LGBTQ+ founders have created 36% more jobs, 114% more patents and 44% more exits than the average founder, according to a research index by StartOut, a nonprofit representing LGBTQ+ entrepreneurs.
Yet LGBTQ+ founders have raised less than 1% of startup funding.
“The business case is there, that investing in this community is important,” Jake Prigoff, M.D., general partner at Gaingels, a venture capital firm focused on diverse companies, told Fierce Healthcare.
StartOut analyzed a total of 95,000 U.S. companies that have raised at least $250,000 between 2000 and 2022. Of 3,745 identified healthcare companies, only two dozen are LGBTQ+. Of 142,000 U.S. founders identified, 1,480—about 1%—are LGBTQ+. There are a number of VCs increasing their interest in LGBTQ+ health, and the number of early-stage companies addressing the medical needs of this community is also growing, Prigoff said. But most diverse investment is still clustered in earlier-stage companies.
Though Pride Month has passed, companies should be considering new initiatives and working toward inclusive goals year-round, Prigoff contends. “This isn’t the only time to accomplish things for the LGBTQ community,” he noted.
On the heels of Pride Month, LGTBQ+ founders reflect on the struggle of building a startup and fundraising in the U.S. while maintaining their identity.
Putting health first
Founders have a duty to their company and may be afraid to be out for fear of jeopardizing potential investments. “It is not always easy to be picky about who is investing in your company,” Prigoff said.
"We collectively are the people who need the most help, the most support. We are also the most resilient." — Alison Greenberg, co-founder and CEO of Ruth Health
Joseph Schneier is the CEO and founder of Trusty.care, a startup that sells software to payers. As a trans founder with conservative investors, Schneier doesn’t typically broach that topic in conversations around fundraising. “It always does make me a little bit nervous,” Schneier told Fierce Healthcare.
Last October, during an ongoing funding round, a trans-affirmative surgery revealed Schneier had cancer. The illness would have automatically outed him, but investors wanted to know details to understand risk, he said.
At the time, he didn’t want to discuss details. But with the new funding round the company just opened, it came down to “do you want the funding or not?" so Schneier disclosed his diagnosis. Some investors pressed for a backup CEO, and Schneier chose not to work with them.
Schneier had considered postponing his surgery to complete the company’s funding round. But he would have only had four months to live had his cancer not been discovered at that time. “It is OK for us to do things for our own health and mental health, and sometimes that can come at the expense of raising capital,” he said.
Hopper Health founder Katya Siddall-Cipolla is queer and uses she/they pronouns. Being autistic and experiencing gender is inextricable for Siddall-Cipolla. Though her gender identity doesn’t come up in fundraising, she doesn’t hide it. Her pronouns are displayed on her social media and on Zoom.
“I intentionally have that show up because I want it to be clear from the beginning of any VC relationship,” Siddall-Cipolla said. She wants people who are curious to ask about it, though most avoid doing so—unless they, too, are LGTBQ+. Because she is femme-presenting and married to a cisgender man, Siddall-Cipolla sees herself as having some privilege in that regard.
"It’s still hard when you’re pitching across the table to people that just see the world very differently."— David Stein, CEO and co-founder, Ash Wellness
So far, her greatest support has come from VCs with shared lived experience. Not only is trust easier to establish, but also feeling like herself helps her make better business decisions, Siddall-Cipolla said. Diverse VCs “are so much more aware of a broader array of topics that impact all kinds of identities,” including the intersectionality of LGBTQ+ and autism.
As a femme-presenting queer woman, Alison Greenberg is often assumed straight, particularly by straight, white men. Greenberg is co-founder and CEO of Ruth Health, a maternal health startup. “People make assumptions that I am, for example, married, or that my partner is male, or that I have children myself,” she told Fierce Healthcare. “Those are really unfair assumptions of someone in the queer community.”
Ruth Health was able to be selective with its investors in 2021—more than half are female and people of color, Greenberg said. As a result, they “don’t just accept who I am, they embrace it.”
When considering investors, Greenberg requires a track record—specifically, they have invested in women, people of color and mission-driven companies.
LGBTQ+ founders’ edge, in Greenberg’s view, is that they have always had to deal with a feeling of “otherness.” “We collectively are the people who need the most help, the most support. We are also the most resilient,” she said.
She encourages founders to be vocal about their beliefs and quantify how much hardship they have overcome to establish themselves. “I try not to see that as a disadvantage,” she said.
Doubling down on "Out, Loud and Proud"
Four of five co-founders of Ash Wellness, an inclusive diagnostics company, are LGBTQ+, as are 85% of its employees. “We’re a pretty gay company,” David Stein, CEO and co-founder, told Fierce Healthcare.
Most of the people he is trying to raise money from don’t look or sound like him and aren’t a part of the queer community. “It’s still hard when you’re pitching across the table to people that just see the world very differently,” Stein said.
"I don’t think there’s any point in building this business if we can’t take a stand." — David Stein, CEO and co-founder, Ash Wellness
Ash Wellness’s largest client is a company that offers PrEP prescriptions virtually. When investors see that, they ask how big that space and the population it serves are. While Ash Wellness has use cases beyond the gay population, gay men are a huge segment because they tend to be more proactive about their health and are easy to engage, Stein said. More than 23 million Americans identify as LGBTQ+.
Included Health’s co-founder Colin Quinn faced a similar challenge with educating his investor base. The company offers inclusive virtual care and navigation services, largely for the LGBTQ+ population. On occasion, investors would ask Quinn, “Is this market large enough to warrant an investment and warrant a return?”
“That was my responsibility to educate and spread that awareness,” Quinn said.
While it was frustrating, “it never got personal.” Quinn is openly gay. It was his attempt to navigate the U.S. healthcare system that led him to start the company in the first place, lending him credibility with investors, he said.
When building out the company, Quinn looked for investors who were passionate about Included’s mission, which saved time in explaining underserved communities and the disparities they faced. “If they got that right away then I knew they understood what we were up to,” Quinn said.
For Ash Wellness, being known as “the gay company” helped attract the right types of investors and prevent mismatches, Stein echoed. But because the company takes a stand for LGBTQ+ rights, Stein does worry about fundraising opportunities; there is a smaller pool of willing investors. “Politically it’s become such a hot topic,” he said. “It precludes us from working with even certain clients.”
But for Stein, that was the only way forward. “I don’t think there’s any point in building this business if we can’t take a stand for that stuff,” he said.