Key Findings

• 5% of Businesses Started in 2023 were Started by LGBTQ Founders

• Making an Impact on Their Communities Is a Top Priority: LGBTQ founders were much more likely than average to say having a positive impact on their communities was a priority for their business. Nearly seventy percent of LGBTQ founders said it was important to make a positive impact on their communities, compared to 56% of all founders.

• LGBTQ Entrepreneurs Are More Likely to Self-Fund Their Business: Eighty-five percent of LGBTQ entrepreneurs funded their business with personal savings or assets, compared to 73% of all entrepreneurs. LGBTQ founders were also more likely than average to need $1,000 or less in start-up funding.

Introduction

Small businesses play a vital role in their communities, providing valuable goods, services, and jobs. LGBTQ entrepreneurs are particularly focused on the relationship between their business and their communities, according to Gusto’s 2024 New Business Formation Report, which surveyed 1,300 entrepreneurs who started a new business in 2023.

LGBTQ business owners were nearly 25% more likely than the average business owner to say it was important to them that their company make a positive impact on the communities they care about, with 69% of LGBTQ business owners listing that goal as a priority, compared to 56% of all the business owners in our survey.

LGBTQ entrepreneurs, who made up 5% of the respondents, were also more likely to fund their business with personal savings or assets and to need $1,000 or less in start-up funding. That self-reliance may reflect a desire on the part of LGBTQ entrepreneurs to start smaller, more community-oriented businesses. It may also be a response to having less access to outside funding.

LGBTQ Founders Started 5% of New Businesses in 2023

About 5% of entrepreneurs in 2023 identified as LGBTQ. This is slightly down from, but in a similar range to, Gusto’s 2021 survey. Recent research from Pew shows that 7.6% of the U.S. population identifies as LGBTQ, with nearly 1-in-5 people in Gen Z doing so. As more people age into entrepreneurship LGBTQ representation will likely increase.

LGBTQ Founders Care About Helping Their Communities

LGBTQ founders show a strong balance between pursuing independence and being attentive to the needs of their communities. New business owners who identified as LGBTQ were much more likely than the average respondent to say that having a positive impact on their communities was important to them: 58% of LGBTQ founders cited this goal as a priority, compared to 56% of all the founders in our survey.

Autonomy and financial independence were also top priorities for LGBTQ founders. Having control of their time and deciding their path in life was the most popular motivator for LGBTQ founders, with 85% citing it as a priority. Meanwhile, 74% of LGBTQ founders said it was important to them to grow a business that would allow them to support themselves and their families far into the future.

The desire for personal and financial freedom also played a major role in many LGBTQ entrepreneurs’ decision to start a business. Wanting flexibility and to be their own boss was by far the most popular reason the entrepreneurs we surveyed started their business, but that was especially true for LGBTQ entrepreneurs: 66% said they wanted more flexibility and to be their own boss, compared to 61% of all entrepreneurs.

LGBTQ Entrepreneurs Are Self-Reliant

LGBTQ business owners tend to need less start-up funding than the average business owner. In 2023, nearly one-third of LGBTQ-owned businesses started with $1,000 or less, compared to 20% of all new businesses. Meanwhile, just 32% of LGBTQ-owned businesses needed more than $10,000, compared to 45% of all new businesses.

That disparity may come from the fact that LGBTQ founders start smaller businesses than average. In 2023, 80% of new LGBTQ businesses employed five or fewer people compared to 45% of all new businesses.

Given that they tend to need less start-up funding, it’s no surprise that LGBTQ entrepreneurs are more likely than average to start their business with their own money. In 2023, 85% of LGBTQ entrepreneurs used personal savings or assets to start their business, compared to 73% of all entrepreneurs.

But in some cases, LGBTQ founders might be self-funding their business out of necessity. A 2024 analysis of LGBTQ-owned firms by regional Federal Reserve Banks showed that LGBTQ-owned businesses were more likely to be denied full financing than non-LGBTQ owned firms, despite the fact that both groups applied for private financing at similar rates. 

Conclusion

LGBTQ business owners are an important part of the entrepreneur community. They understand the vital role businesses can play in their communities by creating new goods, services, and jobs. They also value the independence and financial security starting a business can create for them and their families.