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One in three LGBT entrepreneurs don’t come out to potential investors

One in three LGBT entrepreneurs don’t come out to potential investors

Andres Wydler, Executive Director of StartOut: The organization has surveyed the experiences of LGBT entrepreneurs

A study published by the Chicago Business School has found that one in three LGBT entrepreneurs (37%) who secured or are seeking funding are not out to potential investors.

The study was produced in collaboration with StartOut – the LGBT entrepreneur network group.

When entrepreneurs were asked why they were not out to investors, of the 37% who chose not to disclose their sexuality, nearly half said they didn’t think it relevant, and 12% said that they thought it might hurt them.

The report says there is evidence that investors value openness as ‘part of building a healthy entrepreneur-investor relationship’. It also suggest that investors actively seeking diversity in their investment portfolios might want to better signal this fact.

Other key findings included:

  • From 2005 to 2014 more than one million jobs created by LGBT entrepreneurs left discriminatory states in favor of inclusive states. Of those, 78 percent moved to California, New York and Illinois.
  • Eighty-four per cent of the LGBT entrepreneurs questioned chose to operate their businesses in states that had scored a 100% positive ranking on Human Rights Campaign’s Municipal Equality Index.
  • Lesbian entrepreneurs face bigger funding challenges: 12% of companies owned by GBT men have revenues of more than $5 million compared to 3% of LBT women. Meanwhile, 70% of female LBT founders raised less than $750,000 in funding compared to 47% of male GBT founders who raised more than $2 million.

This last finding echoes wider research undertaken by the National Women’s Business Council (NWBC), among other groups, suggesting gender trumps sexuality when it comes to raising capital.

‘LGBT entrepreneurs specifically choose diversity-friendly states to start their companies’

The survey quizzed 140 founder or C-suite executives of emerging growth companies and 87 seed investors.

Commenting on the findings, co-author and University of Chicago Booth School of Business Clinical Professor Waverly Deutsch, said, ‘It seems politically correct to say that whom one happens to love is not relevant in business, but our research shows otherwise.

‘LGBT entrepreneurs specifically choose diversity-friendly states to start their companies; raise less capital than their straight counterparts and have to balance the risk of homophobia and discrimination with creating authentic relationships with investors, customers and partners.’

‘Economic equality is a critical step along the continuum of progress for LGBT people,’ said StartOut’s Executive Director Andres Wydler in a statement.

‘Over the next few years, we will offer policy makers and business leaders the data and evidence they need to more fully understand the LGBT entrepreneurial experience.’

‘A stark reminder of the unique challenges still faced by too many LGBTQ people, both workers and entrepreneurs’

Beck Bailey, Deputy Director of Employee Engagement at HRC‘s Workplace Equality Program, said, ‘Surveys and inclusive data collection efforts are an important part of understanding the experience and needs of LGBTQ workers, consumers, and business owners.

‘While a majority of entrepreneurs surveyed were out to potential investors, the fact that nearly 40% felt they could not bring their whole selves to their work is a stark reminder of the unique challenges still faced by too many LGBTQ people, both workers and entrepreneurs.’

Stephanie Lampkin, founder of Blendoor
Stephanie Lampkin, founder and CEO of Blendoor

Stephanie Lampkin is a lesbian entrepreneur and the founder of Blendoor – an app that aims to remove unconscious bias from the recruitment process. Commenting on the results, she said in a statement to GSN, ‘All signs point to the fact that the further you are from a white, straight, cis-gender male the least likely you are to be funded – with a small exception for Asian men.

‘Thus, being black and a woman (albeit cis and able-bodied), I don’t see any benefit from disclosing my sexual orientation. I simply wish everyone would recognize whatever ‘privilege’ they have (white privilege, male privilege, cis privilege, etc) and thus be more empathetic for those that don’t.’

Although many parts of the US continue to have a lack of anti-LGBT discrimination protections, other areas are emerging as considerably more welcoming to LGBT-owned businesses.

Last fall, Massachusetts saw the introduction of legislation to guarantee that a proportion of government contracts went to LGBT-owned businesses. In May, similar legislation was introduced in New York and is awaiting consideration

In early July, King County in Seattle, WA, became the largest county in the US to announce that it was to start tracking the number of LGBT-owned businesses that win government contracts, with a view to ensuring they are duly represented alongside other minority-owned businesses.

Jonathan Lovitz, of the National Gay and Lesbian Chamber of Commerce (NGLCC), the widely-recognized US certification body for LGBT-owned businesses, said the report, ‘Underscores the importance of creating a level playing field for the LGBT business community so that more and more opportunities and investments flow our way.

‘Being Certified as an LGBT Business Enterprise (LGBTBE) by NGLCC, which opens doors to mentorship, investment funding, and most importantly contracting opportunities, is essential to leveling that field.

‘NGLCC is excited to share our own groundbreaking research this summer proving that with the right tools, LGBT entrepreneurs will continue to create the equity our community needs to thrive. We look forward to expanding our work with our 45+ NGLCC affiliates, StartOut, and other organizations that support our work creating opportunities for LGBT businesses.’