Journal of Business Venturing Insights 17 (2022) e00314

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Journal of Business Venturing Insights

journal homepage: www.elsevier.com/locate/jbvi

Startup team ethnic diversity and investment capital raised

Sean Wise a, 1, Sepideh Yeganegi b, André O. Laplume c, *
a
Ted Rogers School of Management, Ryerson University, 2-076 TRS, 55 Dundas St., Toronto, Ontario, Canada
b
Lazaridis School of Business and Economics, Wilfrid Laurier University, 4106, Lazaridis Hall, Waterloo, Ontario, Canada
c
Ted Rogers School of Management, Ryerson University, 3-108 TRS, 55 Dundas St., Toronto, Ontario, Canada

A R T I C L E I N F O A B S T R A C T

Keywords: Extant literature suggests that ethnically diverse work teams can generate both positive and
Ethnic diversity negative outcomes, but it is unclear how startup teams are affected. We seek to help clarify the
Diversity as advantage relationship between startup team ethnic diversity and total investment capital. Using statistical
Startup fund-raising analyses on a dataset of startups that participated in Techstars accelerator programs between
Entrepreneurial team 2007 and 2018, our results suggest that startup team ethnic diversity is positively associated with
the aggregate amount of investment capital raised by startups. Our study results suggest that
‘diversity as advantage’ theories may be more appropriate for theorizing about startup fund­
raising than ‘diversity as disadvantage’ theories.

Author statement
Sean Wise: Conceptualization, Data Curation, Writing, Reviewing, and Editing. Sepideh Yeganegi: Conceptualization, Method­
ology, Data Curation, Data Analysis, Writing, Reviewing, and Editing. André Laplume: Conceptualization, Methodology, Writing,
Reviewing, and Editing. All authors had equal contributions.

1. Introduction
The ability to raise capital is pivotal for technology and innovation startups aiming for fast growth and large scale (Deeds et al.,
1997; Fisch, 2019; Kotha and George, 2012; Rosenbusch et al., 2013). New venture team capabilities and human and social capital are
widely expected to boost startup performance and attract investment capital (Dimov et al., 2007; Vogel et al., 2014; Zarutskie, 2010).
For example, a startup team’s functional diversity signals the presence of complementary expertise (Ensley and Hmieleski, 2005; Der
Foo et al., 2005; Joshi and Roh, 2009), and greater cognitive resources at their disposal (Bunderson and Sutcliffe, 2002).
Unlike functional diversity, the entrepreneurship literature is inconclusive about the influence of ethnic diversity on founding team
performance outcomes (Lalonde, 2017). A startup team is considered to be more ethnically diverse if individuals are equally
distributed over all the different ethnic categories (Blau, 1977; Richard et al., 2007), which are groups with common ancestry, culture,
and or/language.
There are some indications that startups with founders of varying ethnicities use different entry strategies (Chaganti et al., 2008),
internationalization strategies (Jiang et al., 2020), and innovation strategies (Brixy, Brunow & D’Ambrosio, 2020). However, studies
directly examining ethnic diversity in the entrepreneurial context are sparse, and tend to focus on related topics like investor-founder

* Corresponding author.
E-mail address: alaplume@ryerson.ca (A.O. Laplume).
1
All authors made equal contributions.

https://doi.org/10.1016/j.jbvi.2022.e00314
Received 30 January 2022; Received in revised form 13 March 2022; Accepted 18 March 2022
Available online 10 April 2022
2352-6734/© 2022 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
S. Wise et al. Journal of Business Venturing Insights 17 (2022) e00314

