The pandemic really showed both startups and individuals why having more than one stream of income is important. Industries that depended on 1 source of income, like travel and tourism, suffered greatly. For example, According to the study called “The Diversification Dividend” by Stryber, air traffic dropped by nearly 40%, causing numerous airline bankruptcies. Related sectors, like car rentals and hospitality, also faced severe difficulties.

On the other hand, companies with diversified revenue streams performed much better. Amazon, for instance, benefited from its different avenues, such as e-commerce, cloud services, and media. This diversification protected Amazon from the worst economic effects of the pandemic and allowed continued growth.

The point is, thinking outside the box, and doing a little more to ensure your startup’s security and sustainability, are important, so that you are able to easily pivot in times where the unexpected occurs.

What Did The Report Find?

The report found a few interesting things as key takeaways:

Higher Returns for Diversifiers: Companies that diversified their revenue streams between 2010 and 2019 achieved 16% higher annual total shareholder returns compared to those that did not.

Pandemic Performance: During the COVID-19 years, companies with diversified revenue streams outperformed non-diversifiers by 53% in annual total shareholder returns.

Core Business Focus: Companies that concentrated solely on their core business saw a decline in annual total shareholder returns by 6% during 2010-2019 and by 14% during 2020-2023.

What Are Experts Saying?

Previously, we asked experts their views on why diversification and diversity are so important in the context of startups. This report, as well as these insights, show exactly why:

Our Experts

• Jon Hunt, UKTIN Project Board Member, Executive Director of Research, Enterprise & Innovation, University of Bristol
• Alistair Moncrieff, Founder, Whisky Partners
• Ronni Zehavi, CEO and Co-Founder, HiBob
• Kevin Fitzgerald, Marketing Director, Employment Hero UK
• Gordon Bateman, Founder, Investor Ladder and Climb24
• Hanno Cappon, Chief Technology Officer, H&H Group
• Amy Tsang, Head of Europe, The Mills Fabrica
• Leo Labies, Founder and CEO, REGnosys
• Jay Shen, Founder and CEO, Transreport

Alistair Moncrieff, Founder, Whisky Partners

“Innovation and diverse ideas are the lifeblood of any successful startup and are crucial when it comes to attracting top talent and forward-thinking investors. Startups that embrace cutting-edge technology and fresh perspectives can gain significant competitive advantages.

“Embracing market adaptability and focusing on enhancing the customer experience are other key tenets for any good startup. Add in problem-solving skills and operational efficiency and you’ve got a recipe for success.”

“We recognise the importance of such qualities and strive to integrate them into our business model to stay ahead in the competitive whisky investment market. By continually pushing the boundaries and welcoming diverse ideas – in our case, this includes embracing augmented reality (AR), blockchain technology, personalised recommendation engines, data analytics, and machine learning – we can better serve our clients and drive the industry forward.”

Jon Hunt, UKTIN Project Board Member, Executive Director of Research, Enterprise & Innovation, University of Bristol

“Start-ups are vital to any growing economy and need to be encouraged and nurtured. Over the past 25 years, small businesses have been responsible for 2 out of every 3 jobs created and are often a breeding ground for advanced innovation and growth.”

“Start-ups provide a much-needed support mechanism for larger businesses, and while consolidations and acquisitions by big tech are common, partnership models between small and large organisations can drive impressive results.”

“It’s crucial to nurture talent coming out of start-ups and small businesses, which is why initiatives such as the UKTIN small business support programme are vital for sustaining innovation in the UK.

“Ultimately, established businesses need to cultivate innovation, and start-ups need the experience and diverse talent pools of bigger organisations. Through partnerships that foster collaboration; talent, experience, and research can all be shared to bring about greater collective benefit for organisations of all sizes.”

Ronni Zehavi, CEO and Co-Founder, HiBob

“As a serial entrepreneur myself, I’ve experienced a lot of trial and error. Mistakes are inevitable, but it’s important to see them for what they are – invaluable learning experiences. I’m building my third company now, and still making (and learning from) mistakes.

“Fostering innovation and diversity of thought are critical for the success of any business. Startups are fueled by creativity, unconventional thinking and the ability to approach challenges from different perspectives. Collaboration between people with different backgrounds, experiences and viewpoints often leads to forward-thinking and exciting ideas. That’s why diverse teams are a key ingredient for success.

