For venture funds focused on LGBTQ+ founders, fundraising has always been an uphill battle. But recent news that Colorful Capital halted efforts to raise its debut fund has come as a big disappointment to other members of this close-knit VC community. And it has reinforced concerns about systemic bias against these and other under-represented members of the venture ecosystem.
Colorful Capital co-founders Megan Kashner and William Burckart launched their firm in June 2022, as a corrective to the findings of research by Kashner, a professor of sustainability and social impact at Northwestern University’s Kellogg School of Management, into the structural fundraising hurdles that LGBTQ+ founders face. Their debut fund was targeting $20 million, as Venture Capital Journal previously reported.
At a time when raising capital is tough for any VC firm without an indisputable track record of success, it’s fair to wonder whether Colorful Capital’s failed fundraising is more a result of its precarious status as an emerging manager than of discrimination tied to its partners’ identities and mission.
Neither Kashner nor Burckart responded to VCJ’s requests for comment, but we spoke with LGBTQ+ fund managers and supporters about the broader implications of the duo’s reported decision to stop trying to raise a debut fund.
Densil Porteous, CEO of Pride VC in Columbus, says Colorful Capital’s fundraising challenge “is not singularly theirs.” He believes it reflects not only being an emerging manager but also systemic roadblocks that LGBTQ+ and other under-represented investors and founders face for who they are, which complicate “fundraising for organizations like Colorful Capital and ourselves and others.”
Porteous sees queer identity as one of several expressions of personal identity that become an obstacle “if you don’t look like or speak like or are educated like some of the folks who are traditional in this space,” namely, cisgender white males.
Many funds-of-funds and other institutional limited partners that talk about backing diverse founders “are not investing in Fund Is,” says Ben Stokes, founder and managing partner of Chasing Rainbows. “They’ll invest in Fund II or Fund III. But the challenge for an emerging manager is: How do you get to Fund II or Fund III if you can’t get Fund I off the ground, or you can’t [reach] a respectable number in order to raise a second fund?”
Stokes was able to hold a first close last year for Chasing Rainbows’ debut venture fund, which is targeting $10 million. Last week, the San Francisco-based firm extended its fundraising period by six months to March 4, 2025, with its LPs’ approval.
Chasing Rainbows is pulling out all stops to raise money. In addition to cutting the minimum initial commitment it’s willing to accept from LPs to $25,000 from $50,000, it has tried to create a stronger sense of community around its founders by making LPs feel they are investing alongside Chasing Rainbows, Stokes says.
“We’ve done a poker tournament and other founder-LP meet-and-greets,” he notes. “We do a monthly report to all of our investors on all of our funds” and where they are deployed.
The firm recently set up a Donor-Advised Fund (DAF) that allows it to take donations as well. That’s critical for individuals “having a liquidation event [who] need a tax reduction rather than an investment opportunity,” says Stokes. Managed by CataCap, an initiative of Impactree Foundation, the DAF also allows Chasing Rainbows to discuss donations with corporates as a form of investment. That can also be a way for large companies to support their internal employee resource groups (ERGs), including those based on LGBTQ+ identity, which have come under fire in recent months from conservatives, he adds.
“Essentially what I’m telling you is we’re trying everything possible and having to be creative to [get this fund] to where we are able to deploy the capital we need,” says Stokes. Despite its funding constraints, Chasing Rainbows has invested in 16 start-ups out of Fund I.
Pride VC has invested in seven companies so far out of its debut fund, which closed on $10 million in 2020. While continuing to seek new deals, it also helps founders gain access to a larger network of investors.
“Normally, if we’re going to cut a check, we’re going to find other funds that want to come in alongside us,” says T Wolf Starr, managing partner of Pride VC. “We might be one of the smaller checks they’ll receive, but we’ll make intros to more traditional VCs that are friends of ours and create those opportunities for the LGBTQ+ founders.
“Most VCs at least say they want to invest in the LGBTQ+ community but [claim] they can’t find those deals,” Starr notes. “We work really hard to showcase the deals so that they won’t be able to say they can’t see those deals.”
Expanding networks
Starr and Porteous see cause for hope in collaborations to build and extend relationships to a broader group of investors that groups such as LGBT+ VC (sic) and Venture Out are orchestrating.
