The Business Gay Podcast with Host Calan Breckon
The Business Gay
What are Venture Capitalists?
What are Venture Capitalists with Ben Stokes from Chasing Rainbows

In this episode of The Business Gay Podcast, host Calan Breckon speaks with Founding Partner at Chasing Rainbows, Ben Stokes.

Ben is a trailblazer, a visionary in venture capital, and a dedicated champion of diversity and inclusion. As the Founding Partner of Chasing Rainbows, an early-stage investment fund, he is on a mission to amplify LGBTQ+ voices in the entrepreneurial landscape. Ben’s accolades speak volumes: he is recognized as a 40 under 40 Rising Star of Venture, an LGBTQ+ Pride Leader, and a Top 100 Investor. He is not only an investor but also a mentor, guiding underrepresented founders toward global success. From the UN General Assembly to NFP boards, his influence is felt worldwide. Ben is a driving force for change, shaping a world of radical inclusivity through Chasing Rainbows.

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Key Takeaways for quick navigation:

  • [03:37] Venture capitalists manage and deploy capital into startups for limited partners, aiming for large exits through IPOs or acquisitions.
  • [08:50] Venture capital is best suited for businesses with the potential for high returns and rapid scalability, often seen in the tech industry.
  • [10:56] Not all investments by Chasing Rainbows are tech-related.
  • [16:30] Early-stage investments typically involve signing a safe note, and the founder may give away around 10% to 20% ownership in exchange for funding.
  • [19:29] Founders should focus on achieving revenue early, making their company sustainable, and giving them negotiating power with investors for better deal terms.
  • [19:56] Chasing Rainbows focuses on mentorship and creating an ecosystem playbook model to support founders beyond just providing capital.
  • [20:39] Key advisors help founders build strategies, set expectations, and create KPIs to showcase their growth, making fundraising for the next round more effective.
  • [24:49] Exit strategies are crucial, and Chasing Rainbows looks for companies that can exit within 5 to 7 years, either through IPO or acquisition.
  • [26:40] Chasing Rainbows aims to create long-term relationships, hoping founders will reinvest in the fund or start new ventures after a successful exit.
  • [30:51] Chasing Rainbows welcomes challenges to its focus on LGBTQ+ representation in investments, emphasizing the underinvestment in this community and the positive outcomes of supporting LGBTQ+ founders.

[00:00:00] Calan Breckon: Looking to grow your business PartnerStack accelerates the growth of your partner ecosystem by simplifying every step of your partnership journey so that you can find new customers, grow your market share, and boost demand for your products. Trusted by companies like Monday, Apollo, IO, and Vimeo PartnerStack is your go-to resource for partner management and affiliate program software. Head on over to to take the free quiz on affiliate marketing, or just click the link in the show notes. Now let’s get on to today’s episode.

Welcome to The Business Gay podcast, where we talk about all things business, marketing, and entrepreneurship. I’m your host, Calan Breckon. And on today’s episode, I have founding partner at Chasing Rainbows, Ben Stokes. Ben is a trailblazer, a visionary in venture capital, and a dedicated champion for diversity and inclusion. As the founding partner of Chasing Rainbows, an early stage investment fund, he is on a mission to amplify LGBTQ+ voices in the entrepreneurial landscape. Ben’s accolades speak volumes. He is recognized as a 40 under 40 rising star adventure, an LGBTQ+ Pride leader, and a top 100 investor. He is not only an investor, but he’s also a mentor, guiding underrepresented founders towards global success. From the UN General Assembly to NFP boards, his influence is felt worldwide. Ben is a driving force for change, shaping a world of radical inclusivity through Chasing Rainbows. I am so excited for today’s episode because Ben is going to be walking us through all the stages of a typical venture capital deal, from initial contact all the way to the final exit and a little bit of extra in there as well. So with all that, let’s jump in.

[00:01:50] Calan Breckon: Awesome. Thank you so much for joining me on the show today. Ben. How’s it going?

[00:01:54] Ben Stokes: Yeah, I’m great. Thanks. How about yourself?