“When hiring it’s important to strive for diversity of thought and backgrounds. While you must watch out for red flags, self-awareness of your decision making is also important; avoid unconscious biases that could lead to building a team with similar perspectives and experiences. I purposefully surround myself with strong individuals who will challenge me, and who I can learn from.

“Diversity breeds innovation, so make room to hire people who offer alternative thoughts, viewpoints and skills. Proactively cultivating a diverse culture will breed the kind of innovative thinking that startups need to adapt swiftly and grow sustainably.”

Kevin Fitzgerald, Marketing Director, Employment Hero UK

“Everyone talks about being innovative, but what does that actually mean? For me, innovation is the solution to a problem that hasn’t been discovered yet. Simply put, it’s solving a problem in a new way. Most people connect innovation with success, but not all innovations are successful – some are impactful, some are inconsequential. Either way, they can still be innovative.

“Innovation takes time, because you exhaust all prior ‘known’ options first. Most people think of ‘innovations’ as completely new services/products, but you can also take an innovative approach to something that already exists, for example Employment Hero’s vision to transform employment (HR, payroll, onboarding, recruitment) from analogue to digital, was unthought of when it was founded 10 years ago.

“Innovation and diversity of thought are crucial for business growth. It teaches you to celebrate failures (something you’ll probably be well adept at as a founder) and, most importantly, it forces you to remain humble. This means being open to the ideas and contributions of your team and recognising that personal growth comes from learning and feedback. Humility fosters a culture of mutual respect, collaboration, and continuous learning. There’s no space for singular thinking in innovation.”

Gordon Bateman, Founder, Investor Ladder and Climb24

“Innovation isn’t just about creating the best solution or product. Start-ups also need to take an innovative approach to how they are operating and introduce diverse ways of working that will help to accelerate growth.

“Often, the simplest initiatives can yield the biggest returns and positively affect areas including staff retention, market share, and business valuation.

“A tech start-up for example, might find that offering flexible working or the ability to spend time volunteering is attractive for recruitment and helps them to secure the best technical team. By building the right team, they can hit their next product development milestone sooner, which also helps to fast-track conversations with investors.

“This could also include looking at opportunities to make meaningful connections. A founder at the beginning of their journey may decide to hot desk in three or four different co-working spaces, or attend events outside of their region, to help broaden their network, for example. Access to a more diverse pool of knowledge may result in growth being fast-tracked – whether that’s due to uncovering a new resource, or an opportune introduction to an investor.”

Hanno Cappon, Chief Technology Officer, H&H Group

“Diversification and innovation need to be treated as a priority within all businesses. Having a strong foundation and a variety of talents, skills, tools and ideas backed by science-based evidence is invaluable when it comes to progressing commercial aims – whether that’s new product development, expanding into new countries, securing financial investment or diversifying your market offering – every business must innovate to stand out, boost the bottom line and remain competitive.

“It’s important that innovation and diversification is spearheaded by customer preferences and fuelled by extensive research and innovation programmes combined with external partnerships to drive cutting-edge solutions.

“New product development and existing product innovation should be a core driver of realising a business’s vision. Products are the currency that you provide to your customers, and as a global organisation that prides itself on its leading products across adult, baby and pet nutrition & wellness, we are continuously developing science-based and innovative products that deliver their health benefits to more and more consumers every day.

“Innovation is what drives businesses forward, combined with efficiencies of sharing insights, technologies and innovative solutions across markets and product categories that allow for speed and scale. That’s why we find it crucial to create strategic innovation frameworks and concerted efforts across our R&D hubs and markets to provide consistent strategic guidance, facilitate sharing of opportunities and best practices and ensure agile execution.

“Especially at H&H Group, where our focus on health and wellness directly impacts the lives of people and pets, it’s of utmost importance that we’re constantly investing in the continuous improvement of the nutritional quality and efficacy of our products. This is why in 2023, we increased our R&D expenditure by 30%, which we invested in building innovation springboards, external partnerships and digital technology to better serve the health and wellbeing needs of our consumers.”

“When looking at strategies for success, at the early stage in the lifecycle of a startup, ensuring you are building a team with diverse backgrounds and thought processes will only add momentum, as diversity fosters creativity and innovation… at least, so the chorus goes.

“I would argue, however, diversity should not be a startup’s sole focus. Though diversity has its merits, it’s not what makes a startup succeed beyond the very first fragile days. A startup needs to “diversify around” in their first months until they find a true problem worth solving and figure out a solution to that problem, aka: their product.

