When Till Klein and Jochen Bütgen met Gaingels, a US-based angel investor syndicate that supports LGBTQ+ founders, they wondered why there wasn't a company doing the same in Europe's LGBTQ+ startup community. Five years later, when no such company still existed, Klein and Bütgen decided to start their own.
In 2023, the two founded Identity.vc, a venture 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 firm is currently raising €50 million for its first fund, having raised €15 million to date. The founding partners also brought on Mari Luukainen, who has previous operating and investment experience, as a principal.
The firm writes checks of 250,000 to 1.5 million euros to companies in the pre-seed to Series A stage. The firm is industry agnostic and invests across Europe and other regions. Identity.vc has backed four companies to date, including eco.mio, a software plugin that helps companies manage the environmental impact of business travel, and Paxton, an AI legal tech company.
“The vast majority of LGBTQ+ founders don’t come out to investors because they feel it could be a disadvantage,” Klein told TechCrunch. “We think that’s a big mistake. [that means] “You don't have trust with your investors. You don't want to have investors on your cap table who don't like that trust. You should be able to be yourself.”
Klein said he's gotten a lot of positive feedback about the strategy and fundraising hasn't been too difficult so far. He added that LPs are looking for funds that bring that diversity. He cited a recent Morgan Stanley survey that found 45% of U.S. investors are looking for ways to support LGBTQ+ founders.
It's no surprise that investors see value in backing diverse teams — numerous studies have shown that diverse teams outperform non-diverse ones — but it's still nice to see the company being embraced by LPs and the European startup community. At a time when some firms focused on investing in diverse founders have struggled to raise capital in the U.S. and others have faced legal pressure over their doctrine, Identity.vc's story is a silver lining.
“So far we've had very supportive relationships with investors and other VCs. They're excited to work with us and our experience,” Klein said. “When I talk to regular funds, they realize they should be more diverse too. They see us as an opportunity to diversify. We haven't experienced that pushback yet, and that's probably because Europe is much more advanced when it comes to investing in diversity.”
While the firm was inspired by Gaingels, it deliberately decided to do things a little differently, Mr. Klein said: He wanted to set up a traditional fund rather than a syndicate to make it easier to make follow-on investments.
The size of the fund was also intentional. Some had recommended they start out with a smaller fund of around €20 million, but Klein said they didn't want to do that. They wanted a larger debut fund to show how serious they were about the opportunity. Klein added that they also wanted to charge high management fees to ensure they had enough capital to start building a European community for LGBTQ+ founders and investors.
“There's a real LGBTQ+ investor community in the U.S. that's not there in Europe,” Klein said. “We need the resources and the people to be able to do that.”
The company launched a Slack channel for its community, which now has 300 members. The company has also hosted events in Madrid, Amsterdam and Paris to create spaces where LGBTQ+ founders and investors can meet and network. These efforts not only help the company build its community, but also aid Identity.vc's deal flow and help startups find other sources of funding, he said.
“We bring the local community together, and you'd be surprised at how few connections there are between LGBTQ+ founders and investors,” Klein said. “Bringing local people together creates value. If there are early-stage startups that are too early for us and angel investors, I can bring them together.”
Though the company has only raised 30% of its funding goal so far, it has already begun to see results 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 that our diversity-focused performance and support for the LGBTQ+ community will enable us to outperform because it gives us unique access to startups and interesting deals.”