Diversity in Britain’s Startups: The Gap No One Is Talking About

New research from Approved Index, a UK-based B2B lead generation company, has disappointing news for the UK’s female entrepreneurs: the number of women on the boards of the UK’s top 100 startups has been continuously declining since 2010. In 2014, female representation at the director level stood at a meagre 8.37%. Compare that to the boards of the FTSE 100 Index, which includes many of the largest and most traditional companies in the UK. The FTSE 100 have witnessed incredible growth in female board representation: women now make up 22.8% of the FTSE 100’s board members.

Thanks to government pressure on British businesses to diversify, most firms on the FTSE list are set to meet their target of having 25 female CEOs by 2025. While this would not be the ideal 50:50 ratio we’re aiming for, it would demonstrate the sway higher authorities can have by taking a pro-equal opportunities stance. Does it go far enough? Some have criticized the FTSE’s “25/25” target as being all talk, suggesting that the enforcement of quotas would have a much bigger impact. But do all women striving for positions at the top want to be rewarded by merit or by legislation? Is a government goal more inspiring and better for women than being given a role simply because of our gender?

New businesses are notably absent from these conversations. Startups are frequently celebrated in the media as being on the cutting edge of business and the pioneers of innovative thinking. They position themselves as the providers of the solutions for tomorrow. This new wave of entrepreneurs has modernized workplace culture with the rise of the open plan office, casual dress policies, and incredible employee perks.

Yet these cool, quirky companies have failed to address the simplest and most pressing of corporate issues: leadership diversity. Their management outlook is significantly less inclusive than that of the FTSE firms formed nearly 200 years ago—and shockingly, this seems to have gone completely under the radar. It begs the question: what is their excuse? Research has also revealed that the directors for these firms are much younger than those seen on the FTSE 100; the average age of a startup CEO is 45, compared with an average age of 67 for FTSE 100 CEOs. It seems a lot is being done to change the typical profile of senior directors by being more welcoming to younger faces, but these faces still remain “male, pale and stale.”

One thing is certain: startups cannot afford to wait for a government incentive or blueprint to get the diversity ball rolling. It could cost them dearly in the future.

In an interview with the Financial Times in 2013, Karin Thorburn of the Norwegian School of Economics claimed that there is ample academic evidence which demonstrates a positive correlation between higher female representation and enhanced company performance. Thomson Reuters conducted a study in 2013 called “Mining the Metrics of Board Diversity” which revealed that companies with a gender-balanced board had better returns and less volatility than those with a male-dominated board.

Trilby Rajna at Approved Index comments: “We have seen firsthand the positive impact having a gender-balanced team can have on a business and wanted to investigate the state of diversity within other startups. It is disheartening that UK startups are failing to reap the benefits that come with including more women on the board. At Approved Index, we feel strongly that much of our success can be attributed to the diversity within our teams. Being able to tap into different pools of knowledge and skills that come with different backgrounds and perspectives has without a doubt improved our decision making.” We can only hope that more startups will embrace this philosophy in the near future so that women are not excluded from the power tables at the top.

About the Author

Jessica Laporte writes about women in business for Approved Index.