As an investor, it’s important to think about investing in human and social capital.
Research suggests that investing in human capital and social capital, alongside traditional capital, is most predictive of any startup’s success. Data shows that having diversity on a team benefits a startup’s performance. An additional dataset from the likes of McKinsey, American Express, and the Kauffman Foundation shows that diversity makes for better financial outcomes with a company. Given the data, looking at diverse teams should be a priority for investors.
Here are a few benefits of investing in team diversity:
- Superior decision making and problem solving
Diverse backgrounds means diverse solutions being brought to the table. This leads to a more informed and well rounded decision-making process and improved results from the team.
Increased innovation
- A diverse team is a melting pot of ideas.
People with different backgrounds and views will bring different solutions to a problem. This, in turn, pushes innovation forward.
- More talent and skills
Individuals from different backgrounds each bring in their own set of skills, talents, and experiences. Not only does this increase performance, it also creates a natural learning environment in which team members can learn from each other.
- A larger talent pool and long term employees
Diversity means attracting more candidates. A progressive company is attractive to prospective employees who value equality and higher employee retention is likely with a more diverse team.