LGBT+ VC, a New York nonprofit, takes a multi-prong approach to narrowing the investment and wealth gap for queer people in the VC community. Founded in late 2022 by Jackson Block, who was previously on Colorful Capital’s investment team, and Tiana Tukes, the organization hosts an annual VC summit for LGBTQ+ and allied investors and entrepreneurs.
The nonprofit also has a legal advisory council that educates founders and VCs about laws and policies affecting their community, with representatives from Cooley, Gunderson and other leading VC law firms. A college fellowship, offered in partnership with the NYC Mayor’s Office to support first-generation and LGBTQ+ youth, enables students to network with investors and entrepreneurs, learn the basics of venture capital and do research on the innovation economy.
“Bringing everyone together lets us know we’re not alone,” and it is also an opportunity to share best practices, says Starr at Pride VC. It also empowers emerging managers to tell prospective LPs about success stories within the broader LGBTQ+ venture community that they may not be aware of, he adds.
These collaborative efforts have traditionally included only people within the LGBTQ+ community and not those who are adjacent to it, says Porteous. “But that has been the impetus for a lot of [larger financial institutions like JPMorgan Chase and the New York Stock Exchange to] start to look at LGBTQ+ venture as an important thing,” he says.
Implicit bias
Block at LGBT+ VC notes that queer founders face both explicit discrimination and implicit bias from VCs. As an example of the former, he says, “Certain investors even in progressive beacons like San Francisco have tried to remove [LGBTQ+ people] from their cap tables” because of the belief that some queer people try to recruit youth to their lifestyles — despite lack of evidence of any such efforts.
The broader funding gap for all under-represented entrepreneurs, who reportedly receive less than 2 percent of all venture funding, is “institutionalized in the community and impacts LGBTQ founders” because many of them are also women and/or people of color, Block notes.
Given VCs’ preoccupation with clear global winners and outsized returns, a common misperception that makes it harder for LGBTQ+ founders to raise money is that the market opportunities are more limited for innovations that start by solving for LGBTQ+ pain points, he explains.
Such a perception fails to recognize that “founders pivot and expand,” Block explains. “You might be solving one problem for LGBTQ families and it actually might be impacting a variety of different families around the world.”
Federal help wanted
Venture Out Partnership, a working group made up of impact fund managers, founders and asset allocators like Mercer and TPG, met with representatives of the Biden administration in June to argue for a national equivalent of a database recently mandated by California to track how assets are being allocated to LGBTQ+ founders and investors. They also asked for more federal grant money to be “circled for LGBTQ people in venture,” Amy Siskind, the working group’s founder, tells VCJ.
Siskind is CEO and a general partner at Causeway Investments, a secondary fund focused on early-stage investments. She launched Venture Out Partnership in July 2023 after learning that many venture funds deploy capital to various buckets of diverse founders without including LGBTQ+ as a measure of diversity.
Citing the need for a national database, Siskind says, “Once you’re identifiable, then you can track [for] venture fund A, what percentage of your employees are LGBTQ, what percentage of your investments are going to LGBTQ founders. When there’s no accountability, it’s impossible to measure.”
A subgroup within Venture Out was instrumental in getting venture capital database Crunchbase to create a tagging system for VCs and founders to voluntarily self-identify as LGBTQ+ to make it easier for interested investors to find them. StartOut, a nonprofit whose Pride Economic Impact Index is one of the only tools that tracks VC investments in LGBTQ-led companies, said last year that 37 percent of founders who identify as LGBTQ+ are not “out” to their investors due to worries about discrimination.
Incentivizing recruitment
Some of the people VCJ spoke with voiced concern about funds that originally focused on LQBTQ+ founders branching out to invest in a broader group of founders. But Block at LGBT+ VC says getting more LGBTQ+ investors in the VC community is a priority.
As part of its work with 3,300 new and aspiring LGBTQ+ investors, Block’s nonprofit provides consulting for staffers at large investment firms, such as Bessemer Venture Partners, who belong to LGBTQ+ pride-oriented employee resource groups, helping them bolster their influence on their companies’ recruitment practices.
“The more you have LGBTQ investors, the more you’ll have more LGBTQ-led funds,” says Block. “While you can invest exclusively/inclusively in LGBTQ-led companies, broadly speaking it’s just stronger to have more [LGBTQ+] fund managers because it influences your decision-making.”