homophily (e.g., Bengtsson and Hsu, 2015), immigrant entrepreneurship (e.g., Chaganti et al., 2008; Dabić, M., Vlačić, Paul, Dana,
Sahasranamam and Glinka, 2020), ethnic/minority entrepreneurship (e.g., Basu, 2006; Younkin and Kuppuswamy, 2018; Dana et al.,
2020), or how a region’s cultural diversity affects entrepreneurship outcomes (Audretsch et al., 2021; Boudreaux, 2020).
The lack of additional studies is curious and problematic given that management researchers have paid much more attention to
ethnic diversity in organizations, especially in work teams. Researchers find both positive team performance consequences (Finkelstein
and Hambrick, 1996; Joshi and Roh, 2009; Richard et al., 2004), as well as a few negative outcomes (Jehn et al., 1999; Pelled et al.,
1999; O’Reilly et al., 1989; Williams & O’Reilly, 1998). The large gap between management and entrepreneurship research in this
stream helps motivate the current study. However, beyond being a gap in the literature, our research question is also motivated by the
desire to help clear the air about the role of ethnic diversity in startup teams and perhaps reduce the potential for biases.
We adopt a research question-based approach where the goal is to explore a dataset with a particular research question in mind,
rather than a specific hypothesis to be tested. It seems clear that more research is needed to better understand the role of ethnic di­
versity in startups and to answer the research question: Does startup team ethnic diversity influence the amount of capital startups raise? We
chose to study the amount of capital raised by startups because it is an observable measure (i.e., recorded in Crunchbase) which is
based on expectations about the startup’s future potential valuation.
To help answer our research question, we elaborate analysis results from a sample composed of startups that participated in the
Techstars accelerator program. We find a robust positive linear relationship between startup team ethnic diversity and total capital
raised. Our results are robust to the addition of control variables including those for other types of diversity such as functional diversity,
geographic diversity, and gender diversity.
Our study contributes to the entrepreneurship literature in important ways. While much of the extant literature on ethnic diversity
in teams has focused on teams of employees working in established organizations, we shed light on the role of ethnic diversity in
startup teams. Startup teams have different incentives and objectives than employee teams created by managerial fiat. In particular,
our study results suggest that when it comes to raising capital, ‘diversity as disadvantage’ theories (i.e., social identity theory and social
categorization theory) may be less appropriate to the entrepreneurship context. These theories emphasize the potential for conflict and
the cost of resolution (Jehn et al., 1999; Ko et al., 2021). Our results suggest that ethnic diversity is a key driver of new venture success
in terms of funding raised, thus supporting the ‘diversity as advantage’ theories (e.g., cognitive diversity theory and social network
theories). These theories emphasize the value of diversity for creativity, innovation, and problem solving (Jehn et al., 1999; Richard
et al., 2004; Van Knippenberg et al., 2004).

2. Method
2.1. Sample and data
To answer our research question, we gather a sample composed of startups that participated in the Techstars accelerator program
between 2007 and 2018. We choose this sample because the literature suggests that diversity may be more important for innovative or
high-tech ventures (Chaganti et al., 2008; Jin et al., 2017; Joshi, Aparna and Roh, 2009) than for those in low-tech industries. Startups
participating in the Techstars accelerator program are selected based on their growth potential (DeTienne et al., 2015). Techstars’
founder has stated that the organization strives to create opportunities for diverse startups (Feld and Cohen, 2019), thus increasing the
chances that we will observe ethnically diverse startups in the sample. Techstars’ website includes announcements about enhancing
diversity at the accelerator as early as 2015. This is important because some prior studies lament the lack of diversity in their samples.
For example, Chowdhury (2005) excludes team ethnic diversity from the study for lack of data, concluding that most startup teams
simply prefer homogenous teams. Another advantage of our sample is that every Techstars startup receives a similar initial investment.
Techstars takes a 6–10% equity stake for up to $118,000 per startup (Smith and Hannigan, 2015). Therefore, each startup is given a
similar starting valuation and capital investment, suggesting that the startups are on a somewhat ‘even keel’ at the start of the program.
By ensuring that we track all of the startups that entered the accelerator, we can also avoid survival bias.
We also gathered data from CrunchBase and LinkedIn to create a database of startups. We obtained ethnic diversity data from
Ethnic Technologies (ethnictechnologies.com), which is often used in medical and demographic research (e.g., Wharam et al., 2017).
According to their website, the main purpose of the database is to provide ethnicity data for audience analysis, targeting marketers.
They employ linguists and data scientists to continually improve their database and algorithm, which is a rule-based system that
incorporates geographic data and uses both first names and surnames for prediction. Their technology works by triangulating the most
likely ethnicity based on names and locations, and the data produced by the algorithm are checked against ancestry databases for
accuracy. After excluding 180 startup teams with missing data, we have a final sample size of 1005 startup teams.

