Struggling to find funding, technology entrepreneur, Bobbie Racette, was told by one investor to downplay her sexuality.
“You don’t need to tell us that you’re LGBT,” she was told. “We can just leave that out of your pitch deck.”
Data suggests the odds are stacked against LGBT+ tech founders and entrepreneurs trying to obtain venture capital (VC) funding.
More than $1.5 trillion was invested in global VC deals from 2010 to 2019, according to Crunchbase, a business information website.
VC funding allows startups and other small companies with high growth potential to raise capital, offering investors high returns in exchange for taking a risk on new or expanding businesses
Less than 1% of US deals go in favour of LGBT+ founders, according to VC firm, Backstage Capital, and 37% of LGBT+ entrepreneurs choose not to ‘out’ themselves to investors, according to StartOut, a non-profit for LGBT+ entrepreneurs.
Venture Out, which connects LGBT+ tech professionals and entrepreneurs, recently launched a six-week accelerator, providing mentorship and other support to help a dozen early-stage LGBT+ founders in Canada find investment.
“For a long time, venture capital has been a very specific type of demographic,” said Danielle Graham, a principal at VC firm, Dream Maker Ventures, and one of Venture Out’s industry contacts, developing a fund for under-represented entrepreneurs.
“When the decision-making is taking place without any kind of (LGBT+) representation, then the likelihood of them being able to relate to those individuals is very low,” she said.
The organisers would like to see more LGBT+ entrepreneurs follow in the footsteps of Dax Dasilva, founder of Montreal-based Lightspeed, a software provider.
Dasilva, who is gay, founded the company in 2005, and 14 years later it raised CAD$240 million at an initial public offering.
In Calgary, Alberta, Racette struggled to find funding for her start-up, Virtual Gurus, which connects businesses to remote workers. She said she suspected being indigenous, LGBT+ and a woman played a part.
Her straight, white, male friends were getting investments, “and they weren’t even off the ground yet,” she said.
Racette eventually secured CAD$1.2 million in VC funding in February, after meeting one of her investors at conference in Toronto for the LGBT+ tech community run by Venture Out.
Investors base decisions on a practice known as pattern-matching, betting on people who mirror those who have succeeded before, such as straight white men, said Kristina Flynn, a Founders Program participant.
In a competitive field, this explains why some entrepreneurs hide their LGBT+ identity, said Flynn, co-founder of jiiWA, which helps non-profits collect and manage data.
“We have to think about how we’re going to present ourselves,” said Flynn.
“I almost have to do a cost-benefit (analysis).”
This can be especially difficult when dealing with investors from countries that are less progressive on LGBT+ issues, said another participant, Yangqi Xu.
“Should I disclose that I’m married to a female?” asked Xu, chief operating officer of Toronto-based Destin AI, an artificial intelligence platform that helps applicants navigate the Canadian immigration process.
Opening up the VC world to more LGBT+ people could reach the largely untapped global purchasing power of the LGBT+ community in the technology market, said Taylor Bond, co-lead of the Founders Program.
“When we get funding, mentorship and community into the hands of these folks, we’re going to see some really exciting market potentials open up,” he said.
Albert Lam, who co-founded Venture Out, and leads the Toronto chapter of Gaingels, a US-based investment vehicle for LGBT+ founders and executives, concurred.
“Our challenges are actually not that different from any other minority group,” Lam said. “Once we become leaders in companies moving the economy, we have a lot more power to effect change.”
-Jack Graham, Thomson Reuters Foundation