A rising trend is more venture capitalists investing in LGBTQ+ entrepreneurs. Their goal is not just to foster diversity but also to acknowledge the immense market potential of these businesses.
Inspired by unique life experiences, LGBTQ+ entrepreneurs often bring innovative ideas and business models to different industries. Such investments promote inclusive work environments and products catering to diverse consumer needs. More importantly, they also pave the way for future LGBTQ+ entrepreneurs, offering them role models and supporters in the process.
Despite these developments, a significant disparity remains in funding allocation. Only 0.5% of $2.1 trillion startup funding between 2000 and 2022 was generated by LGBTQ+ founders, as revealed by StartOut, an LGBTQ+ entrepreneurship nonprofit organization.
Chasing Rainbows, an organization established by Ben Stokes in 2021, was founded to combat this disparity.
Embracing diversity: Investing in LGBTQ+ entrepreneurs
The organization has since supported nearly 15 startups.
According to 2022 survey data, the LGBTQ+ community, which composes 7.2% of the U.S. population, secured only 0.5% of the $2.1 trillion in startup funding between 2020 and 2022. This stark discrepancy in funding highlights the systemic barriers hindering diversity and inclusivity in the startup ecosystem.
Funding is concentrated in only five cities: San Francisco, New York, Los Angeles, Denver, and Austin, Texas. In others, such as Orlando, Florida, Charlotte, North Carolina, and Birmingham, Alabama, there is a distinct lack of LGBTQ+ founders. This geographic disparity calls attention to the necessity for broader, more inclusive support for diverse founders.
Brian Richardson, CEO of StartOut, emphasized that cities that are strong in LGBTQ+ entrepreneurship have enforceable non-discrimination laws that protect LGBTQ+ individuals from prejudice. He also raised concerns about the economic and employment costs associated with anti-LGBTQ+ policies.
Through in-depth research, StartOut revealed how geographic disparities and the unpredicted economic impact of public policies affect entrepreneurial outcomes. Existing research explored states with and without LGBTQ-friendly policies, offering insights into the political entrepreneurship relationship within the LGBTQ+ community. Entrepreneurs’ diverse experiences often hinge on their locations and the policies of their respective states.
