Homophobia Runs Rampant in Startup Culture, Study Says

StartOut identifies part of the problem as existing on a macro, legislative level: In 28 states, employers can legally fire an employee for identifying as LGBTQ. Transgender workers are at risk in four additional states. The study found that LGBTQ entrepreneurs are moving out of states with anti-gay policies, resulting in a loss of over one million jobs.

Dr. Vivienne Ming, vice chair of StartOut and co-founder and managing partner of research institute Socos, emphasized the financial incentive for states to abolish anti-LGBTQ legislation. "I really wanted to dig into this question of states losing their creative talent, specifically in the context of entrepreneurship," she tells Broadly. "I wanted to be able to go to [conservative politicians] and put it in terms they understood: This is about job creation, and growing the economy… When you say, '[LGBT] natives of North Carolina, we don't want you here.' Well, why would I stay and found my company there?"

But fear of discrimination is not limited to states with discriminatory legislation. Many LGBTQ entrepreneurs—even those based in LGBTQ-friendly locations—choose to remain closeted to potential investors when fundraising. The national survey found that "37 percent chose not to self-identify as members of the LGBT community, 12 percent citing concerns that it might hurt their chances to get capital, while 47 percent said that 'being out' wasn't relevant."

Researchers discovered that openly LGBTQ founders could face a monetary penalty. In a previous study, Dr. Ming quantified the economic toll that discrimination takes on unequal communities. (She labeled the burden as the "tax on being different.") Individuals belonging to two unequal communities often experience what Dr. Ming labels as a "double tax." In the StartOut study, this "double tax" came into play when evaluating the fundraising achievements of individuals who were both LGBTQ and female. The study found that "70 percent of female LBT [lesbian, bisexual, and trans] entrepreneurs raised less than $750,000 while 47 percent of male GBT [gay, bisexual, and trans] entrepreneurs raised more than $2 million, mirroring the gender funding gap seen in entrepreneurship in general."

Dr. Ming cites an even greater disparity in transgender fundraising. She identifies as trans and has seen numerous problems. "When we talk about transgender entrepreneurs, the numbers are so small as to be almost unmeasurable," she says. "As one of the few successful entrepreneurs who has gone through gender transition, I've had many young people approach me and say in secret, 'I'm transgender too, but I decided to put it on hold so I could raise money.' It's heartbreaking, but I can't disagree. It's incredibly hard to raise money and be openly transgender."

As American culture becomes more accepting of the LGBTQ community, some people expect younger generations to feel comfortable being out in the workplace, but the opposite is true. According to the study, younger millennials were far less likely to be out than their older coworkers, with "five percent of LGBT young people ages 18 to 24 being totally open at work versus 32 percent of LGBT people ages 35 to 44."

"Baby Boomers and Gen Xers are further along in their business careers. They have management positions and there's less risk [in being out]," says Dr. Mary Shea, the director of StartOut and an adjunct assistant professor of marketing at the University of Chicago Booth School of Business. "But imagine if you're a younger millennial, just starting your career… Younger millennials are very hesitant to come out at work because they don't want to get discriminated against when it comes to getting a promotion or raise."

Yet even older, more secure LGBTQ workers still experience discrimination at work due to their sexual orientation: "Almost 40 percent of LGBT workers report discrimination and harassment when they are 'out' at work, compared with the 10 percent who experience the same challenges while closeted," according to the study.

StartOut researchers believe part of the solution is to open the umbrella of "diversity." Many firms do not include LGBTQ individuals in their definition of diversity. According to Intel's Lisa Lambert in an interview with VentureBeat, the reason for these types of exclusions is twofold: The federal government does not define LGBT individuals as "underrepresented minorities," and there is a lack of research showing the LGBT community as disadvantaged. Companies are not legally required to keep track of their employees' sexual orientation, although they must know their race. "We wanted to keep it simple and consistent," Lambert told VentureBeat. "There is not a lot of visibility around LGBT. It is murkier because it is not a required disclosure."

"The most tangible next step is to have funds that focus on diversity expand beyond gender and ethnicity to include the LGBT community," says Chris Sinton, the secretary and chair emeritus of StartOut. "With this research, combined with the Williams' Institute data about how the LGBT community is at an economic disadvantage, let's get some of these funds to include LGBT in their definition of diversity. Then, the next step is to have the federal government recognize that we are at a disadvantage, and expand its definition of underrepresented minorities… to include the LGBT community. That's a longer term play."