There’s no playbook for starting and running a successful business. As you get started, you quickly prioritize taking bets and investing in what you believe will help your product, business, and culture thrive for the long-term.
One of these long-term bets is our cap (capitalization) table at Threads. Our cap table is 50 percent female and 50 percent male, an essential differentiator for myself and the Threads team. Ensuring this took a significant amount of time and we did so when there were still infinite uncertainties with our business.
We did it because we knew it would be the best thing for our business, product, and culture. Countless studies that prove more diversity leads to more innovation. You can see some here, here, and here. From where I was sitting, this time investment felt like a no-brainer.
More perspective means better decisions
Entrepreneurs have investors for a couple of reasons. Capital is the obvious thing that comes to mind, but a close second is getting advice on important decisions you need to make for the company.
Should I hire this person? How fast should I grow the company? What have you seen done for compensation plans?
These decisions are infrequent but have a significant impact on the business. Something we say at Threads is that the difference between a good and bad decision usually comes down to the amount of context you have when you make it.
With more perspectives, you see more of the solution space. In other words, you avoid landmines and capitalize on opportunities that you wouldn’t have seen otherwise. The ability to make stronger, company-wide decisions will be a competitive advantage for companies as they grow over time.
Positive signals means better recruiting
An unexpected result of our makeup was the increase in people wanting to join Threads once they realized we had a diverse set of investors. There’s something formidable about knowing a company is getting advice from many different perspectives.
Additionally, if you care about hiring a diverse set of people, getting a diverse set of investors is one of the highest ROI projects you can pursue. A person’s network tends to mirror them–– about half of our employees come from underrepresented backgrounds, and investing early on in a diverse cap table made this even more possible.
Where to start
Getting started isn’t always easy. If you’re in the process of closing a round and would like to add more perspectives to your investor set, it’s essential to make this a priority and to be explicit in your ask. Let investors, employees, and partners know that you feel your company has a blind spot and explain why. Once they understand the problem, you can offer a solution.
Ask your mentors for an exhaustive list of investors/leaders that come from underrepresented backgrounds, you may be surprised by who they know. However, if you’ve reached out and are still struggling, take a look at the resources available to you (like #Angels, All Raise, or Women 2.0).
One of the major misconceptions new founders have is, “why should I invest in a diverse cap table or company?” The traditional framing is that it’s the “right” thing to do. While that’s true, it’s also the economic and business-savvy thing to do. Your company will make better decisions, will see opportunities that it wouldn’t have otherwise, will be able to recruit from a more extensive network, and will have a higher chance of building a thriving business.