LGBTQ+ entrepreneurs more interested in making a positive impact than straight counterparts

A new report has highlighted that LGBTQ+ business owners in the US are just as focused on community impact as they are on profits.

Small businesses play a vital role in their communities, providing valuable goods, services and jobs. In the US, 99 per cent of businesses – those with fewer than 500 employees – are considered to be a small-to-medium enterprise (SME).

Forty-six per cent of Americans work for an SME.

A new study from payroll specialists Gusto has shed light on a particularly dedicated group within the entrepreneurial landscape: LGBTQ+ founders.

Gusto’s 2024 New Business Formation Report surveyed more than 1,300 entrepreneurs who launched businesses in 2023, revealing some insights into the motivations and priorities of queer business owners.

The study revealed that members of the LGBTQ+ community are represented among new business owners at the same rate they are within the US population. The LGBTQ community makes up eight per cent of the US population, and that’s the percentage of entrepreneurs who started a business last year. That share is similar to 2021, when seven per cent of new business owners identified as queer.

LGBTQ+ business owners want to make an impact

The report noted that for 70 per cent of LGBTQ+ business owners, having a positive effect on the local communities was a driving factor in creating their business, compared to 53 per cent of all business owners who took part in the survey.

Gusto’s research also found that LGBTQ entrepreneurs are about one-third more likely to start their businesses with the explicit goal of having a positive impact in their community.

According to Nich Tremper, a senior economist at Gusto, the LGBTQ+ community’s history of creating a “found and chosen community”, based on shared experiences of broad discrimination, is a key driver for queer business owners wanting to make a positive impact.

“No matter where folks come from, queer people have had to create a community,” Tremper said. “That really creates a sense of ownership and wanting to support that community.”

The financial resiliency of LGBTQ+ business owners

The survey also found that queer business owners tend to need less start-up funding than their heterosexual peers. In 2023, 40 per cent of LGBTQ+ owners started with less than $1,000 (£786). Another disparity shows that only 17 per cent of LGBTQ+ business started with more than 10 times that, compared with 31 per cent of all new businesses.

However, that disparity may come from the fact that queer founders start smaller than average businesses. In 2023, 27 per cent of new LGBTQ+-owned businesses had no employees, compared to 20 per cent of all new businesses.

The data pointed to another funding disparity, with 86 per cent of LGBTQ+ business owners launching their venture using their own assets. Only 26 per cent of queer founders used external funding, compared with more than 30 per cent of all entrepreneurs.

Tremper acknowledged that fear and discrimination could make queer business owners shy away from seeking external funding from banks or investors. He cited data points from the regional Federal Reserve Banks which revealed that LGBTQ+ business owners were “eight per cent less likely to receive the full funding they asked for”.

He stressed how important that funding can be, and how developing personal relationships can influence getting that loan or investment.

“A key part is building personal relationships, and, if you can’t build that relationship, by sharing personal pieces of yourself,” he said.

Overall, Tremper was encouraged by the representation of new LGBTQ+ business owners.

“I think entrepreneurship is an optimistic act, one [where] somebody is taking a bet on themselves,” he said. “What our survey shows is that LGBTQ+ owners are taking their place in that community and bringing their ideas to market in a way that is really exciting.”