"Angel Investor's Cautionary Advice for LGBTQ+ Founders"

In the world of venture capital, the underfunding of LGBTQ+ entrepreneurs is a stark reminder of the systemic barriers that persist despite their exceptional performance. Despite comprising 7.1% of the U.S. population, LGBTQ+ founders received only 0.5% of the $2.1 trillion in U.S. startup funding from 2000 to 2022. This disparity is not just a financial issue; it's a moral one. It's a testament to the biases and prejudices that still plague the investment landscape, where LGBTQ+ founders are often seen as risky investments simply because of their identity.



The data is clear: LGBTQ+ founders outperform their peers in various metrics. They have created 36% more jobs, secured 114% more patents, and achieved 44% more exits compared to their peers. This exceptional performance with highly limited resources demonstrates their efficiency and effectiveness in creating value—a clear signal to investors that these entrepreneurs are not just competitive but high-potential investment opportunities. Yet, they continue to face significant challenges in securing angel investments.

One of the key challenges is the pervasive discrimination and bias within the investment community. LGBTQ+ founders often conceal their sexual orientation to avoid discrimination, with 75% of founders hiding their identity just to work, let alone to start a company. This concealment is a direct result of the systemic barriers that LGBTQ+ entrepreneurs face in accessing capital. It's a vicious cycle: they need funding to scale and innovate, but they can't get the funding because of their identity.

To address these challenges and foster a more inclusive investment environment, both public and private sectors must take proactive steps. Government initiatives, such as grants and funding specifically for LGBTQ+ businesses, can help level the playing field. For example, dedicated funds for LGBTQ+ founders, investor participation in community events, and public declarations of support can make a significant difference in creating an environment where these entrepreneurs feel empowered to seek the resources they need.

Private investors also need to adopt more inclusive practices, such as integrating LGBTQ+ metrics into their investment criteria and actively supporting LGBTQ+ founders through mentorship and community engagement. True allyship goes beyond words; it requires tangible support, including financial investment and the creation of inclusive networks that allow LGBTQ+ entrepreneurs to thrive. For example, Chasing Rainbows, a venture capital fund, exclusively invests in LGBTQ+-owned businesses and has been very visible in the venture ecosystem as a fund which specifically invests in LGBTQ+ founded companies. This visibility and targeted investment strategy have helped to create a more inclusive investment environment for LGBTQ+ entrepreneurs.

Moreover, post-investment support is crucial for maximizing returns. LGBTQ+ entrepreneurs often face unique challenges that require tailored support. Investors who provide not just capital, but also strategic guidance and mentorship can help LGBTQ+ founders navigate these challenges and scale their businesses more effectively. An effective approach is to design and deploy a matrix approach with subject matter experts (SME) by industries and skill sets, supporting these start-ups on a fractional or as-needed basis. Mentorship from experienced investors who understand the specific needs of LGBTQ+ entrepreneurs can also be transformative. This includes helping them build networks, access new markets, and develop strategies that leverage their unique insights and perspectives. Such support not only increases the chances of business success but also strengthens the investor-founder relationship, fostering long-term collaboration and trust.

In summary, investing in LGBTQ+-led startups is about more than just social responsibility; it’s a sound financial move that statistically leads to outsized returns. Studies have shown that diverse teams bring a broader range of perspectives, leading to better decision-making, innovation, and, hence, higher success rates. This is particularly relevant in industries where disruption and creativity are keys to success, such as fintech, digital health, clean energy, and media—all areas where LGBTQ+ founders are contributing actively and economically. By supporting LGBTQ+ entrepreneurs, investors can align financial returns with social progress, creating a win-win scenario for investors, society, and the economy at large.