For venture funds focused on LGBTQ+ founders, fundraising has always been an uphill battle. But recent news that Colorful Capital halted efforts to raise its debut fund has come as a big disappointment to other members of this close-knit VC community. And it has reinforced concerns about systemic bias against these and other under-represented members of the venture ecosystem.
Colorful Capital co-founders Megan Kashner and William Burckart launched their firm in June 2022, as a corrective to the findings of research by Kashner, a professor of sustainability and social impact at Northwestern University’s Kellogg School of Management, into the structural fundraising hurdles that LGBTQ+ founders face. Their debut fund was targeting $20 million, as Venture Capital Journal previously reported.
At a time when raising capital is tough for any VC firm without an indisputable track record of success, it’s fair to wonder whether Colorful Capital’s failed fundraising is more a result of its precarious status as an emerging manager than of discrimination tied to its partners’ identities and mission.
Neither Kashner nor Burckart responded to VCJ’s requests for comment, but we spoke with LGBTQ+ fund managers and supporters about the broader implications of the duo’s reported decision to stop trying to raise a debut fund.
Densil Porteous, CEO of Pride VC in Columbus, says Colorful Capital’s fundraising challenge “is not singularly theirs.” He believes it reflects not only being an emerging manager but also systemic roadblocks that LGBTQ+ and other under-represented investors and founders face for who they are, which complicate “fundraising for organizations like Colorful Capital and ourselves and others.”
Porteous sees queer identity as one of several expressions of personal identity that become an obstacle “if you don’t look like or speak like or are educated like some of the folks who are traditional in this space,” namely, cisgender white males.
Many funds-of-funds and other institutional limited partners that talk about backing diverse founders “are not investing in Fund Is,” says Ben Stokes, founder and managing partner of Chasing Rainbows. “They’ll invest in Fund II or Fund III. But the challenge for an emerging manager is: How do you get to Fund II or Fund III if you can’t get Fund I off the ground, or you can’t [reach] a respectable number in order to raise a second fund?”
Stokes was able to hold a first close last year for Chasing Rainbows’ debut venture fund, which is targeting $10 million. Last week, the San Francisco-based firm extended its fundraising period by six months to March 4, 2025, with its LPs’ approval.
Chasing Rainbows is pulling out all stops to raise money. In addition to cutting the minimum initial commitment it’s willing to accept from LPs to $25,000 from $50,000, it has tried to create a stronger sense of community around its founders by making LPs feel they are investing alongside Chasing Rainbows, Stokes says.
“We’ve done a poker tournament and other founder-LP meet-and-greets,” he notes. “We do a monthly report to all of our investors on all of our funds” and where they are deployed.
The firm recently set up a Donor-Advised Fund (DAF) that allows it to take donations as well. That’s critical for individuals “having a liquidation event [who] need a tax reduction rather than an investment opportunity,” says Stokes. Managed by CataCap, an initiative of Impactree Foundation, the DAF also allows Chasing Rainbows to discuss donations with corporates as a form of investment. That can also be a way for large companies to support their internal employee resource groups (ERGs), including those based on LGBTQ+ identity, which have come under fire in recent months from conservatives, he adds.
“Essentially what I’m telling you is we’re trying everything possible and having to be creative to [get this fund] to where we are able to deploy the capital we need,” says Stokes. Despite its funding constraints, Chasing Rainbows has invested in 16 start-ups out of Fund I.
Pride VC has invested in seven companies so far out of its debut fund, which closed on $10 million in 2020. While continuing to seek new deals, it also helps founders gain access to a larger network of investors.
“Normally, if we’re going to cut a check, we’re going to find other funds that want to come in alongside us,” says T Wolf Starr, managing partner of Pride VC. “We might be one of the smaller checks they’ll receive, but we’ll make intros to more traditional VCs that are friends of ours and create those opportunities for the LGBTQ+ founders.
“Most VCs at least say they want to invest in the LGBTQ+ community but [claim] they can’t find those deals,” Starr notes. “We work really hard to showcase the deals so that they won’t be able to say they can’t see those deals.”
Expanding networks
Starr and Porteous see cause for hope in collaborations to build and extend relationships to a broader group of investors that groups such as LGBT+ VC (sic) and Venture Out are orchestrating.
