As we enter Pride month, many companies will be showing support for the queer community. Corporations like Wells Fargo and Nike will have floats at Pride and sell merchandise decked out in the rainbow flag, perhaps donating a portion of their sales to LGBTQ+ charities. Despite these showy displays of camaraderie, many queer entrepreneurs still face discrimination and struggle to secure venture capital funding from these same businesses, proving that the fight for LGBTQ+ equality is far from over.
Venture Capital Today
Let’s start with the facts. In recent years, less than 1% of venture capital deals in the U.S have supported queer entrepreneurs. Complicating this number, approximately 37% of queer entrepreneurs choose not to come out to future investors, concerned their identity will be a roadblock to securing funding. This is especially the case when queer entrepreneurs appeal to investors who may be more conservative and not accepting of their identity. In this way, both overt discrimination and unconscious bias place LGBTQ+ entrepreneurs in a precarious dilemma: either hide their identity around investors or be out and proud and face the possible consequences.
For so long, the world of venture capital has been dominated by straight white men. In the face of this continuing trend, professionals in the business world believe that investors don’t discriminate against entrepreneurs based on sexuality, race, and gender identity. According to New York entrepreneur Arie Abecassis, before investing investors look at factors such as market opportunity, investor relevance, and execution capability, none of which are concerned with the identity of an entrepreneur. To the contrary, he argues that queer identity could serve as an x-factor for an entrepreneur, attracting investors with shared backgrounds. However, LGBTQ+ advocates such as Kristina Flynn shatter this optimism by highlighting business practices that perpetuate inequality within the world of venture capital. Through pattern matching, Flynn underscores that investors are more likely to back straight, white male entrepreneurs as they have enjoyed the most success in the past. Therefore, by relying on this technique, investors unconsciously discriminate against entrepreneurs who don’t fall into this narrow demographic, making it that much harder for marginalized people to secure VC funding.
The Future of Venture Capital
In recent years, investors have worked to overcome widespread inequality in venture capital by making funding more accessible to queer entrepreneurs. Just last year, Loud Capital raised $10 million for a VC fund that aims to support early startups + growth companies led by LGBTQ+ entrepreneurs. Through Pride Fund 1, Loud Capital hopes to uplift queer entrepreneurs by providing them with the necessary capital to effect positive change in their communities.
Another investor looking to bolster LGBTQ+ startups is Lorenzo Thione. A queer entrepreneur himself, Thione is the managing director of Gaingels, a community network and investment organization supporting LGBTQ+ people and allies. Through Gaingels, Thione seeks to improve diversity and equity by looking at the sources of venture capital and who is supporting budding entrepreneurs. As Thione argues, “the venture ecosystem was and still is dominated largely by not only straight, white men, but also by a group of people that is predominantly coming from very enclosed financial ecosystems.” To challenge the homogeneity of the VC world, Gaingels aims to establish a new class of investors who will have access to resources that were previously not available to them. One initiative that demonstrates Gaingels’ commitment to supporting a new generation of queer entrepreneurs is their scholarship program. Aside from giving them $5,000 to help with college, the program partners need-based LGBTQ+ students with mentors and provides them with internships and other employment opportunities down the line. Through Gaingel’s advocacy work, Thione hopes to make the startup world more welcoming and to allow LGBTQ+ entrepreneurs to thrive just like he has.
Although the venture capital landscape remains vastly unequal, VC firms like Loud Capital and Gaingels provide hope that a better future for queer entrepreneurs is on the horizon. That being said, the fight is far from over. As a community, we must continue to challenge the straight, white male dominated world of startups in order to make venture capital funding more accessible to people of all identities.
This article originally published on GREY Journal.