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Coming out while raising capital
“Being gay and being Black are superpowers, they make me unique and very beneficial for a VC firm.”
These days, diversity and equity are at the forefront of people’s minds—especially when it comes to entrepreneurship.
Around the world, spaces are cropping up where women and minority founders can connect to refine, ideate, and execute their ideas. From accelerators and incubators to specialized angel groups, it sometimes feels like there has never been such a promising time to be a minority founder. But the numbers tell a different story.
As with many other industries, statistics continue to show that access to the entrepreneur space is still incredibly uneven, with white men receiving more funding than any other demographic. Firms like Backstage Capital have cited that as little as 10% of all venture capital deals actually go to women, people of color, and LGBTQ founders. Today, sexism, racism, and homophobia—and unconscious bias—continue to plague the startup ecosystem and disadvantage many entrepreneurs, particularly when it comes to crucial early-stage financing. And for members of the LGBTQ community, a fraught question arises: is it a good idea to come out while raising capital?
According to a recent study from StartOut, a nonprofit organization serving LGBTQ entrepreneurs and businesses, 37% of LGBTQ founders choose to remain closeted while raising capital. And while there is evidence to suggest that investors value openness as part of a healthy entrepreneur-investor relationship, for some LGBTQ founders, remaining closeted can seem like a safer bet. Despite this reality, there are some LGBTQ entrepreneurs who refuse to hide who they are.
Laura Clise is the founder and CEO of Intentionalist, an online guide to small, diverse businesses that seeks to uplift communities and encourage intentional spending. Clise launched her concept in late 2017, and is rapidly growing both small business and consumer engagement, including a pilot with 14 Seattle-based companies and nonprofits. To date, the business has been funded by Clise's savings and a crowdfunding campaign that raised $37,000.
Currently, Clise is preparing for a pre-seed round that will target impact investors, and though her identity has positively impacted her approach to business, she is aware of the ways in which it could also affect her ability to raise capital. “As a woman of color and a lesbian, I am absolutely cognizant of what the data says about the challenges I will face when it comes to raising capital,” Clise tells Supermaker, adding that she has faced some already. “There have admittedly been times throughout my career when I waited to disclose my identity—situations where it felt like my sexual orientation might somehow be one difference too many.”
Yiliu Shen-Burke also understands the varying access and opportunity that is afforded to people from minority backgrounds. He is currently raising a pre-seed round for his company, Softspace, a virtual project space for creatives, and has been very open about his sexuality. “Business relationships, like all relationships, are built on trust. My policy is to be as open as possible, as early as possible,” Shen-Burke tells Supermaker, adding that he tends to come out as early and casually as possible, usually by mentioning his boyfriend. “If who I am is going to be a problem for someone, I want to know that before knots are tied and dollars wired.”
As an Asian, gay founder, Shen-Burke admits he hasn’t run up against many roadblocks related to his sexual identity. Shen-Burke says that his experiences as a gay man do not compare to the challenges faced by non-male founders, particularly those who are not white or Asian. “I acknowledge that as an Asian male working in tech, I'm unfairly privileged relative to so many other people,” he says.
Despite what statistics may say, not every founder from a marginalized background feels at a disadvantage. Sonya Fox is the founder and CEO of Vurde, a curated wellness platform that connects food, culture, and mindfulness. Fox says she has been able to find empowerment in her experiences of being a Black, queer woman founder. “So far I haven’t had any challenges,” Fox admits to Supermaker. “In the majority of the programs I’ve participated in, I’ve found people who identified as Black and LGBTQ, and I’ve been very intentional about how I connect with people.”
This said, she has not yet approached investors; Vurde is, as of yet, mostly self-funded. Fox hopes to begin exploring fundraising by quarter four of 2019, and is currently working with a mentor to prepare. Still, she is determined not to be shaken by the statistics stacked against minority founders. “I grew up in the church in the South. There was a time I felt self conscious about being out,” Fox says, adding that this was part of the reason why she relocated from North Carolina to Washington D.C. Given her past, Fox feels there is no need to hide any part of who she is in her upcoming fundraising journey.
Like Fox, Clise is aware of the challenges that exist for minority founders and has learned how to leverage them to her advantage. She says her experiences as a lesbian woman of color have ultimately taught her important lessons about the types of people she wants to build business relationships with. “The investors for whom my race, gender, or sexual orientation might pose an issue are absolutely not the right partners for [me],” Clise says.
Though statistics still point to stark differences between white male investors and their minority counterparts, the landscape is slowly evolving. In recent years, initiatives supporting women, people of color, and LGBTQ founders have increasingly shown up, making it their mission to shift the investment ecosystem by creating opportunities for underrepresented entrepreneurs. One such group is Gaingels, a network that offers mentorship and connects LGBTQ founders to a network of LGBTQ and ally investors.
Lorenzo Thione, cofounder of StartOut and managing partner at Gaingels, admits that there are still many barriers for LGBTQ entrepreneurs, particularly for trans individuals and those living in the interior of the country. This is why organizations like Gaingels are focused on “leveling the playing field.” In addition to supporting, mentoring, and encouraging LGBTQ entrepreneurs to own their identity, Gaingels co-invests with the top venture capital and private equity firms in the world in hopes of demonstrating that economic success and diversity and inclusion go hand-in-hand.
From Thione's vantage, helping to normalize narratives of successful LGBTQ founders can have far-reaching effects. "It will encourage more LGBTQ+ entrepreneurs to act on their ideas and seek the support of their community," Thione says, adding that this normalization will also reduce the incentive for investors to discriminate. There are many LGBTQ founders with great ideas, and Thione encourages them not to fear seeking out the help they need. “There is an entire community there ready to support you and help you succeed,” Thione adds.
Ultimately, Fox hopes that equity and inclusion will eventually become a cornerstone of the investment and entrepreneurship space, something that Clise agrees with: “It becomes more equitable when decisions are made by people that reflect diverse demographics.” As of now, the playing field is far from even, and a lot of work still needs to be done. And yet, while it’s important for LGBTQ founders to learn how to navigate this landscape, it’s equally crucial for minority entrepreneurs not to let the current odds define their journey.
“It’s important for the LGTBQ community—especially people of color—to be open,” Fox concludes, adding that when it comes time to raise capital, she doesn’t plan on keeping her identity a secret. “I want to own my narrative and be unapologetic about it. Being gay and being Black are superpowers, they make me unique and very beneficial for a VC firm.”