The Power of Investing in LGBTQ+ Businesses: A Deep-Dive
Investing into LGBTQ+ founders taps into a high-performing, overlooked and determined population, and provides non-competitive access to strong growth prospects. Yet year over year, numbers show that LGBTQ+ led businesses account for 0.5% of all venture capital. 33% of LGBTQ+ employees leave their jobs due to experiencing discrimination at work as it is, and even when things work out, 75% of founders conceal their sexual orientation just to work, let alone to start a company. Yet still they succeed. In fact, they do so with flying colors - studies show that investing in LGBTQ+ businesses is a financially sound strategy. By the balance sheet, business amongst LGBTQ+ led companies is financially robust:
The Business Case for LGBTQ+ Investments
LGBTQ+ led companies exhibit strong financial performance. News sources have for years been reporting more of the same: LGBTQ+ led companies outperform. StartOut in its 2023 State of LGBTQ Entrepreneurship Report found that LGBTQ businesses go on to create 36% more jobs, 114% more patents, and 44% more exits, despite receiving 16% less funding on average. This has been the case since at least 2022, meaning that LGBTQ+ founders are able to do far more with far less than the average founder, suggesting an intrinsic and positive benefit from investing in them. The result? Forbes reported in June that LGBTQ+ led businesses - all 1.4 million of them - contribute $1.7T to the U.S. economy (an average of $1,214,285.71 per business per year) in aggregate on an annual basis.
How?
LGBTQ+ led companies have diverse and inclusive workforces. McKinsey & Company’s Diversity Matters Even More 2023 DEI report shows that diverse and inclusive companies outperform their less diverse peers, with likelihood of outperformance of 1st vs. 4th quartile growing disproportionately by 8% every 2.5 years. LGBTQ+ led companies’ leaders often bring lived, studied, and practiced perspectives on the human and business benefits of diversity and inclusion, meaning their companies more organically reflect the general population, making their products more relevant and thus more valuable.
LGBTQ+ led businesses organically foster more inclusive and innovative work environments, leading to higher employee satisfaction, productivity, and revenue overall. Since all people can fall anywhere on the LGBTQ+ spectrum, LGBTQ+ diversity can intersect with gender and ethnic diversity. The implications for financial outperformance are extremely positive.
Image Credit: McKinsey & Company
Strategies for Investing Into LGBTQ+ Businesses
Directly investing into LGBTQ+ led businesses, such as pre-revenue to growth-stage startups, can yield significant returns for investors. Having knowledge of buying motivators, patterns, and trends within the LGBTQ community can enable the savvy investor to realize outsized returns via these differentiated, unique companies that, given 1 in 200 are funded at any given time, are unicorns in their own right.
Philanthropic giving to a DAF, or donor-advised fund, is also a great way to give charitably to a business or fund while obtaining a tax benefit.
Venture capital funds like us, Chasing Rainbows, serve as opportunity hubs for investors to do both, with differentiated founders leveraging uncommon insights for 10X+ returns. It’s because of this strength that our fund has asymmetric alpha and streaming deal flow, enabling us to empower a new generation of founders. Our portfolio companies’ progress continues:
FULL: Initial investment is up.
GOSU ACADEMY: Partners with universities and coaches the International eSports World Cup in Saudi Arabia.
HELLOWONDER: Secured funding with key advisor Sesame Ventures.
FORTHEM: Doubled their investment and boosted their revenue in 2024.
CORALAI: Joined the competitive Villa Blu Accelerator, part of the Robertet Group, known for Aesop's successful IPO.
Investing in LGBTQ+ companies enables you to generate strong, differentiated financial returns and contribute to building a more equitable world.
