LGBTQ-led food and beverage companies still grossly underfunded even as diversity talks intensify

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The difficulty of raising capital as women and entrepreneurs of color is well documented: 17% of venture capital money went to companies with at least one female founder and only around 3% went to founders of Black and Latinx, showed recent data from PitchBook. Venture capitalists are taking note, committing to increase diversity more proactively not only within their workforce, but also in the investments they make.

But even as investment in diversity accelerates over time, the LGBTQ + sector is still largely absent from the conversation – many blame a hyper-masculine venture capital environment where founders aren’t comfortable with. disclose their identity, fearing that their leadership skills and credibility will be called into question, further causing a shortage of market data.

Backstage Capital estimated that founders of LGBTQ + startups received less than 1% of venture capital funding, and more than a third chose to hide their sexual orientation when raising funds, according to a survey by Start Out at non-profit.

This scenario is all too familiar with Nick Naclerio, founder of functional cookies company Mmmly, who noted how, as a gay man, he often had to “turn the volume down” on parts of his personality traits and intentionally conforming to the communication of largely older heterosexual men. methods and their professional enterprise archetype when raising capital.

“I focused on being neutral in terms of expression and tone. At the heart of it all was self-protection, ”said Naclerio. “I certainly didn’t feel comfortable being myself with a lot of the investors I interacted with… If I was myself with 80% of these groups and individuals, I doubt I would. would be where I am now in terms of progress and fundraising. I am not very feminine, but unfiltered, I am quite lively.

So what is the fundamental question here that has made fundraising such a difficult task for sexual minorities? How do the nuances of discrimination based on sexual orientation manifest themselves in fundraising?

Too much niche to invest? Think about

“Most of the criticism I hear from investors around founders or LGBTQ markets, especially those looking for companies in the pre-seed and seed stage, is that the total addressable market is too small,” Arlan Hamilton , founder and managing partner of Backstage Capital, told me recently.

These type of comments, however, show a lack of research and are often an excuse to “remain blissfully ignorant,” Hamilton explained, noting that 10% of their portfolio is currently run by openly identified LGBTQ founders.

Indeed, many LGBTQ food and drink founders are frustrated that queer-centric products are either seen as one thing a year for Pride Month, or made just for their community. “I see so many products on my desk each year with a rainbow on the label and it just seems so dishonest to me,” said Tim Chan, who co-founded So Gay Rosé with Josh Campbell.

Gefen Skolnick, founder of Couplet Coffee, also argued that brands focused on LGBTQ culture are actually more inclusive by nature, which “fosters more community among those who are our allies and those who love funky and colorful brands. “.

This has helped his company, one of Backstage Capital’s portfolio companies, significantly expand its audience, Skolnick said.

“We want people to know that there is actually a gay founder behind So Gay Rosé and we are not here to wash the rainbow or make some quick money from the community, but rather to empower and give back, ”Chan added. Starting off with $ 10,000, the duo pledged $ 2.5 million to straight white male investors, but decided not to take it and increased their initial round to LGBTQ investors after have set up their DTC sales channel.

“Our initial investors include Jonathan Mildenhall, a former CMO at Airbnb and SVP at Coca-Cola

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, with her husband Mirco Gros; Gayle Troberman, Marketing Director of iHeartMedia and his wife Sue Turner; and a group of investors from the Gaingels, an LGBTQ investment syndicate, ”Chan said.

“It was important for us to increase our first round of funding to the LGBTQ community, and we’re proud to say we’re one of the only brands to have done so.”

Ubiquitous misogyny and intersectionality

For CPG entrepreneurs who are both women and LGBTQ, raising capital might be more intimidating, as Hamilton explained: “I think like a lot of things, discrimination or neglecting LGBTQ entrepreneurs begins with the misogyny that is pervasive throughout venture capital in general. “

Suzie Yorke, founder of Love Good Fats who describes herself as a ‘proud and proud lesbian’ working for CPG as a marketing manager for more than two decades, said she has always been the only LGBTQ woman at the table to fundraise funds for his keto. friendly snack company.

“With fundraising,” Yorke said, “from what incubators and mentors have shared – it’s about building trust in the idea, the brand and the CEO – and with intersectionality , mostly white men across the table cutting the checks, it’s just a harder dynamic.

That’s because, she explained, “If you’re any different from the privileged white men who have successful careers – whether it’s because of your age, gender, sexuality, culture, or location. ‘other biases – it is a bit more difficult for them to identify with, understand, be understood and make the connection needed to get the support needed to raise funds.

Other risks for queer female founders are that they are more likely to face rejection and question social norms, says Coolhaus founder Natasha Case, although these can sometimes serve as an advantage for women. entrepreneurship.

“Heterosexual women are more likely to be marginalized because for homosexual women there is often a non-threatening relationship with men, so there is more access. [to resources]”said Case.

The main advantage of positioning as a minority owned brand is having a unique history and an edge for disruption, says Case. “I think there has been a shift towards the under-represented founders, which is fantastic, and there’s no denying that capitalism is driving it,” she said.

“I think people have come to believe that there is business value in companies with various foundations, so there is money to be spent on it. It will definitely change the business landscape, and we can build better businesses with this thesis. “

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