[00:01:56] Calan Breckon: I’m doing very good. I’m very excited to have this conversation about venture capitalism with you. So what I want to do today is I want to jump into all the bits and bobs about venture capitalism, but first, how about you tell everybody a little bit more about your background and who you are and why you’re having this conversation.

[00:02:13] Ben Stokes: Yeah, sure. So I’m the founding partner of Chasing Rainbows, which is an early stage venture fund which invests in LGBTQ+ standard companies, I guess, like my background. I was a founder myself previously, so I exited my own company in 2021. It was a social dining platform called Social Table. So the idea was that you could book and pay for a single seat at a group table at a restaurant as a way of meeting people. So things dining with strangers and hopefully leaving with friends at the end.

Whilst I was doing that, I was angel investing, and I started to see this similar track with all of the LGBTQ+ founders I was investing in, and that was sadly for a lot of them. When they’d come out, they’d lost their friends and family due to bigotry. And when the very first round of fundraising for a startup founder is quite literally called friends and family and you don’t have any, it’s like, where are you supposed to go to get that access to capital? And so I kind of looked at the ecosystem of Venture and realized that there wasn’t a specific early stage venture fund focusing on the LGBTQ+ community and so saw an opportunity to sort of do that and so created Jason Rainbows about two years ago. We’ve invested so far, I think, in 14 companies to date, I think. And of those companies, we’re really excited.

Our only requirement is that one of the founding team members has to identify as part of the LGBTQ+ community.

[00:03:27] Calan Breckon: Nice. Amazing. Awesome. Well, thank you so much for that. And now we are going to dive into all the juicy stuff. So you mentioned venture capitalism, and we’re all assuming that everybody knows what that is, but I want to talk to the people who have heard the word. They’re like, okay, I’ve heard venture capitalism, but they have no idea what it really, truly is at the core. So can you just give me kind of an overlay of what venture capitalists or what are venture capitalists?

[00:03:52] Ben Stokes: Yeah, so venture capitalists are individuals who manage and deploy capital for limited partners into startups or entrepreneurs, essentially. And so the way it works is that a limited partner or an investor will invest in the fund and then the general partners of that fund. So myself and Patrick, who’s my other general partner in chasing Rainbows, will deploy that capital into startups that we choose. And then how that then works from there is that after that company exits or gets acquired. So that can either be an IPO or an exit. We then get the profits of that, whatever our investment is. So we buy that equity piece in the company, whatever those profits are, we then split that. We first pay back the limited partners 100% of their initial investment and then we split the profits 2080. So the investors get 80% and Patrick and I would split the 20% between us. Okay.

[00:04:53] Calan Breckon: All right. So this clearly is different from traditional loans or traditional things like going to the bank and getting loans. So how would that kind of process work if you were going to walk us through the different stages of a venture capital deal? Let’s start at the beginning where it’s like a prospective business owner has a business idea, whatever that is.

How does that journey start?

[00:05:19] Ben Stokes: So I think the first thing that I always like founders and entrepreneurs to really think about is, is my business a venture backable business? And so that’s, I think, the first question you should always ask yourself. And so what I mean by that is, is this a business where you can see getting multiples upon multiples of return of that capital and having a really large exit. So having someone acquire you for several hundreds of millions of dollars to a billion dollar valuation for example. And so that is the goal. And so as an investor, I will prioritize investing in companies that have the ability to get to that billion dollar valuation. So that’s the first question. Is this a business that can get there in terms of debt financing and things like that obviously going to get? I would always recommend that venture capital is actually the last place you go to get funding for your company. And I say that because the expectations are very different of a venture back or business than what they are for someone who’s going to like a small business or something like that. And so in terms of a small business going out and getting a debt finance or a loan, that works really well for companies that may get to a point where they’re having a $10 million a year sort of profit line, that sort of thing, but they aren’t necessarily going to scale or grow any further than that. And so perfect example of that would be something like a clothing line or something like that. I personally don’t believe that they are venture backable. And the reason why is because I don’t see the amount of money that people have to invest in order to be able to get customers and things like that. And the inventory and levels and things like that just makes it really hard as a venture backable business, particularly because we have to return that capital or return that fund within five to seven years. Up to ten years is the max. And so thinking about that timeline and how fast you can scale and grow that I think is really important to think about.

