Entrepreneurs: Does Investor Homogeny Reduce Success?
by Miki Saxon
Spending time with entrepreneurs is always enlightening.
I was at lunch with a group of them when talk turned to the current “media bashing,” as one person called it, tech was getting over the lack of diversity.
“Jason” said focus was critical in a startup and it was achieved best when the founders hired their friends and friends of friends.
He went on to say that while he understood the importance of diversity in a large company, focus was rarely a byproduct of diversity.
I asked if he considered focus to be as important for investors.
He said of course and went on (and on) explaining why it was even more important with investors, since they usually comprise the startup’s board.
Most hung on his words, since Jason was the big name that day (personally, I found him arrogant and patronizing).
I asked Jason if he would be surprised that research showed the greater the similarities between investors the less likely the success of their portfolio companies—success being an IPO.
They found that the probability of success decreased by 17 percent if two co-investors had previously worked at the same company—even if they hadn’t worked there at the same time. In cases where investors had attended the same undergraduate school, the success rate dropped by 19 percent. And, overall, investors who were members of the same ethnic minority were 20 percent less successful than investors with different ethnic backgrounds.
Conversation more or less died after I shared the URL with them.
They were too busy reading and then we were out of time.
Flickr image credit: Steve Voght
