Monday, June 17, 2024

Warm intros are awful for diversity, so why do investors keep insisting on them?

There are oodles of advantages to having a diverse workforce, but, as inBeta founder James Nash points out, you can’t simply take your homogenous workforce, add diversity, stir and hope for the best.

Often, something subtle gets in the way of diversity at startups: Companies depend on employee referrals in the beginning, but if a startup’s makeup is already not diverse, referrals aren’t going to change that.

That’s for startups. In the world of venture capital, things are more pronounced: A warm introduction is the only way to get in front of investors at many VC funds. That’s great for people who are already hooked into the startup ecosystem, but you don’t have to look for very long to realize that this is not a very diverse group of people.

“We’d love to hear from you. The best way to reach us is through someone we mutually know.” A VC firm's website

For many companies, employee referrals are one of the main ways to attract new talent. That’s all good until you stop to think who your newest hire is likely to know best. It doesn’t take many rounds through that particular mill until you end up with a relatively homogenous group of people with similar education, socioeconomic backgrounds and values.

If that’s what you’re optimizing for, great! Well done. If it isn’t, perhaps it’s time to stop being lazy and question why warm intros are still common practice.

My question has long been: What are you optimizing for by relying on referrals? If you spend some time thinking about that, I bet you’d unearth some uncomfortable unintended consequences.

Let’s talk about what we can do about it.

The situation in VC

If you read any guides about startups or raising money (including my own, although I also try to cover cold emails and cold intros), you’ll find that you need a “warm introduction” to land a meeting with a VC. Given the above parallel with hiring, that’s a problem.

Warm intros are awful for diversity, so why do investors keep insisting on them? by Haje Jan Kamps originally published on TechCrunch

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