Again, my preference is always getting some startup financing from grants. So starting with grants from going to local government, state government or even federal government to sort of see what grants are available for small businesses. There might be loans which you can get directly from the government or you can go to a bank and get that which is debt financing again. And the return on that, obviously you’re paying a percentage point on having to return that capital. But what that means with both of those is that that’s nondilutive capital. So you own 100% of your company if you go to the point of going to venture capital. However, essentially what an investor does is they buy equity or the promise of future equity if they’re investing in an early stage company. And so essentially what that means is that you are not now 100% owner of your company. You might own 90% or 80%. And that obviously keeps getting diluted down further and further. The more people that you come, the more money that you raise and the more people that you come that come on to be an investor in your company as well. And so when you start thinking about that more and more, you actually start losing the power in your company in some respects as well. And so obviously as big investors start coming in, they write larger size checks, what they expect is to be able to get a board seat. And so when they have a board seat, that’s when the direction of the company is no longer just what you want it to be, it’s what all of the investors want it to be as well. And so again, I just want to hone in on that point that I made earlier, which is venture capital should be the last place that you go to get funding for your company. First start off with grants or small business loans.

[00:08:46] Calan Breckon: Yeah, because then you’re going to end up like Sam Altman and what’s going on over at OpenAI with a whole schwack, a mess of everything going on.

[00:08:54] Ben Stokes: Exactly. And I think that that’s the thing when you have a board that can essentially fire you as the CEO, you lose control of your own company as well. And so you just have to be very conscious about what that looks like for you and what the goals are there.

[00:09:07] Calan Breckon: Okay, so taking it back to when you’re looking at something, you’re going at, okay, can I ten X this, 20 X this, and then exit at these large sums, you don’t necessarily want to go after somebody who’s not going to be able to produce that. So is that why a lot of people think that venture capitalism is almost synonymous with the tech industry now? Because those large exits tend to happen?

[00:09:30] Ben Stokes: Yeah, I think that kind of makes sense, absolutely. Because that’s where you’re starting to get these large scale valuations in particular.

And then also thinking about the ability to scale things fast as well. So if you had a standard, I don’t know, like a retail store, for example, actually growing the business, going and then trying doing it again and again and again and again is a lot of hard work. And it will actually take a lot of time as well as a lot of money to be able to do that as well. So that’s why there’s offerings like franchise model and things like that, which is a little bit different from a branding perspective. But outside of that, if I keep thinking about the ability to scale fast, obviously technology is the way to do that. And so thinking about products like SaaS products, to be honest, I don’t mind if a company is B to B or B to C. I think it works in both senses. It’s just really thinking about what your model is. And will this model actually be something that will be able to grow and will be able to scale quickly? Because remembering that we have the five to seven year sort of goal in terms of returning that capital back to investors and obviously aiming for like a five to ten X of that.

[00:10:39] Calan Breckon: Okay, so I’m curious, chasing Rainbows, you’ve helped a number of companies. I’m curious, are all of those ones tech companies or are there examples you have of maybe not a tech company, but they are doing really cool, amazing cool.

[00:10:52] Ben Stokes: Yeah. So not everything is tech, but we have tech or tech adjacent is what we like to invest in. And so one of the companies, and I don’t have my samples here, is called Tomtex, which has created a bio based leather alternative out of mushrooms and shellfish shell waste. Now, that company is not technology, as in online, computer SaaS generated technology, but it is a technology based product, obviously, because they had to create the product itself. Now, the reason why this company is going to be a great investment for us is because from a materials perspective, thinking about sustainability, obviously, the environment, and thinking how we are moving towards a more sustainable future, that company really fits into that sweet spot. And so thinking about that, what they’ve created, like I said, this bio based leather alternative. But when they started, they started in fashion. So small leather, luxury goods like wallets and handbags and things like that, they’ve shifted slightly from that to doing they still work in those spaces. So I think they’ve just recently done a line with Dior and Balenciaga. I think I said that right. I’m not fancy enough to say Balenciaga.

