| | NOVEMBER 2020 9A famous academic problem-solving study showed that teams of diverse strangers solved problems more efficiently than teams of close friendsevidence showing that diversity leads to better business outcomes. Companies with diverse boards of directors and executive teams perform better. The lead takeaway of a landmark ten-year survey by venture capital fund First Round Capital of their entire portfolio was that startups led by female founders outperformed the broader portfolio. A famous academic problem-solving study showed that teams of diverse strangers solved problems more efficiently than teams of close friends. While venture capital investment tends to be extremely homogenous, every indication points to the opposite path for success. "Old boys' clubs" may get along well, and enjoy each others' company, but a non-diverse environment can blind the participants to new ideas, oncoming pitfalls and potential opportunities that a diverse team is more likely to identify and act upon.Notwithstanding the evidence in favor of diversity, a strong cognitive dissonance pervades the venture capital industry. Most investors would be shocked and offended to be called biased, yet they consistently fall prey to a psychological force called Confirmation Bias, which subconsciously induces them to invest in entrepreneurs that look and sound like them and come from similar backgrounds.In the Jerusalem startup ecosystem, one of the things we are most proud of is our community's diversity. While most of the capital in the "Startup Nation" finds its way to the thousands of startups in the Tel Aviv area, Israel's capital Jerusalem has undergone a startup renaissance in recent years and is host to hundreds of exciting startups. In fact two of Israel's largest tech exits in history are Jerusalem-based (Mobileye, acquired by Intel for $15.3 billion in 2017, and NDS, acquired by Cisco for almost $5 billion in 2012). According to Startup Genome, a survey of global startup ecosystems found Jerusalem to be one of the top ten most diverse tech ecosystems in the world. At my fund, Jumpspeed Ventures, which invests exclusively in Jerusalem-originated startups, over 50% of our current portfolio, is made up of female-led startups. Our community features startups led by men and women, secular to Ultra-Orthodox, Jew and Arab, immigrant and native-born founders. The crowd at our popular monthly community meetups is as diverse as the shoppers in the local shuk on a Friday morning. This diversity is the secret sauce of our ecosystem that has helped it grow and strengthen, and it's not only good for our community and society, it's also good for business.Community leaders seeking to create the next Silicon Valley should take note of the key elements that are prerequisites for any startup ecosystem. But in order to truly catapult a city towards entrepreneurial success, they must make efforts to promote diversity and inclusion throughout the ecosystem. Ben Wiener
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