2.2. Study variables

Dependent variable of interest. We measure total capital raised as the sum of all the funding rounds that a startup has received. We
then take the log of this number to normalize the data. The source for records on startup funding is Crunchbase. They track each
funding round, so we use the total dollar amounts (USD) of all their funding rounds. As a result of this choice, we exclude from our
calculations any startup team members who joined the startup after the last round of funding was secured.
Variables of interest. Our key independent variable of interest is startup team ethnic diversity, which is constructed using ethnicity
data from Ethnic Technologies. We provided a list of over 5000 full names of individuals. Using their algorithm, they coded the full
names into groups (African, Hispanic, East Asian, Southeast Asian, South Asian, Central Asian, Middle Eastern, Mediterranean, Eastern
European, Western European, Scandinavian, Jewish, Aboriginal, Caribbean, and Polynesian—see Brixy et al., 2020 for a similar
categorization scheme). Bengtsson and Hsu (2015) also used a similar, name-based approach to categorization. To calculate our

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S. Wise et al. Journal of Business Venturing Insights 17 (2022) e00314

diversity measures, we use the formula known as the Shannon index (Spellerberg and Fedor, 2003). The formula used is:

′
∑
R
H =− pi ln pi
i=1

where pi is the proportion of individuals belonging to the ith type of ethnicity in the startup team of interest. The result quantifies the
uncertainty in predicting the ethnicity of an individual taken at random from the startup team. Thus, a team made up entirely of
individuals from the same ethnic category will receive a value of 0.
To check the reliability of the ethnicity data, we also used a research assistant to validate Ethnic Technologies’ categorization
scheme by coding a subsample for white males based on their LinkedIn photographs were available. We then compared this coding to
the values from Ethnic Technologies and ran an inter-rater reliability analysis yielding a Cronbach alpha of 84%. Thus, we conclude
that the ethnicity data is sufficiently reliable to proceed.
Other diversity variables. We control for startup team functional diversity (Joshi and Roh, 2009). To measure functional diversity,
we categorized startup team members as ‘technical’, ‘managerial’, or ‘subject matter experts’ based on the last highest degree listed on
their LinkedIn profile prior to joining the focal startup. We control for gender diversity (Sullivan and Meek, 2012) using data from Ethnic
Technologies. Finally, we control for geographic diversity by using the cities in which the team members are located based on their
Crunchbase information. We use the same approach (i.e., Shannon) to calculate all diversity scores.
Control variables. We included several control variables in our study. Cohort size counts the number of other startups in the
accelerator at the same time, vying for the same investment funds. Since we have several years of data and we want the startups on an
even keel, we control for the year of the cohort. Startup age represents the number of years from founding to inclusion in the accelerator.
We control for team entrepreneurship experience (average number of years of founding/co-founding startup experience prior to joining
the focal startup). We also control for team fulltime experience (average number of years of fulltime work experience prior to joining the
focal startup). Both team entrepreneurship experience and team fulltime experience captured from LinkedIn profiles. Startup team education
is the average of the education (1 = high school or less; 2 = associate degree or some college; 3 = bachelor; 4 = master; 5 = doctorate)
of the team members, which we collected from LinkedIn profiles. Because we are interested in diversity and we want to control for a
counter case, we added a control for white male percentage (percentage of team members with gender = ‘male’ and ethnicity = ‘Eastern
European’, Western European’, ‘Scandinavian’, or ‘Mediterranean’). In case there is a home turf advantage, we created a dummy
variable for U.S. cohort = 1, international = 0 called location. Finally, we have two control variables that measure the conditions
present in the startup’s industry. First, we measure competition by adding the log of the number of startups in the same industry in the
Crunchbase dataset in the year of last funding round. Second, we measure the funding momentum of the startup’s industry as the log of
the total funding in the previous year in the focal startup’s industry. We use Crunchbase industry categories (e.g., “software”,
“gaming”, and “hardware”). Where startups are registered in more than one industry, we use the average of the variables for all in­
dustries listed (up to three industries per startup).

