Beyond virtue signalling: Australia’s next step in the business of diversity

Why is only 4% of startup funding secured by women? The Australian startup scene is being seriously hindered by the lack of diversity in founding teams. Inadequate government funding and the biased hiring pipeline are feeding into the problem. How can founders and funders correct the imbalance in opportunity?

Australia is making progress with gender diversity in business. But at the moment, that progress is more like a hand-dug road than a blazing trail.

Over the past 4 years, solely female-founded companies secured just 4% of startup funding in Australia. When a male was also on the founding team, the number rises to 19.7%. Looking at VC investment alone, female founders secured 4.4% of investment, and 12% of deals. When a team included both a male and female founder, the numbers jump up to 32.2% of total investment secured.

The implications are clear. In 2022, female founders are still not being given trust and credibility unless there’s a man sharing the helm. And even then, they’re not securing as much investment as male-only founders.

Government aid is at hand, but there’s a serious stumbling block

The Australian government has done a pretty good job of issuing just under AUD $36 million in grants for women over the past year, namely in the form of the BFF initiative (Boosting Female Founders). 

To qualify, a start-up just has to be 50% female owned. But the problem hits as soon as startups reach investment stage. The kicker is that angel investors and venture capitalists are overwhelmingly male. As soon as a male investor takes a stake in the company, the female ownership ratio is knocked off, and the company no longer qualifies for the funding.

Post seed stage, maintaining more than a 50% share in your company is rare for any founder. For many applicants to the program, it presents an impossible hurdle. 

There is a pipeline problem, but it’s not a lack of women in STEM

Leaders of the “technocracy” might try to tell you that they want to hire more women, there just aren’t enough of them around. Unfortunately for them, this defence has been disproven. 

We’re familiar with Stanford and MIT from the countless film and media references and interviews with Silicon Valley founders.The student intake (as well as the interviewing academic staff) is predominantly white and male. When these universities are at the mouth of the hiring pipeline, it’s those demographics that will always filter prolifically from institutions into companies.

Things are no better in Australia. On the University of Technology Sydney’s mechanical engineering/mechatronics courses, 4-8% of places were offered to women. Measures taken in the past two years aim to boost those numbers to a pretty underwhelming 20%.

These universities are not as exclusive as America’s Ivy League or the UK’s redbricks. But they attract a demographic who has had a quality early education, exposure to and knowledge of the tech sector, and often access to expensive tech at home. 

There’s nothing to say girls aren’t getting this exposure, and it’s long been proven girls perform better in school. But it seems the competitive masculine culture of the “right” institutions isn’t appealing to them (41% of women drop out of Australian STEM degrees compared to 17% of men). 

Perhaps it’s not that qualified women aren’t out there. Maybe it’s just that employers aren’t looking in the right places.    

Lacking diversity is addressed with bullshit virtue signalling

Old-school business leaders are quick to define diversity as a set of cold demographics. They think they’re doing enough by playing with the numbers; establishing cold hard quotas to employ X more women and people of colour. 

This does a disservice to the true meaning of diversity. 

Two heads are better than one. But what’s better than that? Two heads with different brains. And what’s better than that? Lots of different heads with lots of different brains. What diversity actually brings to the table is a vast range of experiences, perspectives, skills, styles, histories, and levels of education that all-white, all-male C-suites are going without.

Diversity is not hiring women for womens’ sake. It shouldn’t be a favour or a forbearance. But luckily for leaders for whom “it’s the right thing to do” is not a compelling enough argument…

Diversity doesn’t just benefit disenfranchised groups

Boosting diversity is good for the business and the bottom line. The volume of scientific evidence that has emerged over the past decade is impossible to ignore. Last year, a Gender Equity Insights report showed that ASX companies that increased female leadership by 10% or above added 6.6% to their market value.

It’s been shown time and again that when women enter Top Management Teams (TMTs), companies become less risk-seeking, more open to new perspectives, and more focused on R&D, all to the betterment of the company’s finances and futures.

Startups have a golden opportunity to lead the way

Entrepreneurs are the lifeblood of the new ideas that can achieve the envisioned knowledge economy and rethink how we operate economically and socially.

— Susan Oliver, Chair of the Alice Anderson Fund

Some startups are directly targeting the issue. Women and minorities have been found to be more “passive” when applying for roles, and tend to under-represent themselves. HR platform Talenya created an algorithm that interprets skills that are often left off CVs. For employers, this can boost diverse candidates by 2x – 10x. Kanarys uses a data driven approach to help track and manage equitable hiring. 

If you’re not directly disrupting homogeneity in business (or using tools like Talenya in your hiring process), there are other ways you can contribute.

Vernacular is important. Using the same old codified application forms, language, and interviewing techniques can be exclusionary of applicants who weren’t “schooled” in traditional pipeline institutions. Make sure your interview questions make sense to everyone. 

Diversity and inclusion must be rooted into your operations. It should appear in your mission statement, be tracked as goals or KPIs, and be apparent in your advertising and social media presence as well as your team. 

In Australia, if 30% of your board of directors or 50% of your founding team identify as female, your startup is eligible for a Femeconomy approval badge. Buyers can go via the Femeconomy website to shop for anything from clothes to hardware to legal or marketing services. It might be a novel idea now, but if the Femeconomy gets big enough, users will be able to ensure that everything they buy is from gender-diverse companies. That can only be a good thing in a world becoming more conscious of ethical and equitable buying decisions.

Finally, female-owned businesses must give as much as they take. Those who conquer adversity need to be reaching back down to help up the next generation of female executives. 

As entrepreneurs, we can wait for governments, universities to catch up with reality, or we can simply take matters into our own hands and lead by example.

Diversity is not about being ESG compliant, or about adopting a few women into a men’s club to polish the statistics, or confining yourself to “white diversity” without having a clear-sighted view of what our society actually looks like today.

Diversity is about actively building an organisation capable of meeting an increasingly complex market environment, and fostering innovation to stay ahead of competition.

True business value comes from creating an inclusive culture where you as a leader ensure that everyone can be themselves, and you as a team build on the diverse set of competencies.

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