EVANSTON, IL — JUNE 8, 2022 — With LGBTQ+ founders receiving less than 1% of U.S. venture funding, Colorful Capital launched today with a mission of delivering capital and support to an undervalued community of business leaders across multiple sectors.
Founded by Megan Kashner, a Professor of Sustainability and Social Impact at the Kellogg School of Management at Northwestern University, and William Burckart, CEO of TIIP (The Investment Integration Project), Colorful Capital will bring investor attention to the structural fundraising hurdles LGBTQ+ founders face, as well as the long-overlooked opportunity inherent to proven, growing businesses run by these underestimated leaders.
"As someone whose work and professional community sit at the intersection of markets and impact, and as a proud member of the LGBTQ+ community, I can clearly see the challenges faced by these entrepreneurs," said Kashner. "Our emphasis on breaking down capital barriers for LGBTQ+ businesses will unlock value, drive returns, and bring real benefits to our community."
"With our unique position of trust, we've identified a phenomenal group of entrepreneurs that have demonstrated pathways to profitability and are ready to scale their businesses," added Burckart. "Colorful Capital intends to invest significantly in this segment and open doors to other funders who may be less familiar with LGBTQ+ founders."
To achieve its mission, Colorful Capital has assembled a talented group of Advisors, bringing together leaders across academia, impact finance, asset management and traditional investment. In addition to providing counsel, this diverse array of advisors is reaching across the market to surface the right ventures, founders, and connections for the firm.
With a potential pipeline of thousands of LGBTQ+ founders and their enterprises, Burckart said the plan will be to target seed and pre-seed rounds, with investments of up to $1 million, including firms in food and agriculture, climate tech, media and entertainment, consumer products and services, B2B SaaS, and personal care and health. Colorful Capital also plans to align incentives with LGBTQ+ founders to drive collective success and intent.
Research-Based VC
Colorful Capital's Pride Month launch dovetails with their groundbreaking research on the VC market. In Barriers & Exclusion, a baseline study on the LGBTQ+ experience in venture funding, Kashner and co-author Martin De Leon conducted detailed interviews with founders and analyzed a somewhat limited pool of relevant statistical data. They found that LGBTQ+ entrepreneurs have less access to early-stage capital and face discrimination when fundraising.
According to the study:
There remain systemic obstacles and significant differences that place LGBTQ+ people at an economic disadvantage. In several areas, including employment, homeownership and retirement, LGBT people consistently are at a relative disadvantage despite having, on average, higher educational attainment than straight people.
- LGBTQ+ founders frequently find themselves outside the circles of connection and acceptance among VCs. The landscape is fraught with exclusion and unanswered calls and emails, and the path to raising venture capital is often blocked when no investor steps forward to lead a funding round.
- LGBTQ+ founders have raised just $13 billion in venture capital, compared to $1.8 trillion raised overall, according to the Startout Pride Economic Impact Index.
- Despite these barriers, the LGBTQ+ startup community, though relatively nascent, is strong. Early entrepreneurs like Maca Baigorria, founder of Avocademy, and James Silva of ConciergeBot are examples of current LGBTQ+ founder talent. Ben Stokes, who transitioned from founder to institutional investor, has launched Chasing Rainbows, a fund that is proving and building the field further.
With its focus on addressing the systemic issues identified in Barriers & Exclusion, Colorful Capital aims to add financing and expertise to unlock impact for the LGBTQ+ community, seeking:
- Strong financial returns for investors, founders, advisors, and enterprise teams
- Increased founder and team diversity to enable future diverse leaders and founders to step in
- Improved access to economic mobility and income that will offer dividends across the LGBTQ+ community
"The research shows that investors can achieve outsized returns from diverse teams—whether it's improved risk management, amplified IRR or increased valuation," said Kashner. "We're bringing that investment thesis to companies led by LGBTQ+ founders that have been routinely underestimated by mainstream capital providers. It's an investment opportunity whose time has come."
About Colorful Capital
Colorful Capital aims to bring capital support and scaffolding to enterprises founded and led by members of the broad LGBTQ+ community. By filling financing gaps and overcoming detrimental heuristics, we intend to bridge divides and strengthen economic opportunity.
Diverse gender and sexual identity and expression is too often a barrier to access to capital and inclusion in traditional financial market flows. By investing in, supporting, and celebrating members of our communities and the ventures they build and grow, Colorful Capital seeks to provide opportunity, spotlight, and a pathway to success for promising ventures and their fabulous leaders.
For more information on Colorful Capital, please visit
www.colorful-capital.com/ .
