Fellowship Spotlight: Chasing Rainbows
Ben Stokes, founding partner of Chasing Rainbows, is guided by something deeper than simply getting money into queer founders’ hands. “We want to help people realize that their authentic self is their best self,” he says, “and when they are their best self, they can focus 100% of their energy on creating a business that will solve the problem they’re going after.”
Chasing Rainbows
Chasing Rainbows invests in early-stage, LGBTQ+-founded companies as a way of closing gaps in access to capital for LGBTQ+ founders. “We’re doing kind of an ecosystem flywheel attack,” shares co-founder Patrick Driscoll. “We’re trying to attract LGBTQ+ dollars from high-net-worth individuals for LPs and institutions that care about underrepresented founders to deploy capital downstream to the founders themselves.” The fund is also taking what they call “friendly” dollars from people outside of the LGBTQ+ community.
Stokes explains that, when he first decided to launch a fund, he set out to help all underrepresented founders in the VC space. But when he received advice from Adam Sterling, who runs the VC University class at UC Berkeley, he crystallized his focus to be a bit more personal. “Sterling advised that I really needed to lean into the networks and the things that I knew.” He looked across the ecosystem as a whole and realized that—even though LBGTQ+ companies boast higher rates of job creation, patent registration, and successful exits—there was no specific early-stage LGBTQ+ fund at the time. “We really leaned into that,” Stokes reflects, “and I think that made a massive difference for us.”
Driscoll sees this specificity as a promising and impactful approach. “Ideally,” he says, “this will lead to generational wealth creation for the LGBTQ+ ecosystem as a whole, since historically, less than 0.7% of VC has gone to this community.”
Starting Out at StartOut
Driscoll and Stokes first met at StartOut, an LGBTQ+ ecosystem builder. At the time, Stokes was already a prolific angel investor and a founder who had brought a company from the ideation stage to a successful exit. Driscoll, on the other hand, had previously worked as a VC operator with 500 Global and managed multi-million dollar accelerator programs before joining a large growth-stage company to scale their VC products. “I had the macro lens and the strategic, back office perspective,” Driscoll says, contrasting with Stokes’ direct investment experience. “So we complement each other in several ways.”
And these complementary skillsets and contrasting career journeys serve to extend the pair’s reach as well. “Because of our brand within the LGBTQ+ ecosystem,” Driscoll offers, “people know us and they know to come to us if they have a great idea or a great founder. Our counterparts at other VC funds will send us deals because they think of us as ‘the queer fund,’ so any time they come across a deal that happens to have an LGBTQ+ founder, they’re like, ‘Oh, you should check out Chasing Rainbows!’”
Closing Gaps Particular to the LGBTQ+ Community
In his work as an angel investor, Stokes noticed a trend among LGBTQ+ founders. “Sadly—for a lot of them—when they’d come out, they lost their friends and family due to bigotry. When the very first round of fundraising is literally called ‘friends and family’ and you don’t have any,” Stokes probes, “where are you supposed to go to get access to capital?”
Compounded with the limitations that make it difficult for LGBTQ+ founders to source capital from their informal networks are the barriers they face when pursuing institutional dollars or private investments outside of their personal circles. Being openly LGBTQ+ in the VC world can result in being discriminated against by LPs who use their political or religious views to justify their refusal to invest in LGBTQ+ companies.
Coupling these observations with the starkly low percentage of capital going to LGBTQ+ founders, Stokes was further motivated to address the clear need to focus specifically in this area. “Hearing stories of queer founders experiencing discrimination made me realize that there really needed to be somebody who stood up for our community,” he explains, “and actually invested in the early stage to not only give them an opportunity but also showcase the incredible talent that our community has.”
The Disruption of Discrimination
“There’s a perceived risk of being too femme, too butch, coming across as super gay or super queer,” Driscoll points out, offering examples of how queer founders contort and code switch in order to avoid being discriminated against. According to a recent report from Proud Ventures, 75% of LGBTQ+ founders report concealing their identity from investors at some point during fundraising. “It’s sad,” Driscoll goes on, “that these folks have to alter the way that they come across to the external world in order to feel like they are de-risking themselves. There is no risk associated with being queer, being gay, being a lesbian, being trans. That’s not a risk to someone running a successful business, but unfortunately there’s a lot of fear around that.”