“But then, it’s really crucial to lay strong foundations to what exactly their offering to prospective customers is and reinforce it. It’s pretty simple: If they don’t get to that point, a startup is dead. In moving from the ‘problem-solution-fit’ towards ‘product-market-fit’, startups need to foster uniformity, not diversity.

“Diversity is very close to diversification, because in the early stage, every idea sounds like a great idea worth exploring. But diversification in the early days is actually something else entirely: it’s distraction.

“Although a diversification of revenue streams has a proven benefit for large businesses – with our recent Diversification Dividend study showing that diversifying companies deliver 53% higher annual shareholder returns than non-diversifying companies – for startups it’s an entirely different story. From research we conducted in-house, from a cohort of start-ups launched since 2013, there was a success rate of only 11%.

“The remaining 89% failing aren’t doing so because of a lack of diversity; they simply fail because their products never find a market. To achieve that, startups need precision focus on building their offering, and avoid getting caught up in trying to bolster their diversity credentials.

“As a startup, you have bigger problems (first and foremost, your customer’s problems) to worry about. Once the foundations are laid in this respect, startups should absolutely focus on building a diverse team – in all aspects.”

Amy Tsang, Head of Europe, The Mills Fabrica

“Startups need to be innovative, adaptable and flexible. Having a diverse workforce with different skills and points of view can help start-ups achieve success. In order to disrupt the
market and successfully innovate within your industry, start-ups must ensure they are taking in multiple perspectives into consideration, and encouraging diverse ideas is a necessity to achieve this.

“At The Mills Fabrica we help start-ups to discover new innovations through our shared spaces, one of which is our membership-led co-working space that is dedicated to sustainable innovators.
This space is ideal for facilitating diverse and collaborative thinking, and its exclusivity to innovators in the sustainability space helps ensure it hosts like-minded innovators who have similar goals.

“We also have our experiential retail and innovation exhibition destination, Fabrica X. Here we display a curated selection of techstyle products and innovations, showcasing the latest groundbreaking
innovations of the future, each heralding biodiverse material use, minimal waste, and ethical production.

“Shared spaces such as these are an effective way to encourage diverse thinking and learn from other start-ups in the innovation space.”

Leo Labies, Founder and CEO, REGnosys

“Most founders would argue that in the early stages of a start-up attracting the best talent quickly is all that matters. It would be great if it’s diverse, but it isn’t the priority. I was guilty of
this thinking too.

“However, if you wait until your company is at 20 people plus to pay attention, then candidates from diverse backgrounds will look at your company and see a narrow pool. They simply won’t want to join you.

“By making a conscious effort to improve diversity and partner with organisations such as WISE and NextTechGirls, we were able to deliver on our pledge to boost women’s representation within the firm. This is now at 38%. By doing so, we have noticed a real positive difference in our team workings, performance and growth.”

Jay Shen, Founder and CEO, Transreport

“Entrepreneurs have the opportunity to really make a difference with their idea and vision. An innovative idea has the potential to make a huge difference to people’s lives. If you combine this with genuine passion and societal demand, there is scope for wide-reaching social impact. Be bold, be innovative and take a chance.

“Successful businesses set out to solve real problems. Purpose-driven organisations prioritise people’s genuine needs and when you focus on hiring authentic passion within a team, you unlock the potential for meaningful change.

“Diversification within a team is crucial to enable a constant flow of new ideas and perspectives. At Transreport, social impact is the number one measurement for our success. Our Passenger Assistance technology is about connection at its core, leveraging innovation to shape more inclusive travel experiences for disabled and older people.

“Startups and scaleups have a unique advantage when it comes to creating social change because we are able to move very quickly. We can react to what the data, the industry, and end-users are telling us and action feedback at scale.

“To do this, you need people who are capable and dedicated, and who come from a wide range of backgrounds and experiences. As a CEO and Founder, you have an obligation to make sure your team is diverse and that your work culture is consistently inclusive. It also makes business sense because your role is so multifaceted that you need to delegate, and you need to have absolute trust in your team.

“This means hiring fast and hiring well. The most important piece of advice I could give is to hire people with lived experience of disability and chronic illness. This is essential for diversity and inclusion within an organisation – it’s not enough in 2024 to just have lived experience in the room. People with lived experience expertise need to be involved in all key-decision making processes across the business.

“Diversity and creativity go hand in hand. Fostering an inclusive work culture reduces stigma and stagnation and increases innovation. It’s important that businesses recognise accessibility isn’t a “nice to have”, it’s a must-have.”