3. Results
Table 1 provides definitions and sources for all of our variables. Table 2 presents summary statistics, correlations, and variance
inflation factors (VIFs) for all variables used in this study. Except for the quadratic terms, all VIFs are within an acceptable range.
Although the VIFs for the quadratic terms are high, this is expected and can safely be ignored as they do not affect the variable of
interest (Allison, 2012). However, following common practice, we mean-centered the variables (education and gender diversity) and
reran the VIFs, which dropped below 10 (see bottom row, Table 2), suggesting no problematic multicolinearity.
Our dependent variable is a continuous variable leading us to use multiple linear regression (with ordinary least squares esti­
mation) for our analyses. We see a positive main effect relationship between startup team ethnic diversity and total capital raised. We
added startup team ethnic diversity to Model 2 (see Table 3). The coefficient is positive (beta = 0.54) and statistically significant (p <
0.001) meaning that a one unit increase in ethnic diversity is associated with a 54 percent increase in total capital raised. As can been seen
at the bottom of Table 3, the R-squared statistic increases from Model 1 to Model 2 by about 1% suggesting that variable added in
Model 2 explains incrementally more of the variance in the dependent variable. The change in R-squared from Model 1 to Model 2 is
statistically significant (p < 0.001).
We removed the square terms for education and gender diversity from Model 2 (Table 3) just in case these were actually causing
multicolinearity problems. As can be seen in Model 3 (Table 3), the results of our main analysis are not affected by this change.
Next, we interpret the results for other types of diversity control variables (Table 3, Model 1). The result for functional diversity is
positive (beta = 0.78) and significant (p < 0.001). Geographic diversity is positive (beta = 0.61) and significant (p < 0.001). The result
for gender diversity’s main effect is positive and significant (beta = 4.60; p < 0.001), while the square term is negative and significant
(beta = − 7.03; p < 0.001).2 This suggests an inverted U-shaped curve, with a positive association that becomes negatives after an
inflection point (Dai et al., 2019). Perhaps the curve reflects observed gender biases among venture capitalists (Geiger and Oranburg,
2018; Malmström et al., 2020).
Finally, we report the results for the other control variables that are statistically significant (Table 3, Model 1). Cohort size is positive
(beta = 0.06; p < 0.05). Cohort year is negative (beta = − 0.22; p < 0.001), startup age is negative (− 0.10; p < 0.000), team fulltime

2
We also tried square terms and cubic terms for all other diversity variables and none is significant.

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S. Wise et al. Journal of Business Venturing Insights 17 (2022) e00314

Table 1
Variable definitions and sources.

Variable Definition/operationalization Data source

Total Capital Raised Sum of all the funding rounds that a startup has received Crunchbase
Ethnic Diversity Shannon index on the ethnicity of the startup team members Ethnic
Technologies
Functional Diversity Shannon index on the functions (business, technology, or subject matter expert) of the startup team LinkedIn
members—based on last degree prior to joining the focal startup
Geographic Diversity Shannon index on the cities that startup team members live in Crunchbase
Gender Diversity Shannon index on the genders of the startups team members (male, female, non-binary) Crunchbase
Year Year of the Techstars cohort Crunchbase
Startup Age Number of years from founding to inclusion in the accelerator LinkedIn
Cohort Size Number of other startups in the accelerator at the same time Crunchbase
Full-time experience Average number of years of startup team members fulltime work experience prior to joining the focal startup LinkedIn
Team entrepreneurship Average number of years of startup founder/co-founder experience prior to joining the focal startup LinkedIn
experience
Education Average of the team members’ education LinkedIn
White male percentage Percentage of team members that are ‘male’ and belong to: = ‘Eastern European’, Western European’, Ethnic
‘Scandinavian’, or ‘Mediterranean’ groups Technologies
Location Dummy variable with value of 1 if startup location is U.S. and 0 for other countries Crunchbase
Competition Log of the number of startups in the same industry in the year of the last funding round Crunchbase
Momentum Log of the total funding in the previous year in the focal startup’s industry Crunchbase

