Saq Nadeem had blazed trails as the first openly gay student body president at Northwestern’s Kellogg School of Management, but when it came to raising money for Paradise for Paws, a boarding service for pets, he hesitated to disclose his sexual orientation to potential investors.

He isn’t alone. 37 percent of lesbian, gay, bisexual and transgender (LGBT) founders (who have raised funds or will raise in the next year) do not come out to their investors, according to an upcoming study of 140 LGBT entrepreneurs by University of Chicago Booth’s Waverly Deutsch and researcher Dr. Vivienne Ming. Though 47 percent of those founders said they didn’t disclose because they don’t believe it is relevant, 12 percent of those founders said they didn’t come out because they were worried it would negatively affect them.

Saq Nadeem, founder of Paradise for Paws.
Saq Nadeem, founder of Paradise for Paws.

Discrimination based on sexual orientation can affect any work environment, but the investor and startup founder relationship is a personal one: It’s often described as a “marriage.” The 24/7 requirements of launching and growing a business mean that investors get to know their founders as they would their closest companions, learning about their work habits, leadership style, desires and relationship status.

Investors don’t know someone’s sexual orientation when they walk into the room. And despite how progressive the tech world is, asking about someone’s sexual orientation isn’t a common question. All this puts the onus on a founder to decide if, when, and how they come out to an investor—and what they’d be risking if they did.

There is little data on the LGBT entrepreneurship community–Deutsch and Ming’s study, which surveyed 140 entrepreneurs, is the largest since 2007. About half of the 87 investors that Deutsche surveyed said they invest with diversity in mind, but that doesn’t always benefit LGBT founders: Deutsch said one investor she talked to mused that if a founder was gay, it could affect hiring and recruiting, depending on the views of a potential employee.

The tech world has several openly gay executives, including Tim Cook, Apple’s CEO, and Peter Thiel, founder of PayPal. But both only publicly came out after significant business success. Even then, they expressed fear before coming out: Thiel (who is funding a lawsuit against Gawker partially motivated by a story they wrote in 2007 about his sexual orientation) told CNN, “The fears you have of people rejecting you are often somewhat misplaced. But at the same time you never quite know what people think so there’s always a sense of anxiety.”

Nadeem overcame his hesitation; he later decided to always come out to investors. Though he was worried that it would negatively affect his ability to fundraise, he realized that it was more important that he build his company with people who supported him in every way.

“What I realized is that it actually didn’t matter,” Nadeem said, mentioning that all his investors were accepting. “It was in my head…Instead of focusing on the aspects of the deal, making the right business case, helping the potential investors, it just took so much of the mindshare of ‘Should I talk about it, should I not talk about it?’”

Rusty Sproat, founder of Figo Pet Insurance.
Rusty Sproat, founder of Figo Pet Insurance.

“It should be a nonissue,” he added. “But if it is an issue then they aren’t the right investor for me.”

Jim Dugan, founder of OCA Ventures, said he doesn’t feel “entitled to know someone’s sexual orientation or preference,” but he cautioned LGBT founders against working with a VC that wouldn’t be comfortable with that conversation. “If you feel like you can’t share [your sexual orientation], I’d question the relationship with a VC,” he said at a recent StartOut event.

“There is an intimacy and a trust in the business, especially early stage,” he explained. And if a founder came out to him, he said “I would be more sensitive and understanding to the whole person. And that would mean stronger results for the entrepreneur.”

But even if an investor is accepting, entrepreneurs struggle with when, and how, to come out in a business setting. This is where the “relevance” of sexual orientation often becomes an issue, founders said. It may not be relevant to a conversation about business goals. But it is relevant when an investor asks what a founder did that weekend.

“I didn’t ever feel the need to lead with, ‘I’m gay and I’m looking for funding for my company,'” said Rusty Sproat, founder of Figo Pet Insurance, which has raised $8 million in funding since launching in 2012.

However, Sproat said it’s important to him to be authentic, and when questions of a significant other have come up, he doesn’t hesitate to mention his husband.“I always just do it authentically and when it’s appropriate,” he said.

“Never ever has that been a priority for me, because I wouldn’t have a need to tell them if I was straight,” he added.

Emily Miller, cofounder of Rumi Spice.
Emily Miller, cofounder of Rumi Spice.

Emily Miller, founder of Rumi Spice, a social enterprise startup that sources saffron from Afghan farmers, echoed his sentiment. “It’s hard because yes, I’m gay, but…I don’t always want to lead with that because I don’t want that to be my defining feature,” she said. “Being gay is a big part of who I am, but I never like being put into a corner.”

Miller said she struggled with this when seeking funding for Rumi Spice. She is a military veteran, West Point alum, and was active in the movement to repeal “Don’t Ask, Don’t Tell.” She sought funding from veteran and military academy alumni funds, and though her activism is clearly stated on LinkedIn and company bios, it never came up in funding conversations. “I knew it could potentially harm me,” she said.

She later came out to her military-related investors, and they were completely accepting, she said. In hindsight, by worrying about how her sexual orientation would affect her prospects, Miller feels she may have missed funding and mentorship opportunities from organizations such as StartOut.

If you feel like you can’t (share your sexual orientation), I’d question the relationship with a VC

 “I never even thought about turning to the LGBT community,” she said. “Unfortunately in my mind, when I think about being a lesbian, I think about it as more of a liability. I never thought of it as maybe there are people out there who want to support LGBT entrepreneurs.”

And it’s not totally surprising that she sees her sexual orientation as a hurdle: In 28 states it’s still legal to fire someone for being a member of the LGBT community. That impacts the workplace: 21 percent of lesbian, gay, bisexual or transgender adults said they have experienced workplace discrimination according to Pew, and 53 percent of LGBT workers hide their sexual identity at work, a 2014 Human Rights Commission study found.

“There are clearly still business risks associated with being LGBT,” said Deutsch, the UChicago Booth researcher.

But that’s why, she said, it’s important for lesbian, gay, bisexual and transgender entrepreneurs to launch businesses, to change the conversation on a larger scale.

“We need examples of really successful LGBT entrepreneurs from the beginning, so this question of whether it is relevant to business performance can be put aside,” she said.