LGBTQ+ business owners going back into the closet when dealing with investors

For the research report above, Proud Ventures surveyed 118 LGBTQ+ founders and 61 investors based in the UK, a first-of-its-kind report in the startup community here, according to them.

Out of all the LGBTQ+ startup founders and LGBTQ+ entrepreneurs who conceal their gender identities from investors, 45% reported feeling that it wasn’t at all ‘relevant’ or ‘important’ to the situation; around 27% said that it made them uncomfortable sharing any information on gender or sexual orientation with investors, and; 18% said that by sharing it, their fundraising efforts may be undermined.

Research shows that concealing a minority gender identity can lead to some very negative health outcomes, including depression and substance abuse.

The LGBTQ+ community in general and not just LGBTQ+ entrepreneurs, for example, has indeed come a long way in terms of enjoy acceptance and equal rights – however, we still have quite a bit of distance to cover as inequity is still rampant. LGBTQ+ entrepreneurship is one area where the community still faces significant challenges.

Even though the general community understands some of the barriers at the workplace LGBTQ+ individuals face, not that many are aware specifically of the obstacles LGBTQ+ business founders face. The report from Proud Ventures highlighted some of those barriers and paints a clear picture around the work that must be done to make inclusion a part of the startup ecosystem.

A deeper look into the report reveals some disturbing findings

The Proud Ventures report shows that 75% of LGBTQ+ business owners and 79% of LGBTQ+ investors conceal their identity from other investors. More than a quarter of LGBTQ+ founders do not feel comfortable at all sharing their sexual orientation, while 18% believe that sharing something that personal may harm the fundraising process. In fact, 57% of women, non-binary and trans founders said that they would never disclose their identity, no matter what.

For the lucky LGBTQ+ business founders that do obtain funding, there is a frustrating amount of discrepancy between the amounts they manage to secure, depending on their individual gender identities. For example, the report stated that gay founders were able to raise, on average, 2.5 times more than their bisexual counterparts, and a whopping 22 times more than their lesbian counterparts.

The report noted some of the impacts on the mental health of LGBTQ+ startup founders who had to conceal their identity. For example, the founder and CEO of Stella Insurance, Sam White, reported not being able to be herself in front of investors which took a toll on her mental health, with multiple panic attacks a day and suffering from anxiety.

Are investors flat out ignoring LGBTQ+ founders? Are they not doing enough?

The report by Proud Venture mentions investors as showing support toward ‘diverse’ founders, but few of them showed any real support for LGBTQ+ business founders. The report also claimed that 80% of investors are taking active steps toward more inclusion and diversity, but only 26% have taken any specific action to openly fund LGBTQ+ founders. Unfortunately, it seems that to UK investors, LGBTQ+ entrepreneurs are not considered a part of the underrepresented segment of founders.

However, on the flip side, many investors have shown an interest in supporting LGBTQ+ startups and LGBTQ+ business owners although they do not know how to act upon that interest to help things move forward in the LGBTQ+ entrepreneurship community.

With all of the above said, we feel that investors can and should publicly voice their support for LGBTQ+ entrepreneurs whom they already know or have had some interaction with, as this will attract more diverse founders toward seeking investments.

The report also noted that there is a general lack of ‘voices speaking out’ when it comes to venture capital firms showing support for LGBTQ+ startup founders – this is one major reason that LGBTQ+ founders continue to hide in the closet.

Venture capital firms should be doing more to ensure that their investment teams are made up of a diverse and all-inclusive group of employees – so that the LGBTQ+ founders never feel awkward, shy, nervous or underrepresented when approaching them. There’s research which clearly shows that diverse investment teams are likely to generate higher ROIs and also more diverse talent.

Can LGBTQ+ founders and startups do anything about it?

As a matter of fact, they can:

Build a strong network of connections

By building a network of supporters, allies and other LGBTQ+ business owners, it will lead to greater visibility, which means that investors can be found more easily as long as they are supportive of the LGBTQ+ community at large.

Research more into potential investors

Before approaching any potential investors, LGBTQ+ founders must conduct extensive research into their backgrounds, and especially, their views on the LGBTQ+ community as well as its issues. This will help to identify and set apart investors who are willing to be supportive and, therefore, less likely to be discriminative.

Reveal your identity strategically

This may be difficult to gauge but as an LGBTQ+ founder, you need to know when the time is right to reveal your identity, that is, if that is even necessary to begin with. Consider factors like what stage of the fundraising process you are at as well as the level of safety and comfort you’ve built with the investment teams.

Closing thoughts

While the Proud Ventures report certainly brings to light some of the challenges facing LGBTQ+ startup founders during the fundraising process, it also gives us hope.

As more investment firms across the UK and beyond are waking up to the fact that having a diverse portfolio is a critical success factor, it should progressively be easier for LGBTQ+ founders to build their own businesses – so that the world continues to innovate, and the end users continue to enjoy fantastic products and services!