experience is positive (beta = 0.03; p < 0.01). Team education is positive (beta = 1.62; p < 0.01), team education squared is negative
(− 0.24; p < 0.01). These results suggest the presence of an inverted-U shaped curve relationship with the total capital raised. Location is
significant (beta = 0.29; p < 0.05), competition is negative (beta = − 0.58; p < 0.001), and momentum is positive (beta = 1.21; p <
0.001).

4. Discussion
The results of this study provide support for a positive association between startup team ethnic diversity and the total capital raised
by the startup. These results are robust in the presence of control variables, including other types of diversity (i.e., gender, geographic
and functional diversity). We contribute to the entrepreneurship literature in three ways: implications for theory, implications for
policy (i.e., accelerator leadership), and implications for practice (i.e., entrepreneurial teams). Our study contributes to theory by
bolstering ‘diversity as advantage’ theories in entrepreneurship and rebuffing the ‘diversity as disadvantage’ theories in the context of
raising startup capital.
Diversity as advantage. Our results are broadly consistent with the ‘diversity as advantage’ perspective. This perspective has two
main theories. First, the cognitive and information processing theories highlight the value in accessing different sources of information
and developing alternative interpretations of the same information (Amason and Sapienza, 1997; Cox et al., 1991; Richard et al.,
2004). Diverse mind frames may increase innovation and problem-solving capacity by mixing individuals with different cognitive
models (Jehn et al., 1999; Pelled et al., 1999; Van Knippenberg, De Dreu & Homan, 2004; Williams & O’Reilly, 1998). Cognitive
diversity helps with brainstorming, creativity, and other types of exploratory behaviors and processes that require high idea variety to
increase chances of discovering innovations (Van Knippenberg et al., 2004). Second, the social network (Burt, 1982) and social capital
(Coleman, 1988) theories come into play. Social capital is the “sum of actual and potential resources embedded within, available
through, and derived from the network of relationships possessed by individuals or social units” (Nahapiet and Ghoshal, 1998, p. 243).
Networks and social capital are particularly important from a resource perspective, because networks act as conduits through which
entrepreneurial teams access the resources they need for the growth and development of their startups (Gedajlovic et al., 2013; Leung
et al., 2006; Stuart and Sorenson, 2007; Stam et al., 2014; Vissa and Chacar, 2009).
In summary, each startup team member can bring with them cognitive and social connections to different networks (Barkema and
Shvyrkov, 2007). Ethnic diversity may create access channels to a greater variety of networks that can be potential sources of ideas and
resources for cross-pollination into new combinations (Fleming, 2004; Homan et al., 2008). This sets up the founding team as a broker
of network ideas and resources needed for the implementation of a new venture, product, and/or service.
Diversity as disadvantage. Our results do not appear to be compatible with social identity theory (SIT) (Jehn et al., 1999; Ko et al.,
2021; Pelled et al., 1999; Tajfel, 1982; Tajfel and Turner, 1979; Tsui, Egan, & O’Reilly, 1992; Williams & O’Reilly, 1998), or its related
variant called social categorization theory. SIT arguments suggest ethnic diversity could increase conflict (O’Reilly et al., 1989), or
decrease information exchange efficiencies, cohesion and trust, leading to negative performance effects (Amason et al., 2006; Lechner
et al., 2010; Wise, 2014). Perhaps, startup teams are different from employee teams in relation to social identity theory. Although SIT
suggests several short-term benefits, such as communication efficiency, it also posits that social identification can produce groupthink
that is antithetical to innovation. “Entrepreneurial teams […] engage in nonrepetitive tasks and usually require application of
knowledge and expertise” (Jin et al., 2017; 748).
Perhaps, as Chowdhury (2005) suggest, startup teams may prefer homogeneity over heterogeneity, however, our results indicate
that such preferences do not necessarily translate into advantages in raising capital. Our results are also broadly consistent with
Bengtsson and Hsu (2015), who find that ethnic homophily between investors and founders tends to lower performance outcomes.