But then on the other side, they’ve now started doing car seats with Porsche, BMW, Audi and Jaguar. And so, for me, thinking of that long term strategy of replacing leather with this bio based leather alternative, I think is a really great option. And so thinking future forward, that deal, I think is going to be a great one from a sustainability standpoint. The other thing as well is that they just, as of like last week, actually converted. We invested in their very first round. So we invested at an $8 million valuation cap.

There was no price on their shares or anything like that to last week, where they converted with Happiness Fund, which was the first investor in Beyond Meat.

They actually put a price on every share. So now all of our shares have been priced and we actually got a 25% uplift on our shares, which is amazing in terms of the value. And then we’re now at a $12.7 million valuation cap, which obviously will continue to grow further and further.

[00:12:55] Calan Breckon: Okay, so it’s not all tech. That’s good to know that it’s not always going to be all tech.

[00:13:00] Ben Stokes: But I think there’s certain things that I really like to ask founders when I first meet them and sort of like to understand what their business model is and whether or not I see this as something that would be a good investment for us. As a fund, I give everyone 30 minutes of my time. You’ve got to wow me in 30 minutes. But essentially what I want to get across or want you to get across as a founder is three things, and that’s tell me about your team and why you believe you and the rest of the team are uniquely positioned to not only understand but solve the problem that you’re going after. And that doesn’t also necessarily just mean your academic background either. I want to understand your lived experience and why you want to solve this problem is really important for me to understand. The next thing is the size of the market opportunities or the tam. And so I want to understand how big is this addressable market is. There the ability to start thinking about ways that you might be able to expand that market by either going down a different slightly different business model or even going after a different industry vertical or after a new set of customers. And then lastly, the last thing is really about the traction that you’ve had to date. And if you don’t have revenue, that’s okay. I really want to understand how you got those first users. If you’re a B to C company or if you’re a B to B company, do you have any proof of concept or agreements from companies to actually use your product?

And the reason why I want to ask that question is to understand how you’ve gone to market, how you’ve had those customer conversations, and what that potential looks like and what the feedback has been. If you can get those three questions right, then I would move you on to the next meeting. Okay. It’s really important for me to start thinking about, okay, well, what is the right thing? What are other trends in the market as well? So obviously, we’re going through this massive AI trend at the moment, and so I keep thinking more and more around, okay, well, is your company fully reliant on AI? And will the AI essentially be able to something like OpenAI? Will they be able to do what you’re talking about very soon? So will that make your product what’s the word? My brain is so not working today.

Not required anymore. Essentially obsolete is the word I was thinking. Yeah. So does that make your product obsolete or are you using AI in a way that is adjacent to your product so that you’re using it to actually manage the process or process pieces of your tool to make it work faster and smarter? And I’ve got a perfect example of a company that we invested in who’s doing exactly that. So they are an education platform that is using AI as an online tutoring platform for professional exams. And so what it does is kind of like what duolingo does. It kind of finds the gaps in your learning based on the AI and then pushes questions based off that to you so that you can learn those pieces of information that you may be lacking. And what they’ve done is they’ve increased the first time sit exam for the CFA and CPA by 28%. So it’s quite significant.

[00:15:56] Calan Breckon: What that’s huge.

[00:15:58] Ben Stokes: And again, it’s using AI as a complement to the product, but it’s not the basis of the product.

[00:16:02] Calan Breckon: Yeah, it’s not, like, the base foundation of the product.

[00:16:04] Ben Stokes: Okay.

[00:16:05] Calan Breckon: So I want to track back to that first question of how if does somebody get involved? So you’ve already answered the questions of, okay, you need to check off these kind of three major questions. So the first approach would be somebody getting in contact with you and saying, hey, I want to kind of pitch you or talk to you about this idea.

[00:16:22] Ben Stokes: I don’t know if this is a mistake or not. It might be. I actually have an open calendar link on my LinkedIn profile, which for some reason today actually disappeared.

And it’s also on our website as well, literally, the calendar link. So Chasing Rainbowsvc gets you into our calendar, and then you can find the founder link and then fill out the information there.

