Diversity, equity and inclusion have rightfully been major areas of business focus recently, as executives increasingly appreciate DEI as a growth driver that can unlock new market opportunities. Diversity as a business imperative was a topic in the spotlight at the Strategic Growth Forum® US when CEOs, executives, and entrepreneurs convened in November 2021.
“We are at a moment in our country’s history when we need to really examine our processes and practices and policies,” said Wendy Guillies, President and CEO of the Ewing Marion Kauffman Foundation, at the event. “We are on this long journey of racial equity, diversity, inclusion, and working to make sure that we have a welcoming, inclusive environment. It’s an inside-out approach, and we all have a role to play.”
Today’s top talent and consumers alike expect brands to go far beyond diversity buzzwords, requiring they truly live the spirit of inclusion, from external messaging and product design to internal hiring practices and company culture. To ensure an equitable future for diverse entrepreneurs, business leaders should start within their own organizations. Fostering greater diversity, equity and inclusion requires a committed leadership team that’s willing to invest — not only with money, but also with time and resources.
“Access to knowledge, networks and opportunities opens the eyes of people like me who truly seek the know-how needed to be great in my own business and to ultimately make a difference in the lives of others,” said Tracey Grace, CEO of IBEX IT Business Experts and a member of the EY Entrepreneurial Winning Women™ Class of 2021, a program where she gets lifelong access to advice, business-building resources and a lively peer community of women founders. “I have learned so much from my Winning Women peers, just sitting with them and collaborating with them.”
Supporting diversity within
Guillies and others in the entrepreneurial community noted more businesses than ever are prioritizing diversity and inclusion, from boardrooms and leadership programs to entrepreneurship incubators and apprenticeships for underserved founders. As many entrepreneurs present at the Forum shared, this support is key to opening doors and breaking down barriers.
“Fostering equity has helped entrepreneurs like us innovate,” said startup founder Vin Montes, who is part of the EY Entrepreneurs Access Network, an educational and business-building program developed for Black and Latinx entrepreneurs. “By having access to the right resources, rich networks and know-how, founders like myself can avoid unforeseen pitfalls. It can truly mean the difference between failure and success.”
Ensuring inclusive access to capital
One of the toughest obstacles for diverse founders is access to capital, making it extremely difficult or even impossible for them to scale their companies. According to Guillies, only 0.5% of venture capital goes to women or minority founders, and bank loans only reach about 17% of entrepreneurs. That means that some 83% of entrepreneurs can’t get access to these two forms of institutional capital.
A recent report that analyzed the 500 biggest venture capital and private equity deals in 2020 found that Latinx founders received smaller checks on average — to the point that they needed about twice as many investors to achieve as much funding as startups founded by white entrepreneurs.¹
According to Montes, “Many minority business owners struggle getting access to banking and accounting tools to get their finances right.” Montes, who identifies as Latino, and Frantz Romain, who identifies as Black, cofounded PROFIT Bank, a digital bank for small businesses that offers a free bank account with bookkeeping technology at no cost. “We recently experienced this ourselves,” Montes said. “I believe business leaders can better support underserved entrepreneurs by doing more to give them access to growth capital.”
To better serve diverse founders, business leaders must first acknowledge these deep-rooted challenges. By working to truly understand what women and entrepreneurs of color are up against, they can begin to break down these barriers and build the infrastructure that can help them and the next generation succeed. This can begin with building genuine relationships with diverse founders and funding their ventures, but must also extend to updating policies and supporting legislation that codifies equitable access to capital.
“Policy can make a difference that can level the playing field for those that are left behind and underrepresented populations,” Guillies said. “The reality is, we had about twice as many startups in this country in the 1980s as we do today [thanks to policy].”
Achieving true equity
Truly innovative thinking can sustain long-term success, not only for a generation of diverse founders, but also for business overall. Companies with above-average diversity in their workforces have 19% higher innovation revenue and 9% higher earnings margins, according to a Harvard Business Review study.²
Leaders who want to champion diversity must understand what equity and inclusion mean for every individual — it’s not just about the numbers. Sometimes equity is wrongly assumed to mean everyone in marginalized communities should be treated the same way, said Eleanor Lee, cofounder and director of the Vancouver-based sustainable children’s brand Loulou Lollipop. Lee is also a participant in the EY Entrepreneurial Winning Women™ program.
“Equity won’t be accomplished through treating everyone equally, but by treating everyone equitably according to their needs,” Lee said. “We all have different needs and face a different set of challenges. By having a level playing field, everyone has a fair and equal chance of succeeding.”
But sobering statistics and personal experiences show uneven results. That’s discouraged some entrepreneurs from bringing their full selves to the table, said Guy Persaud, President of New Business at Procter & Gamble.
“All too often, women and minority entrepreneurs try to fit into a mold that they think will make venture capitalists think they will be successful,” Persaud said. “We need to help people break out of that, because innovative ideas will start to roll when people can be themselves.”
While it may require hard work, expanding opportunity and creating a foundation of belonging create positive ripple effects that spread not only through the organization, but also outward, helping drive long-term value, said Kim Billeter, EY Americas People Advisory Services Leader.
“A workplace culture aligned to values is really important to create belonging, to create trust,” Billeter said. That, in turn, “draws the line of sight to long-term value and [builds] that linkage between customers and employees.”