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The tech industry is proving to be one of the most resilient amid a global health crisis. Whether the uptick in remote working or the push for innovation in healthtech to support the NHS, many digital companies are seeing demand, or are at least agile enough by nature to adapt.
Although many early-stage companies are struggling, our tech entrepreneurs have been through economic crises before and continue to show unparalleled resilience.
When this is all over, we will hopefully be able to see the positive impact of the unprecedented support packages provided by the UK government, most recently the Future Fund, that demonstrate its willingness to support the sector that underpins the British digital economy.
The government’s measures have been largely welcomed by the sector, providing support for many innovative companies during a turbulent economic period.
In a recent survey from Tech London Advocates, more than half of tech startups recognised that survival was the priority for the next three months. No wonder then, when the Chancellor announced a £1.25bn support package, hope prevailed.
Diversity and inclusion
However, we must not be blinded by short-termism. While the industry and government are quite rightly focused on providing immediate support, we risk ignoring, and even exacerbating, one of the sector’s most pervasive issues – diversity and inclusion.
Just last year, the Rose Review showed that only 10% of female-founded businesses were able to scale to £1m turnover or more, less than half compared to their male counterparts (21%) – showing the funding barriers that women face when starting up a business.
Innovative tech companies have been hailed for adapting quickly to the challenges posed by coronavirus, but the measures introduced have also marginalised many earlier stage startups, unable to stay afloat due to being excluded.
Coronavirus will undoubtedly mean that not all of our digital businesses survive – and that is no bad thing – but will it halt our progress in moving the needle on diversity and inclusion?
The £500m Future Fund, alongside the £750m of Innovate UK grants that supplement it, risks being restricted to beneficiaries that are not representative of our wonderfully diverse tech sector. Diverse founders tend to more often seek funding through alternative means, such as angel investors and family offices.
Therefore, the focus of the Future Fund on startups with existing support from venture capital (VC) firms creates barriers to crucial funding for under-represented founders that don’t have the necessary relationships in place.
We must first, therefore, acknowledge that these schemes have been constructed with VC-backed startups in mind, shutting out others that have raised investment via other means such as angels. Often, those missing out are usually founded by female, BAME and LGBTQ+ entrepreneurs.
But Rome was not built in a day, and neither were the government’s support packages. It takes a collaborative effort to refine and improve these schemes that need to be so all-encompassing.
The collaborative efforts of the private and public sector are to be applauded. Just recall the open letter from the campaigners making up the Save Our Startups campaign, which helped bring to the fore the limitations the CBILS posed to loss-making businesses.
The solution is out there. We’ve seen it outlined by some of the strongest voices in the sector. Recall Check Warner’s constructive suggestions around making sure that founders that are funded by VC Trusts (VCTs) and angel syndicates are eligible for match-funding and loans, and that VC funds and angels sign the government-backed Investing in Women Code. And Hephzi Pemberton and Emma Sinclair’s petition calling on the government to align the Future Fund with the diversity agenda.
We’ve also seen great work from the YSYS to include more BAME representation within the sector. These are all simple ideas that are not meant to make support schemes more inclusive just for the under-represented, but for everyone.
As such, the private sector must collaborate with the government to provide them with the knowledge they need to ensure that we are leaving no one behind. We must call on the government to relax rules governing VCTs and the Enterprise Investment Scheme (EIS) to help those angels and private investors willing to match-fund startups that do not fit into the traditional VC mould and therefore unable to apply for current packages.
Equally, the government can build out new initiatives to support under-represented founders. For instance, Innovate UK could provide more funding for research led by diverse entrepreneurs through the creation of targets – or even better, by allocating specific budgets based on a realistic representation of how many diverse founders are in the UK.
Recruit diverse talent
But even outside Westminster, the tech sector must also look to support diverse founders. This problem is not particular to this pandemic – it is a deep-set issue that is simply in danger of being accentuated.
VC firms must look for ways to diversify their portfolios, companies still hiring must ensure they are recruiting talent from a range of backgrounds, and the industry networks that campaign for diversity and inclusion within the sector have an important role to play now more than ever.
As the pandemic affects each and every one of us, we must ensure that we are not leaving anyone behind. Our sector has for so long been crippled by the diversity crisis, and short-sighted in understanding the potential that diversity brings to innovation and our economy as a whole.
Just recall McKinsey’s latest report, Diversity wins, showing how companies in the top quartile for gender and ethnic diversity on senior teams were more likely to better perform and had an above-average profitability than those which didn’t.
Some of the government’s schemes epitomise the tech sector’s diversity problem as the core of this issue. If we don’t act now, we risk compromising the strong progress we’ve made on diversity and inclusion in recent years – limiting the potential of our tech community once we are out the other side.