your network to help solve this chicken-and-egg fundraising challenge.
  2. Give actual financial support. Don’t expect founders to quit their jobs, leave their families, move to a different city and live without income to join your accelerator. Recognise the conditions under which a founding team built their venture and create flexible conditions that make it possible for less financially privileged founders to participate (this might include childcare, stipends, relocation support or offering remote programmes).

“Sustainable change will require a collective shift both in how we invest and how we run our own companies,” says Catherine Lenson, managing partner and head of social impact at SoftBank.

By understanding more about the specific challenges faced by underrepresented founders, we can cultivate a pipeline that supports them through every stage of the investment lifecycle, creating a new set of sector champions and role models for the future. We hope our Accelerating Diversity white paper, which you can read here, provides food for thought as well as tangible changes that you can make to have a real impact.