As a female venture capitalist, I often find myself navigating the "impact" pipeline, which is frequently populated with initiatives that, while noble, lack strong business fundamentals.

In my view, true impact doesn't happen without sound business principles; the two must coexist for sustainable success. This is why I am thrilled to announce my decision to join identity.vc, an investment fund specifically focused on supporting startups with LGBTQ+ leadership.

And this isn't just an impact decision; it's a strategic money decision for the future.

Untapped potential and diversity as an investment case

The LGBTQ+ community represents a significant untapped potential in the business world. Historically, diversity has proven to be an attractive investment case.

A comprehensive study by Boston Consulting Group (BCG) found that companies with more diverse leadership teams report higher levels of innovation and better financial performance. This is further supported by a McKinsey study showing that companies with diverse executive teams are more likely to financially outperform their peers.

However, many of these studies are not LGBTQ+ specific. The StartOut study fills this gap by highlighting how LGBTQ+ founders outperform their peers, yet 75% of LGBTQ+ founders still feel compelled to hide their identity. Imagine the potential unleashed if these founders could channel their energy into their businesses rather than concealing their true selves.

The US success story and investor demand

In the United States, LGBTQ+-focused investments have already shown great success. This is driven by both market demand and workforce expectations.

Millennials and Gen Z are significantly more likely to value and advocate for diversity and inclusion compared to older generations.

A Morgan Stanley report reveals that 45% of investors are actively seeking LGBTQ+ investment opportunities, underscoring the growing recognition of its importance.

Financial outperformance and workforce expectations

It's not just about social responsibility; it's about financial outperformance.

The same McKinsey study on diversity highlights that inclusive companies are 35% more likely to outperform their competitors. This financial advantage is a direct result of diverse teams driving better decision-making, innovation, and market understanding.

Moreover, the workforce of today and tomorrow - comprising Millennials and Gen Z - demands more from their employers in terms of diversity and inclusion.

A report from McKinsey on LGBTQ+ inclusion in the workplace shows that these generations are not only more likely to identify as LGBTQ+ but also more likely to advocate for inclusive cultures. BCG’s research further emphasizes that inclusive cultures are critical for attracting and retaining top talent, which is essential for long-term business success.

Building trust and unlocking potential

For investors, building trust with founders is paramount. Yet, the reality is stark: LGBTQ+ founders often struggle to establish this trust due to the need to hide their identity. This lack of openness can hinder the growth and potential of their companies.

By focusing on LGBTQ+ leadership, identity.vc aims to create an environment where founders can be their authentic selves, fostering stronger, more genuine relationships between investors and entrepreneurs.

A bold step towards the future

So, joining identity.vc is not just about supporting a cause; it's about recognizing and capitalizing on a significant, underexplored investment opportunity.

The data is clear: diverse leadership leads to better business outcomes. The LGBTQ+ community, with its vast, untapped potential, represents the next frontier in achieving these outcomes.

As we move forward, I am excited to be part of a movement that not only champions diversity and inclusion but also drives substantial financial returns.

Sources:

• How and Where Diversity Drives Financial Performance - Harvard Business Review
• Diversity Wins: How Inclusion Matters - McKinsey & Company
• 2023 State of LGBTQ+ Entrepreneurship Report - StartOut
• Broadening the Spectrum of Investing: LGBTQ+ Investing - Morgan Stanley
• LGBTQ+ Inclusion in the Workplace - McKinsey & Company
• Inclusive Cultures Must Follow the New LGBTQ Workforce - BCG