October 09, 2020

Are West Coast Startups the Least Diverse and Inclusive?

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The Kauffman Fellows Research Center (KFRC) has previously explored multiple facets of startup diversity, including geography, ethnicity, education, and gender.

A few readers reached out and asked us which U.S. geographies have the most diverse startup founders and executives. In this series, we looked at more granular data and made some surprising findings.

Similar to our previous paper, we looked at the following U.S. regions: Pacific, Rocky Mountains, Southwest, Noncontiguous, Northeast, Southeast, and Midwest.

KFRC evaluated startup founders and C-level executives segmented by perceived ethnicity. We utilized the same Clarifai dataset as before and used these five perceived ethnicity categories: White, Asian, Latinx, Black, and Other.

 

For more details on perceived ethnicity including the details to the methodology used, please refer to our previous paper linked above.

 

Key Findings

How Ethnically Diverse Are Diverse Teams?

First, we look at ethnicity by comparing All-White Teams to Ethnically Diverse Teams.

The definitions are:

By this measure, the Pacific and Northeast are the most diverse (Chart 1). 28% and 19% of startups in these regions, respectively, had ethnically diverse founding teams.

The Rocky Mountains, in comparison, had the least diversity with only 10% of startup teams having at least one diverse founder.

Chart 1: When looking at overall ethnicity, we find that the Pacific region has the most ethnically diverse founding teams and the Rocky Mountains as the fewest.

The results are similar when looking at startup executive teams (Chart 2). The Pacific (30%) and Northeast (22%) lead in diversity, while the Rocky Mountains (11%) is falling behind.

Chart 2: When looking at all U.S. startups, the Pacific has the most ethnically diverse executive teams in the country with the Rocky Mountains having the least diversity.

The data above has poor representation, especially when considering a team could have a single ethnically diverse member and count as diverse. This is a low bar and, in our next section, we will break down the data even further by looking at individual ethnicities.

Looking at Individual Ethnicity Groups

Next, we look at the individual ethnicities for startup executives only. The charts below segment out the White and Other groups to take a closer look at the representation of Asian, Latinx, and Black executives.

Surprisingly, 24% of all ethnically diverse executives in the Southeast were Black (Chart 3), the highest representation for Black executives in the country.

We also find that 24% of all ethnically diverse executives in the Rocky Mountains were Latinx, the best presentation for that group as well.

Chart 3: When we look deeper into ethnically diverse teams, we find that the Asian executives are overrepresented and this influences the Pacific’s overall diversity figures. The Pacific region actually has the lowest percentage of Black and Latinx executives.

Meanwhile, the Pacific has the lowest representation of Black (7% of non-white executives) and Latinx executives (11%). The Northeast has the second fewest Black (13%) and Latinx (15%) executives.

Upon closer inspection, perhaps the coasts are not as diverse as we believe they are. Please note that the percentages do not add up to 100% due to excluding the Other classification.

Conclusion & Discussions

While the coasts have the highest number of non-white executives, they still have poor representation of Black and Latinx executives.

As we found in a previous report, White and Asian executives are generally overrepresented in the startup ecosystem. There is a more optimistic way of looking at the data too: The Midwest and Rocky Mountains have strong representation of Latinx and Black executives.

That said, we should remember that the Pacific region has 300% more executives than the Southeast and 50% more than the Northeast, which could impact the distributions overall.

In the author’s humble opinion, as a community, perhaps we should make more of an effort to build accelerators, incubators, and venture funds in the middle of the country. Helping inclusive startups succeed improves the makeup of the entire ecosystem. There are opportunities to do both – increasing diversity on the coasts and supporting companies in the heartland – to improve the quality of startups.

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