LGBT+ VC, a New York nonprofit, takes a multi-prong approach to narrowing the investment and wealth gap for queer people in the VC community. Founded in late 2022 by Jackson Block, who was previously on Colorful Capital’s investment team, and Tiana Tukes, the organization hosts an annual VC summit for LGBTQ+ and allied investors and entrepreneurs.
The nonprofit also has a legal advisory council that educates founders and VCs about laws and policies affecting their community, with representatives from Cooley, Gunderson and other leading VC law firms. A college fellowship, offered in partnership with the NYC Mayor’s Office to support first-generation and LGBTQ+ youth, enables students to network with investors and entrepreneurs, learn the basics of venture capital and do research on the innovation economy.
“Bringing everyone together lets us know we’re not alone,” and it is also an opportunity to share best practices, says Starr at Pride VC. It also empowers emerging managers to tell prospective LPs about success stories within the broader LGBTQ+ venture community that they may not be aware of, he adds.
These collaborative efforts have traditionally included only people within the LGBTQ+ community and not those who are adjacent to it, says Porteous. “But that has been the impetus for a lot of [larger financial institutions like JPMorgan Chase and the New York Stock Exchange to] start to look at LGBTQ+ venture as an important thing,” he says.
Implicit bias
Block at LGBT+ VC notes that queer founders face both explicit discrimination and implicit bias from VCs. As an example of the former, he says, “Certain investors even in progressive beacons like San Francisco have tried to remove [LGBTQ+ people] from their cap tables” because of the belief that some queer people try to recruit youth to their lifestyles — despite lack of evidence of any such efforts.
The broader funding gap for all under-represented entrepreneurs, who reportedly receive less than 2 percent of all venture funding, is “institutionalized in the community and impacts LGBTQ founders” because many of them are also women and/or people of color, Block notes.
Given VCs’ preoccupation with clear global winners and outsized returns, a common misperception that makes it harder for LGBTQ+ founders to raise money is that the market opportunities are more limited for innovations that start by solving for LGBTQ+ pain points, he explains.
Such a perception fails to recognize that “founders pivot and expand,” Block explains. “You might be solving one problem for LGBTQ families and it actually might be impacting a variety of different families around the world.”
Federal help wanted
Venture Out Partnership, a working group made up of impact fund managers, founders and asset allocators like Mercer and TPG, met with representatives of the Biden administration in June to argue for a national equivalent of a database recently mandated by California to track how assets are being allocated to LGBTQ+ founders and investors. They also asked for more federal grant money to be “circled for LGBTQ people in venture,” Amy Siskind, the working group’s founder, tells VCJ.
Siskind is CEO and a general partner at Causeway Investments, a secondary fund focused on early-stage investments. She launched Venture Out Partnership in July 2023 after learning that many venture funds deploy capital to various buckets of diverse founders without including LGBTQ+ as a measure of diversity.
Citing the need for a national database, Siskind says, “Once you’re identifiable, then you can track [for] venture fund A, what percentage of your employees are LGBTQ, what percentage of your investments are going to LGBTQ founders. When there’s no accountability, it’s impossible to measure.”
A subgroup within Venture Out was instrumental in getting venture capital database Crunchbase to create a tagging system for VCs and founders to voluntarily self-identify as LGBTQ+ to make it easier for interested investors to find them. StartOut, a nonprofit whose Pride Economic Impact Index is one of the only tools that tracks VC investments in LGBTQ-led companies, said last year that 37 percent of founders who identify as LGBTQ+ are not “out” to their investors due to worries about discrimination.
Incentivizing recruitment
Some of the people VCJ spoke with voiced concern about funds that originally focused on LQBTQ+ founders branching out to invest in a broader group of founders. But Block at LGBT+ VC says getting more LGBTQ+ investors in the VC community is a priority.
As part of its work with 3,300 new and aspiring LGBTQ+ investors, Block’s nonprofit provides consulting for staffers at large investment firms, such as Bessemer Venture Partners, who belong to LGBTQ+ pride-oriented employee resource groups, helping them bolster their influence on their companies’ recruitment practices.
“The more you have LGBTQ investors, the more you’ll have more LGBTQ-led funds,” says Block. “While you can invest exclusively/inclusively in LGBTQ-led companies, broadly speaking it’s just stronger to have more [LGBTQ+] fund managers because it influences your decision-making.”
