One in six startups (17.6%) were founded or co-founded by a member of the LGBTQ+ community. That’s according to a new study by Identity.vc, Europe’s first venture fund devoted to financing early-stage companies led by LGBTQ+ founders. This figure is expected to increase to more than a quarter (26.1%) by 2030, driven by a wave of gen-Z entrepreneurs, who are more likely to identify as LGBTQ+.
But even as the numbers climb, trust and inclusion remain a challenge. More than a third of LGBTQ+ founders in Europe choose to conceal their sexual orientation from investors, the report found. Even among those who are open, many are not out from their initial interactions with investors.
Of those who chose to hide their sexual identity, 77.6% did so because they believed it was not relevant; they would rather be judged on their ideas than their sexual orientation. One in five (20.3%) worried that doing so would limit their fundraising opportunities.
Data suggests the odds are stacked against entrepreneurs from under-represented groups seeking to obtain funding. Just 0.5% of the $2.1tn (£1.68tn) in startup funding was raised by LGBTQ+ founders between 2000 and 2022, according to StartOut, a non-profit organisation that works with LGBTQ+ entrepreneurs. This is changing, however, with the help of venture capital (VC) firms such as Identity.vc, which are backing LGBTQ+ founders in an effort to help them scale up their operations.
According to Til Klein, a founding partner at Identity.vc, the real barrier for many LGBTQ+ entrepreneurs is not access to capital, it’s the pressure to hide who they are. “Every ounce of energy spent hiding who you are is energy taken away from building your company and leading your team.”
Why identity matters
Klein frames openness as a strategic advantage for entrepreneurs. “It is in their best interest to be open, particularly because long-term partnerships between founders and investors require significant trust,” he says. When challenges arise, a foundation of trust helps to facilitate support and open communication.
As an investor, Klein wants to know the person behind the pitch deck. This is why Identity.vc’s investment process includes an informal dinner. “I want to know their background, their hobbies and whether they have spouses, kids or pets – if they are a dog or cat person.”
For many LGBTQ+ individuals questioning convention is part of daily life. They are born to disrupt
Klein says such conversations on personal matters must become more common. Investors often fixate on cold, hard facts and figures – valuation, profitability and revenue growth – while paying less attention to the qualities of the teams that drive those numbers. “How founders think, solve problems, cope with stress and demonstrate resilience makes a huge difference today – especially in a world where all teams have access to the same technology.”
Given their unique experiences, LGBTQ+ individuals are often well positioned to develop qualities such as resilience. The report findings show that 82% of LGBTQ+ founders believe they are more resilient than the average entrepreneur and roughly the same share believe they have a stronger work ethic than most startup owners.
“For many LGBTQ+ individuals, questioning convention is part of daily life,” Klein says. “This ingrained ability to think differently gives them confidence to resist conformity, pursue bold ideas and build ventures that break new ground. They are born to disrupt.”
A secret advantage
Klein says that by disclosing their sexual orientation, LGBTQ+ founders could tap into a huge, hidden resource: the large, supportive LGBTQ+ community network.
“This community is open to helping each other, connecting people on a level that many VCs promise but rarely deliver,” Klein says. “In an industry where warm introductions and personal relationships often tip the scales, identity and community can be a powerful catalyst for success.”
For funds such as Identity.vc, the LGBTQ+ community has provided unique access to deals. Approximately 80% of the fund’s deal flow is inbound from the network, Klein says. It has even enabled Identity.vc to participate in highly competitive funding rounds, including for Peak – one of the hottest startups in Europe this year.
Tech bros and tick boxes
Regrettably, discrimination still lingers in the VC market. Henry Blast is a co-founder of Polari Group, a sexual health firm. “I had never experienced homophobia in my professional life until I entered the VC space,” he says.
His story is not unique. Many founders from under-represented backgrounds report feeling excluded in an industry that clings to old stereotypes and is dominated by white men from elite schools and similar professional circles. Since capital tends to flow through personal networks, deals tend to go to founders who look and sound like the investors themselves.
Every ounce of energy spent hiding who you are is energy taken away from building your company
Klein says the VC industry has “failed miserably” to move beyond its “tech bro” image. If anything, recent headlines suggest it is getting worse. Mark Zuckerberg, the CEO of Meta, recently declared that modern businesses would benefit from more “masculine energy”. At the same time, the industry is doubling down on an aggressive, hustle mentality – embracing the notorious 996 work culture – and fixating on hypergrowth and exclusionary social norms that leave little room for differences.
Camilla Bergman, the founder of Loop + Impact Loop, recently expressed her frustration at the number of “tech bro hackathons” and “meet-ups” flooding social media with seemingly no, or very few, women in sight. This, at a time when gender gaps remain stark: in 2024, female-founded startups received just 1.4% of VC investment, according to data by PitchBook, an investment-insights platform.
When it comes to diversity, Klein believes that a different approach is needed to move the VC industry beyond mere box-ticking. “Diversity is often reduced to shallow ESG targets or KPIs that nobody cares about, rather than truly focusing on creating successful, diverse teams and supporting non-typical VCs and founders,” he says.
With many US businesses now rolling back their diversity and inclusion pledges, Klein believes Europe has an opportunity to double down on diversity. “Our hope is to inspire other funds to adopt similar investment theses and to bring about a general change in the industry towards greater diversity.”
For founders and business leaders from under-represented backgrounds, Klein’s advice is simple: “Be yourself, leverage your community and build something great.”
One in six startups (17.6%) were founded or co-founded by a member of the LGBTQ+ community. That's according to a new study by Identity.vc, Europe’s first venture fund devoted to financing early-stage companies led by LGBTQ+ founders. This figure is expected to increase to more than a quarter (26.1%) by 2030, driven by a wave of gen-Z entrepreneurs, who are more likely to identify as LGBTQ+.
But even as the numbers climb, trust and inclusion remain a challenge. More than a third of LGBTQ+ founders in Europe choose to conceal their sexual orientation from investors, the report found. Even among those who are open, many are not out from their initial interactions with investors.
Of those who chose to hide their sexual identity, 77.6% did so because they believed it was not relevant; they would rather be judged on their ideas than their sexual orientation. One in five (20.3%) worried that doing so would limit their fundraising opportunities.