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Table 2
Means, standard deviations, pearson correlations, and variance inflation factors a,b.

Variables Mean S.D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

1 Total capital raised (log) 14.38 2.01

2 Cohort size 9.13 2.12 0.13
3 Year 8.18 2.38 − 0.18 − 0.29
4 Startup age 1.87 1.84 − 0.13 − 0.12 0.16
5 Full-time experience 7.05 4.75 0.17 − 0.06 0.10 0.01
6 Team entrepreneurship 1.60 2.21 0.03 − 0.02 0.04 − 0.05 0.10
experience
7 Education 3.32 0.57 0.01 − 0.03 0.15 0.03 0.13 − 0.08
8 Education (squared) 11.37 3.84 − 0.01 − 0.03 0.15 0.03 0.12 − 0.09 0.99
9 White male percentage 0.36 0.36 0.02 − 0.01 0.03 0.00 0.00 0.05 − 0.03 − 0.03
10 Location (U.S.) 0.76 0.43 0.11 0.19 − 0.23 − 0.03 0.06 0.00 − 0.06 − 0.07 − 0.01
11 Competition (log) 6.74 0.53 0.21 − 0.06 0.33 0.01 0.14 − 0.02 0.12 0.12 0.01 − 0.11
5

12 Momentum (log) 23.59 0.93 0.36 − 0.14 0.45 0.01 0.18 0.00 0.14 0.14 0.05 − 0.14 0.74
13 Geographic diversity 0.29 0.43 0.35 0.09 − 0.17 0.05 0.15 0.08 − 0.02 − 0.04 0.03 0.08 0.14 0.15
14 Functional diversity 0.48 0.43 0.37 0.13 − 0.23 0.01 0.11 0.00 − 0.03 − 0.06 0.03 0.08 0.04 0.07 0.37
15 Gender diversity 0.19 0.28 0.15 0.10 − 0.02 0.05 0.09 − 0.01 0.02 0.01 − 0.14 0.01 0.06 0.08 0.21 0.28
16 Gender diversity (squared) 0.11 0.18 0.10 0.08 0.01 0.04 0.08 − 0.01 0.02 0.01 − 0.15 0.01 0.05 0.07 0.17 0.23 0.98
17 Ethnic diversity 0.47 0.46 0.35 0.13 − 0.24 0.02 − 0.05 − 0.06 − 0.03 − 0.05 − 0.08 0.10 0.03 0.07 0.30 0.44 0.26 0.20

VIF 1.15 1.68 1.07 1.12 1.04 42.61 42.75 1.05 1.10 2.23 2.67 1.31 1.49 40.28 38.77 1.45
VIF c (mean-centered) 1.15 1.68 1.07 1.12 1.04 1.06 1.05 1.05 1.10 2.23 2.67 1.31 1.49 8.22 7.60 1.45

Journal of Business Venturing Insights 17 (2022) e00314

a
N = 1005.
b
Correlations equal to 0.06 or above are significant at p = 0.05 level, 0.08 and above are significant at p = 0.01 level (two-tailed tests).
c
Education and Gender diversity are mean-centered.
S. Wise et al. Journal of Business Venturing Insights 17 (2022) e00314

Table 3
a,b,c
Results of multiple linear regression (dependent variable: Total capital raised) .

