Historically, the startup ecosystem — especially in the B2B space — has not been inclusive. Less than 20 percent of developers are women and only 13 percent of venture capital (VC) dollars go to startups with at least one female founder.
SAP believes it can change status quo by focusing on three impact areas:
Corporations can a lead here in making a difference. For instance, SAP recently launched SAP.iO No Boundaries, an initiative where it will commit funds and incubate over 200 startups in the next five years. SAP plans to achieve this goal by committing up to 40 percent of its investible capital in SAP.iO Fund toward women and minority entrepreneurs and scaling the SAP.iO Foundries program with focus on inclusive entrepreneurship.
We need more of these initiatives, where corporations, VC firms, and the public sector can come together to improve the diversity of the startup ecosystem.
Innovation has always been about generating good ideas by challenging the status quo with new viewpoints. That is why diversity is fundamental to the sustained success of any innovation ecosystem. Promoting diversity in entrepreneurship and technological innovation can deliver greater economic and societal value. As society experiments with new technologies such as artificial intelligence (AI), we must be careful to ensure that our own individual biases do not taint the data we use to train AI algorithms. Training data must accurately represent human viewpoints from the global population, so that AI can augment humans ethically, safely, and fairly.
Today, examples abound demonstrating the need for diversity in the training of AI. For example, 45 percent of ImageNet data, which is commonly used to train computer vision algorithms, comes from the U.S., while only three percent comes from China and India combined. This is a problem when you consider that China and India together represent 36 percent of the global population and the U.S. only represents four percent.
But diversity doesn’t just lead to better technology, it leads to better business and financial results. On average, companies with more diverse leadership teams report almost 20 percent higher revenues from innovation. More specifically, within the startup ecosystem, numerous studies have found that diversity in the leadership ranks yields a better return on investment (ROI) for investors and better exits for entrepreneurs. One such study showed that, over a five-year period, for every dollar of VC invested, female-led or female-co-founded startups generated 78 cents of revenue, while male-led startups only generated 31 cents.
The startup ecosystem has not been inclusive in U.S. and Europe. Consider these 2018 facts:
Many of these issues arise from the fact that less than 20 percent of software developers are female. There needs to be a structural change in the STEM education model to attract more female developers, which would result in more aspiring female entrepreneurs. In the near term, there is an opportunity to improve the state of women and minority entrepreneurs.
The startup ecosystem needs to better nurture inclusive entrepreneurship by driving change in three interrelated areas:
By addressing these three areas, governments, businesses, and societies can better connect underrepresented entrepreneurs to the resources they need to be successful in starting and growing business ventures.
Corporations can lead the way in addressing the current diversity and inclusion opportunity in the startup ecosystem. The recently announced SAP.iO No Boundaries is an example for how private sector organizations can scale inclusive entrepreneurship by driving a focused initiative around the three impact areas.
With these initiatives, SAP is creating a one-of-its-kind forum for inclusive innovation globally.
Deepak Krishnamurthy is chief strategy officer at SAP.