Boston-based Launch Angels announced a completely different type of affinity venture fund today. VentureOut will back early stage companies that have lesbian, gay, bisexual, and transgender founders and management team members.
With a stated goal of creating “the next generation of LGBT entrepreneurs,” the new (expected $2 million) fund is a joint effort between Greg Wiles, who serve as the managing director of the VentureOut Fund from the West Coast, and Launch Angels’ chief executive Shereen Shermak.
The idea of “affinity funds,” where people come together around a specific purpose, is something Shermak has developed as the focus for Launch Angels. The focus on LGBT founded and led businesses seemed like a perfect fit, and after talking with members of the community who agreed, Shermak connected with Wiles, who’d had the same idea on the West Coast.
“It’s not until recently that a lot of LGBT entrepreneurs have been coming out of the closet, and are out,” Wiles said, “so it seemed to make sense to try to focus a venture capital fund on LGBT entrepreneurs, and to help leverage the LGBT community.”
Realizing that the idea might work, Wiles planned on raising $10-15 million for a LGBT-focused fund, but connected with Launch Angels, which had a similar idea but with a small fund to test the idea. “A lot of folks are skeptical that there are enough LGBT entrepreneurs out there to support a successful venture capital fund. But we are confident that there are,” Wiles said. Launch Angels plans to start off small, funding 12-16 companies in the next year, prove that the idea can work, and then go out and raise a larger fund.
I asked both Shermak and Wiles about the challenges that both the fund and LGBT entrepreneurs might face by participating in the fund.
“We feel pretty strongly that folks who have faced challenges like that tend to make better entrepreneurs. It kind of becomes another qualification that an entrepreneur can work through challenges faced by the LGBT community,” Shermak said.
She added: “In the VC world, people tend to invest in folks who demographically identify as they do…LGBT entrepreneurs don’t quite fit the mold of the typical VC firms, and although there aren’t a lot of numbers, there are a lot of anecdotes to back that up.”
For Wiles, there is a difference between an issue that has been discussed in the media more recently, relating to the lack of openly gay Fortune 500 CEOs, and early-stage startup founders. “With Fortune 500 companies, it’s not about the CEOs, it’s about the company. But with entrepreneurs, you are talking about companies that are starting from the ground up and it’s about the entrepreneur—the business is them, it’s their passion,” he said.
Wiles added that he has spoken to some entrepreneurs who’ve expressed concern about taking money from a fund like VentureOut that will identify them as gay and put a label on them or stigmatize them. “That’s a very minor concern among most of the folks that I’ve spoke to,” he said.
Shermak believes this is the perfect time to launch VentureOut. “We hope to have a huge impact. Now that it’s public, we can really get the word out in the LGBT community,” she said.
The VentureOut fund will be promoted through a series of networking events on both coasts. The first event will take place in New York City on July 29. For more information, please contact [email protected]