5 Reasons Why LGBTQ Entrepreneurs Are Joining Forces
Originally written by Dylan McNally ’15, Patrick McAnaney ’13, & Andrew Lowenthal of Out in Tech on the Venture for America Forbes blog.
Entrepreneurship and risk are a package deal, and launching a company as an LGBTQ person places yet another set of challenges on an already uncertain endeavor. A question such as, “Is my product-market fit secure enough to raise venture capital?” gives way to something more haunting: “Could my sexual orientation or gender identity limit how much funding I get from investors?” As a result, a young LGBTQ person might forego their innovative startup idea for a more secure job at a company that accepts, or even celebrates, their identity.
To help reduce career barriers for LGBTQ entrepreneurs and promote innovation around issues affecting the LGBTQ community, Venture for America and Out in Tech have joined forces. Together, they are committed to building networks of LGBTQ entrepreneurs, promoting diversity in startup communities, and enabling more LGBTQ people to see entrepreneurship and tech as viable career paths.
1. The data show real inequality gaps for LGBTQ people in entrepreneurship.
Entrepreneurship, especially in tech, has a well-documented problem with racial and gender diversity. Research on LGBTQ diversity is more limited – an issue in and of itself – but evidence suggests LGBTQ founders also face difficulties. A 2016 study by StartOut reported that 37% of LGBT startup founders in the United States did not come out to their investors, and LGBT-founded companies raised 11% less capital than a sample of their non-LGBT peers.
Companies in states and cities with anti-LGBT policies, as well as those founded by LBT women, were at an even greater disadvantage. Among study participants, LGBT founders were more than twice as likely as their non-LGBT counterparts to move their companies to more accepting locales like California, New York, and Massachusetts. Seventy percent of LBT women raised less than $750,000 of outside capital, while 47% of GBT men raised at least $2 million.
2. Strong networks provide better access to resources and investors.
Startup life can be lonely, and that isolation can be costly for new ventures. Research from Babson College on common practices of entrepreneurs highlights the need for “membership in physical communities where ideas can be shared and shaped.” Startup communities tend to offer good opportunities for productive collaboration like co-working spaces and meet-ups around shared interests. Even with the best intentions of inclusivity and acceptance, however, straight white men tend to dominate these circles and diversity remains elusive.
As a result, and due to the smaller proportion of LGBTQ people in the general population, the density of LGBTQ people in startup networks is low. This makes it tough to find a strong network of advisors, confidantes, and advocates. Building communities of LGBTQ entrepreneurs can help. Together, we can connect with each other and generate the social capital necessary to build customer bases, recruit top talent, and attract investors.
3. LGBTQ-supportive companies see positive outcomes for employees.
In many cases, corporate employees benefit from policies and employee resource groups that protect LGBTQ individuals from workplace discrimination and provide a sense of formal inclusion. A 2013 study from the Williams Institute finds that LGBTQ employees at supportive companies experience less discrimination, better health, and higher job satisfaction and commitment.
Startups, however, often lack the scale at which intra-company LGBTQ groups can be formed. Early-stage companies may only have a handful of employees, of which one or two might identify as LGBTQ. LGBTQ entrepreneurs can build formal networks to mimic the sense of community gained from such groups in corporate spaces and benefit from a heightened sense of well-being at work and in the broader startup community.
4. LGBTQ innovation helps companies solve problems and tap into new markets.
In 2015, LGBTQ Americans had $917 billion in collective buying power, on par with that of other minority groups. Of course, LGBTQ entrepreneurs themselves are uniquely equipped to develop new products and services tailored to LGBTQ consumers.
LGBTQ employees at Facebook listened to fellow LGBTQ users and advocated for custom gender identities on profiles. Her, a lesbian dating app, was developed out of the founder’s own frustration with using versions of other apps geared toward heterosexuals and gay men. The Out in Tech Digital Corps helps provide web services for LGBTQ activists and organizations around the world. A quick search for “best LGBTQ products,” however, reveals few results and lots of room for growth. Together, we can identify and tap into opportunities in our own market more effectively.
Diversity in company leadership also drives innovation. Research published in the Harvard Business Review found that firms with a diverse set of leaders are 45% more likely to report market share growth and 70% more likely to have secured a new market altogether. However, 78% of firms lack a diverse set of leaders, and LGBT employees at these companies are 21% less likely to win endorsement for their ideas.
5. Future generations of LGBTQ people should see entrepreneurship as a viable path to success.
Adversity is only one side of the story. In contrast to some LGBTQ people with careers in traditional organizations – financial institutions, school districts, corporate law firms, retail companies, etc. – LGBTQ entrepreneurs may have an easier time carving out paths for themselves without daily dealings with prejudiced bosses or coworkers. LGBTQ people should embrace entrepreneurship as a way to escape the old boys clubs and create their own inclusive work environments.
That being said, challenges persist. Venture for America and Out in Tech believe that the best way to resolve these issues is to encourage more entrepreneurship in the LGBTQ community. After all, embarking on an entrepreneurial endeavor and coming out as LGBTQ are easier with role models to admire. A similar sense of familiarity with LGBTQ people is also important for our straight and cis-gendered colleagues. Together, we can inspire future generations to prioritize gender identity and sexual orientation as assets and never as liabilities.