Getting your startup off the ground is hard enough. Now imagine the extra challenges you might face as an LGBTQ+ entrepreneur.
Despite progress toward diversifying funding for startups, discrimination and marginalization have hindered the LGBTQ+ entrepreneurial spirit and prevented small-business owners from obtaining capital for their ventures. Yet, LGBTQ+ businesses have a significant social and economic impact, contributing an annual $1.7 trillion to the United States economy.
The prevalence of LGBTQ+ businesses is vital. If you’re trying to secure funding as an LGBTQ+ entrepreneur for your startup, this article can help you.
What issues do LGBTQ+ entrepreneurs face?
Gender and race are the two most common issues LGBTQ+ entrepreneurs face when securing startup funding.
According to a 2018 study by LGBTQ+ nonprofit organization StartOut, female-owned startups usually secured about 29% less funding than their male counterparts. Throughout history, venture capitalism (VC) hasn’t been known for its accessibility to diverse groups — 89% of VC partners are male and 76% are white men.
As a result, many members of the LGBTQ+ community find it hard to create their startups because investors often favor cisgender- and heterosexual-owned businesses. You may also want to take funding from nondiscriminatory places only but find it hard to locate such information. Calls for broadening diversity and visibility in VC funding opportunities are loud and clear but slow to change.
Black entrepreneurs also have difficulty securing funding for their businesses, while Black female entrepreneurs struggle the most.
Discrimination against the LGBTQ+ community has long been a core issue in U.S. law. In fact, it was only in 2020 when the U.S. Supreme Court decided workplace discrimination and firing based on sexual orientation were illegal across the board. At that time, more than half of the U.S. states had little or no legislation protecting LGBTQ+ employees.
7 ways LGBTQ+ entrepreneurs can secure funding
LGBTQ+ entrepreneurs have little time to spare when securing funding for their startups and VC funding isn’t the most reliable source. Instead, these seven alternatives may prove more beneficial.
- Crowd funding
LGBTQ+ entrepreneurs may want to consider crowdfunding their business ventures or project. Crowdfunding — also known as alternative finance or crowdsourcing — is a method of financing a startup with public donations.
Today, entrepreneurs can set up a crowdfunding profile online, making it easy for people to share the link and for you to garner additional funds.
- Angel capitalists
Angel investors are affluent, private investors that contribute monetary assets to business startups in exchange for convertible notes or some amount of equity in your business. They often assist small businesses when other investor types show little interest.
Angels are somewhat different from venture capitalists because they might offer smaller amounts over a long period. But they do so on the contingency of investment maturation in which they can exit the deal, having pocketed their profits by a public offering or acquiring the company.
In 2020, angel investors invested nearly $25.3 billion in startup capital — 6% more than in 2019.
This Angel Investor Shares 11 Tips for Entrepreneurs to Raise Smart Money
- LGBT business chamber membership
Search your local LGBT business chamber for more significant funding and educational opportunities.
Membership in your local business chamber connects you with vast financial institutions and networking resources. It also delivers several chances to learn about what it takes to thrive as an LGBTQ+ business owner.
Community engagement is critical for any startup to thrive and becoming a member of your local LGBT business chamber can help thrust your business into the spotlight.
- StartOut
LGBTQ+ nonprofit organization StartOut recognizes entrepreneurs only succeed when they build their network. That requires professional and community-wide support, locating mentors and accessing critical business resources.
Unfortunately, aspiring LGBTQ+ entrepreneurs have fewer opportunities to find role models to empower them and learn from because these creators rarely get the spotlight. StartOut helps connect this business community by boosting LGBTQ+ mentors’ visibility to overcome personal and business growth challenges.
LGBTQ+ business owners can browse StartOut’s several initiatives, grants and other funding resources. They can also view the mentorship programs, networking and educational opportunities.
As of June 2021, Amazon Web Services (AWS) partnered with StartOut to bridge the opportunity gap for LGBTQ+ entrepreneurs and help further StartOut’s mission. StartOut has connected 750 mentors to mentees and hopes to match another 50 by the end of 2022 with AWS’s help.
- NGLCC certification
The National Gay and Lesbian Chamber of Commerce (NGLCC) offers certification for LGBTQ+ entrepreneurs for financial prospects and corporate partnerships they might otherwise miss.
For instance, NGLCC holders can access corporate representatives and supplier diversity specialists who want to work with LGBTQ+ businesses and use NGLCC support programs and resources.
Any LBGTQ+ entrepreneur interested in NGLCC certification must meet the following criteria:
- At least 51% of the company is owned and operated by individuals who identify as LGBTQ+.
- Owners must maintain U.S. citizenship or lawful permanent resident status.
- The business functions separately from non-LGBT business enterprises.
- The company is registered and headquartered in the U.S. as a legal, for-profit corporation.
LGBTQ+ business owners can create a business profile to verify their eligibility and fill out the NGLCC application for certification. A regional NGLCC representative will then visit your business to gain insight into how earning certification will aid in helping you meet your long-term business goals.
Generally, it takes about three months for the National Certification Committee to make a final decision. After you’re approved, you’ll be invited to an online orientation to learn the ins and outs of your NGLCC certification and benefits program.
- Online lenders
Online lenders make securing funding easier than ever for LGBTQ-owned businesses.
Government grants and traditional bank loans take a long time to get approved. However, online lenders offer better interest rates, lower service fees and are usually easier and faster.
These lenders also have more flexible credit eligibility requirements and consider your creditworthiness by evaluating your credit scores, utility payments, debt-to-income ratios and information from your online networks.
Perhaps the most significant advantage is that online loans are unsecured — they don’t require a form of collateral — making them a much safer borrowing option. If you fail to repay the loan, your credit score will drop, but you won’t lose everything you own.
- Borrowing from friends
It can be hit or miss to secure funding as an LGBTQ+ entrepreneur. The current system doesn’t make it easy. Fortunately, you can always rely on your friends and family for help. Reach out to your loved ones about your need for financial support as you venture into the business world.
Develop an agreement indicating the amount you owe them with interest and by a particular date if necessary — this will help everyone avoid confusion and bad blood.
Likewise, they may know other people who might show interest in investing in your business startup. Sharing your business idea with people you know and trust may open doors to additional funding and networking opportunities.
Conclusion
Funding your startup as an LGBTQ+ entrepreneur can sometimes be discouraging, but it’s worth it in the end if you stay vigilant. Don’t give up on your dreams of owning a successful business. The world needs greater LGBTQ+ visibility wherever it can get it.
