More than just a “nice to have” – why diversity makes companies better

Start-ups with a good corporate culture tend to be more successful. This involves fulfilling ESG (environmental, social, governance) criteria as well as actively promoting diversity. We sat down for a chat with Claudia Raber, ESG Manager and Principal at HTGF, and Barbara Lutz, founder of the consulting firm FKi Diversity for Success and initiator of the Impact of Diversity Award.

Claudia, you’re responsible for ESG at HGTF, together with Dr. Adrian Fuchs. What does ESG mean for a seed investor?

Claudia Raber: Sustainability is one of the major challenges of our times. ESG is a core component of the way companies view sustainability. Don’t forget, it wasn’t all that long ago that companies saw sustainability and profitability as being mutually exclusive. Thankfully, that is no longer the case. Many studies, including one by Accenture in 2022, show that taking ESG criteria into account can help deliver positive returns for investors. As far as HTGF is concerned, ESG criteria now form a core element of our due diligence process.

Why has it now become so important for start-ups to focus so heavily on ESG?

Claudia Raber: It’s because start-ups also tend to be more successful when they address these topics. ESG helps drive sales growth for companies by facilitating better pricing and longer-term investment. After all, consumers tend to be willing to spend more money on “green” products. What’s more, start-ups that tick the ESG box often receive preferential treatment when it comes to financing. So they have a better chance of securing capital. And on top of all that, ESG helps improve corporate culture. The key word here is diversity, which is an important part of ESG, especially the social aspect

Let’s stick with that subject for a moment. Barbara, you’ve been working in the start-up scene for quite some time now, and diversity is a topic that has frequently cropped up. If we think about diversity within teams, what do you think are the biggest advantages for start-ups?
Barbara Lutz: Diverse teams offer a whole host of advantages. They promote an open and inclusive corporate culture in which staff feel heard and respected. This increases employee retention and satisfaction while also strengthening a company’s ability to innovate. Diverse teams also help start-ups address a diverse customer segment, boosting growth and success. Priorities may initially lie elsewhere, which is understandable, but we mustn’t forget how important diversity in particular has become for investors.

Why are some start-ups struggling to get to grips with the topic?
Claudia Raber: Let’s take a specific look at science and tech: Most students are male. So it’s not surprising to see more men on the team when a start-up is taking its first few steps. But then when teams start to get bigger, or even before that, you need to focus on achieving greater diversity. This doesn’t only apply to gender, though. Here at HTGF, we offer targeted support to our portfolio companies while helping to foster understanding.

What can founders do to achieve greater diversity within their teams?
Barbara Lutz: Take action, and communicate sensitively. The two most important aspects. And by ‘communicate sensitively’, I mean inclusive communication: How can I communicate in a way that makes everybody feel included? And then within teams, or also externally for future team members: How do I formulate the content on my website? How do I present my company? This also applies to job ads, and using inclusive language, as linguistic nuances can often leave certain groups feeling excluded. And on top of that, the work culture needs to be right. That includes fundamental aspects such as offering flexible working arrangements and part-time work.

How can leadership benefit from diversity, and what advice would you give to founders?
Barbara Lutz: Diversity unlocks huge opportunities for leadership. By effectively managing a diverse workforce, leaders can take advantage of a broad spectrum of perspectives and experience, resulting in sound decision-making and innovative solutions. They can learn from different mindsets and work styles, and in doing so improve their own leadership skills and deliver much better results. My advice to founders would therefore be as follows: Right from the get go, make sure you create awareness for the importance of diversity in leadership, and build diverse teams. It’s important to promote a culture of inclusion in which all team members feel heard and respected, irrespective of their background. Laying better foundations for decision-making paves the way for greater success and efficiency, and is therefore key for founders.