The UK startup scene has seen a surge in popularity in recent years, with record-breaking numbers of new businesses founded in 2014(1), 2015(2) and 2016(3). But while the bigger picture focusses on an industry going from strength to strength, a closer look tells a more nuanced story and highlight one major failing: UK startups are severely lacking in diversity.
In fact, while the UK in general is more diverse than any other major startup ecosystem(7) that advantage hasn’t translated into a similarly diverse startup community. Those who work in the startup economy know it is disproportionately white, male and relatively wealthy.
To understand this let’s start by looking at the importance of money in starting a business. Research published by Crowdfinders and IW Capital(5) found that over 50% of company founders said that money from family members had been integral in starting their business and 45% had used finances from friends.
In addition to this, the research looked at the most popular routes to funding for entrepreneurs in Britain and reported that: 35% used personal savings, 28% used banks and institutions, 15% used friends and families.
This is pointing out the obvious, I know, but it’s important to note the fact that many aspiring entrepreneurs don’t have personal savings, would not be able to borrow money from banks and institutions and are not able to ask friends and families for financial help.
At London Met University we run entrepreneurship programmes for student and graduate from an incredibly diverse set of backgrounds. Most of them don’t have savings or access to family money to get started. This means they have to work full time while trying to get their idea of the ground, which often proves impossible.
The effect of this is the startup industry is losing out on a huge untapped pool talent and creativity.
The good news is that the cost of starting a business has dropping through the floor in recent years so it doesn’t take that much to get started. The winners of our Big Idea Challenge competition share in a prize pool worth £30,000 and we have seen that a small amount of cash can go a long way in the early testing phase – with previous winners using their prize money and the support of mentors to start businesses that are thriving years later.
As well as the wealth and class issue, business owner Suzanne Noble points out that “Ageism and sexism are rife”(6) in the UK startup scene.
This often-repeated opinion is rooted in fact, with women making up only a third of the UK’s entrepreneurs(7) and only 17% of US startups have a female founder(11). This may be due in part to traditional gender roles, or the fact that gender has been proven to affect funding, with women being less likely to get VC or angel funding and more likely to be self-funded(4). In First Round’s State of Startups 2016 report(8), 700 surveyed startups were questioned on the male to female ratio of their teams. Their answers were telling with 61% of startups being mostly or all male and only 8% mostly or all female.
What’s even more telling is that, in this report, “diversity” appears to refer only to gender – and not to race. While the male to female ratio of boards and teams was evaluated, race wasn’t. At all. According to a survey undertaken by Tech London Advocates when 200 tech leaders were questioned, only 9.4% believed multiculturalism drove their enterprise9 . This is in stark contrast to comments made by Lawrence Wintermeyer, CEO of UK’s FinTech membership association Innovate Finance, who said that “Diversity… brings new ideas for services and different solutions to problems in a world of changing markets and customer demands. It also brings a range of skills, experience and cultural understanding to inform companies. It is a reality that we must all embrace. Inclusion is the solution for a better future for everyone.”(10)
So, what does this mean for the future of startups? With an increased focus on representation, there is a drive towards creating diversity in the startup industry. And the fact is that companies not only have a moral and ethical reason to recruit diversely, but many business reasons, too.
London Met Uni’s Big Ideas Challenge is one of several initiatives created to even out the playing field, so to speak, and push the industry towards a truly representative workforce. Initially started to discover and support entrepreneurial talent amongst London Met’s student body, this year the university was joined by 17 competing colleges from across the capital, whose students also reflect the broad diversity of the city. For many of the young people taking part it was their first exposure to the world of entrepreneurship and for some the start of a long and rewarding journey.
Throughout the competition, the students gain core skills and knowledge with the help of some incredible mentors from corporates such as NatWest and Microsoft, nonprofits including the Prince’s Trust and founders of successful startups. On “Bootcamp Day” it’s incredible to see them transform from nervous wrecks when they first meet their mentor into empowered budding entrepreneurs by the time they pitch to a live audience at the end of the day.
Building confidence like this is a crucial part of opening the door to entrepreneurship to young people from all backgrounds. No matter how smart, imaginative and driven students are it takes someone to recognise that and give them the confidence and support to set their aspirations high.
Excitingly, this year’s winners of the Big Idea Challenge were presented with their awards by The Duke of York at St. James’s Palace – both validating their hard work and inspiring them to take their ideas on.
With their new found confidence, network, support and a small about of money we hope many of these young people will go on to start successful companies. And at the same time make the startup world a more diverse, interesting and successful sector.
Head of Accelerator
(1,2) Britain hits record number of startups as more aspiring entrepreneurs take the plunge, The Telegraph (3) Record 80 new companies being born an hour in 2016, The Telegraph (4) Opinion: London’s ‘amoral’ tech elite is driving inequality, wired.co.uk (5) Is equity crowdfunding truly democratic?, crowdfinders.com (6) What 2015 taught me about the London tech scene, Tech Crunch (7) Diversity vs. class in UK’s startup scene, IDG Connect (8) State of Startups 2016, firstround.com (9) Tech still trails: Half of London’s tech sector believe bias against women exists, startups.co.uk (10) UK MORE DIVERSE THAN OTHER MAJOR START-UP ECOSYSTEMS, INCLUDING THE US, SILICON VALLEY, NYC AND TEL AVIV, wayra.co.uk (11) Opinion: London’s ‘amoral’ tech elite is driving inequality, wired.co.uk