SAP's new incubator taps the potential of women and minority founders
Shoba Purushothaman, a founder of multiple startups in the last 18 years, used to dislike the idea of special programs designed give women a leg-up in the startup world. “I grew up in Malaysia,” Purushothaman told Yahoo Finance UK. “For my entire childhood I had a negative view on anything that was affirmative action.”
However, in 2001, she was trying to get her digital news-video platform The NewsMarket off the ground and decided to participate in a women entrepreneurs forum called The Springboard and raised $3 million from it. “That was a game changer for me because I realised the benefits you can get,” she said.
Purushothaman’s fund-raising experience mirrors that of hundreds of other women founders. According to Pitchbook, just over 2% of a total of $130 billion in venture capital invested in the US last year went to female founders. Things are no better in Europe: Atomico’s State of European Tech 2018 report said all-male-founded startups scooped 93% of capital investment and accounted for 85% of the deals.
“Not a social initiative”
For the past three months, Purushothaman and her co-founders at Hardskills — an online platform that helps companies train their workforce in behavioural skills—have been one of six startups in SAP’s new B2B diversity accelerator in Berlin.
The German giant, a market leader in enterprise application software, launched the SAP.iO No Boundaries initiative in January, with the goal of incubating underrepresented entrepreneurs to drive inclusive entrepreneurship and level the playing field. It plans to boost 200 such startups by 2023.
SAP chief strategy officer Deepak Krishnamurthy told Yahoo Finance UK that their goal is to help the startups be successful and “create an ecosystem that makes our solutions more valuable for our customers.”
SAP does not take equity in the startups in the program, or own their intellectual property; they remain independent and can sell their products to whoever they like.
The strategy chief views the investment in the diversity program as a financial opportunity for the company.
“If we are able to identify teams that other people are not investing in or accelerating, it’s going to help us transform into a growth company and an innovation company, and this is a huge part of our strategic focus,” he said.
Krishnamurthy emphasised that the diversity accelerator is “not a social initiative.” SAP has learned from programs they have already run in New York and San Francisco that the quality of the startups led by women or minorities was “at par or even better compared to the all-male founding teams,” in terms of performing better, being more inclusive in the way they hire, and being able to create much more value.
A 2018 Boston Consulting study of 1,700 companies of various sizes, and sectors across eight countries found that firms with above-average diversity on their leadership teams reported better overall financial performance.
“At the end of the day, SAP is a big company, we are for-profit, and this is still a business initiative for us,” Krishnamurthy said. “We think that these are great companies that we would love to work with and having a program like this helps us bring them to our ecosystem, rather than going to some other ecosystem.”
He adds that ultimately nurturing the best of diverse startups helps both parties grow: “They’re not getting a break from us — they have to be at the same level that any other company needs to meet to be an SAP.io company.”
Credibility and clout
With her time at the accelerator almost up, Purushothaman said it has been “definitely one of the best decisions we have made as founders.” The key advantages for Hardskills has been getting their software integrated with SAP, the validation and credibility that comes with being in the SAP app center, and access to its “gold mine” of partners and customers—it has around 400,000 customers.
“We have gotten in front of several of SAP’s biggest customers, these are DAX top 10 companies, and we been integrated within Success Factors [SAP’s human resource management software], so SAP clients will be able to use us more easily and establish business relationships with us,” she said.
From the other side, Purushothaman has noticed that the startups have brought fresh ideas and approaches into SAP too. “I certainly felt that they [the SAP people] get emboldened by the fact that it is possible to be unconventional,” she said. “I think there is definitely a recognition that ‘startups are going straight to our customers, we need to understand and learn from this because we need to be at the very least informed about what they are selling our customers’.”