Stokes reflects on his own experiences encountering homophobia early in his career. He shares an example that happened while attending a professional conference in the U.S. with attendees from all over the world. While heading to an event in a car with a small group, a colleague expressed severe and violent hatred for gay people. “I was sitting in the car just thinking, if I say anything, I could die right now. So I just sat there and said nothing.” He considers this time in his life, when he would neutralize his partner’s pronouns while talking with coworkers to mask his sexuality and leave his partner behind instead of bringing him along to professional engagements. “I was wasting so much energy saying ‘they/them’ or trying to code switch,” he laments, “which at the end of the day meant that I wasn’t performing at my absolute best because I wasn’t able to bring my whole self to the situation.”
Offering a Breath of Fresh Air
Having personally experienced the dynamics they’re working to interrupt, both Stokes and Driscoll have a deep understanding of how powerful it can be to not have to hide. “If someone has to stretch the truth, go back in the closet, or code switch,” Driscoll says, “the second they get in front of Ben and me or other queer investors, it’s just a breath of fresh air. There’s an immediate affinity.”
Stokes shares more on this topic, saying, “When they go to other investors, who are usually the straight White men of the world, they often feel like they’re having to present themselves in front of their bullies from school.” Chasing Rainbows offers a clear alternative. “When they sit across the table from us, they know they’re not going to get bullied here. They’re going to be evaluated on their business idea and how they’re going about executing their product, their timing, and their team.”
The Power of Visibility
“The element of visibility is so important,” Stokes underscores. “That’s the piece we’re leaning in on: being very visible in the communities we serve to ensure that everyone knows who we are and that we’re getting that deal flow as well.”
And the firm’s visibility seems to be doing just that: accessing deals. “It’s amazing when I look back at the past year,” Driscoll says reflectively, “what we’ve been able to accomplish in terms of brand visibility, with amazing founders approaching us to get in on the rounds before we were even close to having capital to spend.” Stokes speaks to the catalyzing effect that their early investments are making as well. “It’s really powerful to see that a fund like ours investing in a founder early allows them to use that investment to raise hundreds of millions of dollars outside of us. It’s fantastic.”
Chasing Rainbows’ track record so far suggests that Driscoll and Stokes are focusing their energy in the right direction and positioning themselves effectively. “In the last 18 months,” Stokes explains, “we’ve had three exits and warehoused a couple of other deals that will definitely become unicorns.” He shares the example of one deal Chasing Rainbows got in on early, a cannabis compliance company being purchased by Green Check Verified, one of the largest fintech companies working in the cannabis space, doing about $680M monthly in GMV.
Driving Change for the Entire Ecosystem
“People are excited about what we’re doing,” Driscoll says. “We are obviously interested in having a large impact in the LGBTQ+ community, but we are returns focused because there’s a lot riding on our fund’s success to outperform the market norm. If we prove through our fund that these queer founders are going to outperform and change the future with their innovative ideas and services and products,” he says with confidence, “then it’s a win-win situation for our entire ecosystem.”
“And this is just the beginning,” he adds, elevating the pair’s plans to have several more funds after this initial one. “We’re building a long lasting firm with this small $10M fund, and ideally we’ll expand to a significantly larger fund 2; we’ll start getting institutional dollars from endowments and foundations. We’re in it for the long haul and excited to be driving this change for the whole LGBTQ+ startup world.”
Participating in the VC Include Fellowship
Stokes and Driscoll came to the VC Include Fellowship with plenty of accelerator experience, and they were still able to gain plenty from our program. “Not only were the speakers and the sessions great,” Stokes points out, “but the community that’s been created by the team at VCI is where I see so much value.”
“As an LGBTQ+ fund, we were thrilled to be accepted into the program,” says Driscoll, who is White and appreciates being welcomed into a space that was curated primarily for Black, Latinx, and woman founders.
The other programs they’ve participated in were good, they say, but, Driscoll offers, “The content that was provided, the speakers that were brought in, and the network that we’ve cultivated with our cohort mates and even the speakers, instructors, and VCI staff has been a huge differentiator. The caliber is top notch and motivational.”
It’s a pleasure to be able to add value to the work of Chasing Rainbows, as we know they will continue to add immeasurable value to the lives of so many.
