When Til Klein and Jochen Beutgen came across Gaingels, the US-based syndicate of angel investors backing LGBTQ+ founders, they wondered why there wasn't a company looking to do the same for Europe's LGBTQ+ startup community. Five years later, with such a company still not existing, Klein and Beutgen decided they should try to launch one themselves.
In 2023, the duo launched Identity.vc, a venture capital firm that invests in early-stage companies with at least one founder or executive who identifies as a member of the LGBTQ+ community. The Berlin-based company is currently raising €50 million for its debut fund and has raised €15 million to date. The founders also brought on board Mari Luukkainen, who has previous operating and investing experience, as a managing director.
The company writes checks ranging from €250,000 to €1.5 million in companies from pre-seed to Series A stages. The company is sector agnostic and invests in Europe and beyond. Identity.vc has backed four companies to date, including eco.mio, a software plugin that helps companies manage the environmental impact of their business travel, and Paxton, an AI legal tech company.
“The majority of LGBTQ+ founders: They’re not out to their investors because they feel like that’s a detriment,” Klein told JS. “We think that’s a huge mistake and [that means] you don't have this trusted relationship with your investors. Those investors that don't like it, you don't want them on your cap table. You have to be able to be yourself.”
Klein said they've received a lot of positive feedback on the strategy, and fundraising hasn't been too difficult so far. He added that LPs are looking for funds that offer them this type of diversification. He cited a recent Morgan Stanley survey that found 45% of U.S. investors were too looking for a way to support LGBTQ+ founders.
Not surprisingly, investors see the value in supporting diverse teams – many of them to research have shown that diverse teams outperform non-diverse teams – but it’s still refreshing to see that LPs and the European startup community have embraced the company. Identity.vc’s story is a bright spot at a time when some companies focused on investing in diverse founders have struggled to raise money in the US, and others have faced legal pressure for their thesis.
“So far, the investors and other venture capital funds have been helped very positively. They enjoy working with us and our experience,” Klein said. “When I talk to regular funds, they also know that they need to be more diverse. They see us as an opportunity to increase their diversity. We have not yet experienced that backlash, perhaps because Europe is so much further along when it comes to diversity investments.”
While the company drew inspiration from Gaingels, Klein said they intentionally decided to do things a little differently. He said they wanted to attract a traditional fund, rather than a syndicate, so that follow-on investments would be easier.
The size of the fund was also deliberate. While some people recommended the firm start with a smaller fund, say €20 million, Klein said they didn’t want to do that. They wanted a larger debut fund to show how seriously they were taking this opportunity. Klein added that they also wanted to charge a high management fee so they would have enough capital to start building the European community for LGBTQ+ founders and investors.
“In the US there is a real LGBTQ+ investor community — that's not the case in Europe,” Klein said. “We need resources and people who can do community work.”
The company launched a Slack channel for the community, which currently has 300 members. The company has also organized events in Madrid, Amsterdam and Paris to create spaces where LGBTQ+ founders and investors can meet and connect. He said these initiatives not only help their company build a community, but can also help with deal flow for Identity.vc and help startups find other sources of capital as well.
“We bring the local community together, and you’d be surprised how little LGBTQ+ founders and investors are connected,” Klein said. “We can create value by bringing local people together. If there’s an early-stage startup that’s too early for us and an angel investor, I can bring them together.”
The company has only raised 30% of its fund target to date, but is already starting to make a difference – a difference that will continue to grow as the company raises more capital.
“There are multiple reasons why we think it's necessary,” Klein said of Identity.vc's existence. “We strongly believe we can perform better because diversity-driven performance and supporting the LGBTQ+ community give us unique access to startups and access to exciting deals.”
