This is a topic of great importance and one that we in the tech/startup sector have not done a good job with. We wait until a company is ready to go public and then address it. While that is better than nothing, it is not good enough.
The board diversity problem is a symptom of a much broader problem around lack of diversity in founders that get funded and lack of diversity in VC firms. Most startup boards are made up of a few founders and a few VCs. No wonder you have no diversity on the board.
Here are some suggestions for addressing this situation. I am working on this in my portfolio and USV is working on this in our broader portfolio. We are not control investors so this is a process of advocacy and persistence. This post is a part of that effort.
1/ When a startup board is created, there should be two independent seats on it. Day one. I know that will mean that founders will be unable to control their boards early on but these “independent seats” can be nominated by the founders to allay those concerns. And founders should put diverse people (gender, race, life experience, etc) into these independent seats.
2/ VCs should accept observer seats instead of board seats when they invest in companies. Boards don’t need three or four VCs on them. One is often enough. Two maximum. Instead VCs should negotiate for an observer right and the ability to nominate an independent director. And they should nominate diverse people for those seats.
3/ There should be term limits on board seats. Nobody and no investor should have the right to sit on a board forever. I could argue that in some situations, the founder might be the exception to this statement. That does not mean a valued board member should step down. That valued board member can always be asked to serve another term. What term limits do is raise the question about whether a person is the ideal board member for the company for the next few years. Often the answer is no.
4/ We need more resources like The Board List, Athena Alliance, and ELC to surface great board candidates. One of the many problems with boards that aren’t diverse is that they are not well connected to diverse candidates.
5/ We must commit to addressing this issue and make it a priority. Board development in general is not a high priority for founders. They are rightly focused on their company, their products, their customers, and enormous challenges of building a business from scratch. But boards are important. They need to be a priority and a diverse board is a better board for everyone. So we need to increase our efforts here.
Ten years ago the the tech/startup/venture industries started to make gender balance a priority in management teams, boards, and the venture capital industry. While we are not where we need to be, we have made good progress. We can do the same with diversity across the board. We can use the same approaches and the same persistent approach to the issue.
I am committed to making this a priority with the founders and companies I work with and I hope that all of you will too.