Variables Model 1 Model 2 Model 3 (without square terms)

Intercept − 12.61** (1.77) − 11.96*** (1.76) − 9.73*** (1.52)

Cohort size 0.06* (0.02) 0.06* (0.02) 0.06* (0.02)
Cohort year − 0.22*** (0.03) − 0.20*** (0.03) − 0.21*** (0.03)
Start-up age − 0.10*** (0.03) − 0.11*** (0.03) − 0.10*** (0.03)
Team full time experience 0.03** (0.01) 0.04*** (0.01) 0.04*** (0.01)
Team entrepreneurship experience 0.01 (0.02) 0.02 (0.02) 0.02 (0.02)
Team education 1.62** (0.57) 1.57** (0.56) − 0.01 (0.09)
Team education squared − 0.24** (0.08) − 0.23** (0.08)
White male percentage − 0.07 (0.14) − 0.01 (0.14) 0.01 (0.14)
Location 0.29* (0.12) 0.27* (0.12) 0.27* (0.12)
Competition (log) − 0.58*** (0.14) − 0.55*** (0.14) − 0.54*** (0.14)
Momentum (log) 1.21*** (0.09) 1.17*** (0.09) 1.18*** (0.09)
Geographic diversity 0.61*** (0.13) 0.55*** (0.13) 0.60*** (0.13)
Functional diversity 0.78*** (0.14) 0.61*** (0.14) 0.72*** (0.14)
Gender diversity 4.60*** (1.10) 3.67** (1.11) − 0.02 (0.19)
Gender diversity squared − 7.03*** (1.69) − 5.76*** (1.70)
Ethnic diversity 0.54*** (0.13) 0.62*** (0.13)
R-squared 0.41 0.42 0.41
a
N = 1005.
b
*p≤0.05; **p≤0.01; ***p≤0.001 (two-tailed tests).
c
Standard errors are displayed in parentheses beside the beta coefficients.

Much like investor founder matching, it may well be that founders prefer to build homogeneous teams, but this is not necessarily
related to performance outcomes such as total capital raised. Rather, selection based on homophily may reduce conflict, but also trim
due diligence processes—causing team members to rely too much on trust rather than verification.
Our study also has implication for policy and practice. Our study carries policy implications for accelerator programs. In particular,
accelerator leaders should be alert to the potential for ethnically diverse startups to raise capital effectively. Perhaps rather than
achieving cohort level diversity by attracting a variety of homogenous teams, they can do so by attracting startups with diverse teams.
Similarly, our study provides implications for practice. Entrepreneurs should not shy away from forming diverse teams but instead,
should view members of different ethnicities as potentially advantageous when raising startup capital.

4.1. Limitations and future research

To what extend cognition and network contribute independently is a question for future research. It would be interesting to
disentangle the roles of cognitive and network aspects empirically (Gedajlovic et al., 2013). Our sample is limited to startups that
participated in the Techstars accelerator, which is by no means representative of the majority of startups. Perhaps future studies could
examine more comprehensive samples as it is possible our results are driven by the context of the study (Fisher et al., 2017). Techstars
and its network of investors may be more open to ethnic diversity than others. Thus, our results suggest that such diversity can lead
positive outcomes for startups in similar investor networks. Future researchers might examine the conditions that bring about diverse
startup teams in the first place. Startup team ethnic diversity might be more important in some conditions than in others. Testing for
potential moderators is a good way to reveal potential boundary conditions (Dawson, 2014). Although we found support for ‘diversity
as advantage’ for our singular dependent variable (total capital raised), effects may differ for other dependent variable (e.g., operation
efficiency). Thus, future researchers may examine the effect of ethnic diversity on other startup outcomes.

Declaration of competing interest

The authors declare the following financial interests/personal relationships which may be considered as potential competing in­
terests: Andre Laplume reports financial support was provided by Social Science Research Council. Sean Wise reports a relationship
with Techstars that includes: non-financial support.

Data availability

Data will be made available on request.

Acknowledgments
We acknowledge the Social Sociences and Humanities Research Council of Canada for funding this research with an Insight Grant.
A special thanks to Laurier research assistants Hai (Bryan) Phan and Peter Poydenko for their excellect contributions to this project.

Appendix A. Supplementary material

Supplementary data to this article can be found online at https://doi.org/10.1016/j.jbvi.2022.e00314.

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