Nearly one-quarter of LGBTQ+ startup founders believe disclosing their sexual or gender identity could pose disadvantages when seeking investment, research finds.
The LGBTQ+ Founder report, compiled by Proud Ventures, showed that 18% of founders think their identity may have a negative impact on fundraising attempts while 27% said they believe their identity could give them a general disadvantage.
The report highlighted concerning statistics on inclusivity in the UK tech industry, noting that three-quarters of startup founders “aren’t comfortable sharing their identities with others”.
Heather Delaney, MD and founder of London-based tech consultancy Gallium Ventures, told IT Pro this underlines a long-running trend of LGBTQ+ startup founders being forced to conform to both industry and societal ‘norms’ in order to achieve success.
"LGBTQ+ founders who find themselves looking for funding for their business will often hide their true self in order to fit in with 'the norm' and be judged based on their hard work and dedication, instead of the potential where they might be judged for who they love,” Heather said.
“It's a tough reality many founders have found themselves in whether fundraising, growing a client base, or even hiring.”
LGBTQ+ funding options
In the venture capital space, Proud Ventures observed similar trends regarding individuals disclosing their identities.
Around 79% of LGBTQ+ investors were found to have withheld their identity from colleagues while 26% said they would never disclose their identity with other investors in the ecosystem.
Proud Ventures said this highlights that LGBTQ+ founders face “additional barriers” traversing the VC ecosystem, and this acutely impacts non-binary founders and those who identify as women.
Data shows that gay founders raised a median 2.25x more than bisexual founders and 22x more than lesbian founders.
The report claimed that, despite calls across the industry for greater support for LGBTQ+ inclusivity, investors still “overlook” founders, or are “unsure of how to support them”.
"Our survey data showed that just one-third of VCs who stated they were taking action to support ‘diverse’ founders were doing anything to support LGBTQ+ founders,” the report noted.
Responding to the report findings, diversity and inclusivity consultancy Templeton & Partners told IT Pro that founders are “right to worry” that their LGBTQ+ status might affect funding outcomes given long-standing issues affecting founders.
In the US, for example, LGBTQ+ founders have raised less than 1% of venture capital funding. Meanwhile, in the UK, founders continue to face similar challenges that force them to “work harder than peers to receive opportunities and success”.
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“Like most LGBTQ+ tech professionals, unconscious rather than overt bias is likely to present multiple hurdles for LGBTQ+ founders at multiple stages,” the consultancy said.
“We know female entrepreneurs receive far less funding compared to their male counterparts, and founders’ sexual orientation and gender identity have a similar negative impact on their success rates.”
“Many will continue to hide their identities from current colleagues and future partners, but a large proportion will also streamline their options to screen for more inclusive potential partners, limiting their own chances of success, and continuing to deprive less diverse VCs of the opportunity to become more inclusive.”
Supporting tech sector inclusivity
Proud Ventures outlined a series of recommended steps to bolster inclusion and create a more equitable tech and VC landscape for LGBTQ+ founders.
In particular, the report noted that VC firms should place a stronger focus on hiring more diverse investment teams.
“Research is clear that more diverse investment teams both perform better in terms of returns, but also attract a more diverse dealflow,” the report said.
Similarly, VCs were advised to quantify DEI metrics in their funds to measure the diversity of deal flows and investments in their portfolio.
Meri Williams, CTO at Pleo, said that policies which offer support for diverse employees are vital to embedding a culture of acceptance within organisational structures.
"In practice, creating support structures for employees from underrepresented groups will not only help promote diversity, but create a culture of acceptance at the very heart of the business," Williams said. "Companies should also conduct a regular review of the diversity statistics of one's own workforce to ensure that the company is on the right track to achieve the D&I goals."
"After all, if the company is serious about promoting diversity, equality, inclusion, and belonging, it should check how representative it really is. As a sector that prides itself on being for everyone, IT companies in 2023 need to ensure that everyone is represented, and that everyone is made to feel like they belong and can succeed on their own terms."