[00:16:46] Speaker A: Oh, perfect.

[00:16:46] Calan Breckon: So you make it super easy for somebody to get in that first step to make it super approachable, because I think that’s one of the first things that, at least for me, looking from the outside in, it was always like, oh, tech bros. And very much a world that wasn’t very welcoming, especially to LGBTQ people. And so it was like, how do we even get involved in that space without feeling intimidated? So you’ve really opened the door and made it accessible to people.

[00:17:11] Ben Stokes: Yeah. And I don’t know if that’s a mistake or just I am actually joking here. It is absolutely not a mistake. And the reason why I say that is our best deal, which that founder, Googled, LGBT investor found our LinkedIn and our website booked a meeting with us, we invested. And that deal went from a $5 million valuation cap to just recently, like, two weeks ago, signing $120,000,000 valuation cap. So we’ve increased our investment in that company by 26% sorry. 26 times. Sorry.

So just saying that having that open calendar inc has been the reason for our success, and it’s just about being visible and then having an opportunity for people to find.

[00:17:54] Calan Breckon: So, okay. You make it super easy to access, which is great. People need to know that. They come in, they answer those three questions. You’re really excited. I want to move a little bit further along on the stages of this journey with you. And how does that next step look of, like, okay, you want to invest? What does that look like for an owner who’s like, how much of the piece of the pie am I giving up in exchange for this? What’s that all look like?

[00:18:18] Ben Stokes: We essentially will usually sign on a safe note, and so that’s if we’re early stage early stage, investments are anywhere from precede to Series A. And so precede is usually a safe note.

Seed is mostly on a safe note, but there sometimes are examples where that would be on either convertible note or someone has actually put a term sheet together and actually put a price on your shares or a price around. And then you get to a Series A, which is always a price round, pretty much.

And so, looking at all of that process in general, usually you’ll be signing on a safe note if you’re giving away. So if you go into a safe note where it’s the promise of future equity, usually what I like to see are companies that are looking at raising between 500 and a million dollars, not $500,000 sorry, and a million dollars. And then their valuation cap is somewhere between three to $8 million. Essentially. That’s what I like to look for in a precede round, at a seed round, I’m thinking something more along the lines of 1.5 to 2.5 million in terms of a raise amount and you’d be looking at a valuation cap anywhere between eight to 15. And then for a series Eight, you’d be thinking about raising two to 5 million, essentially. And then you’d be looking at valuation cap of 20 million plus.

[00:19:43] Calan Breckon: Okay, what’s the percentage that the person, the owner is looking to give away?

[00:19:48] Ben Stokes: Is there number? No, there’s not really a certain number. That’s why I sort of gave those ranges.

And so it’s usually somewhere around 10% to 20% for the round.

[00:20:00] Calan Breckon: Okay, so how would this differ from getting that loan? Basically means, okay, they own everything, but they have to bootstrap it. This is just giving them more access.

[00:20:09] Ben Stokes: To money with a loan. Actually you could still get a loan from a bank, from a business loan perspective and so you would be still 100% owner, but the bank would obviously be lending you that money and you’d have to pay that back. And so one of the things I’m really big on is thinking about that ownership level and what you are willing to give away as well. So just being conscious about what that is.

It’s better to own a little bit of nothing sorry, a little bit of something sorry. Than a lot of nothing, if that makes sense. Nothing. But my big focus for every founder that I speak to is focus on revenue. As soon as you’re a revenue generating company, you are a sustainable company. And when you’re a sustainable company, what that means is that you’re not raising out of desperation to keep your company alive. Instead you’re raising actually out of strategic need for growth. And I think that makes a really big difference because when you are having that conversation with investors, you’re actually able to negotiate better and have better deal terms because you don’t necessarily need their money. You want it in order to be able to scale and grow and so it’s giving the founders back a little bit more of that power versus coming to an investor and thinking that they have all the power. Because essentially if you’re running out of cash and you’re desperate to keep your company alive, then that’s often the conversation. And so investors will potentially screw you on that deal as well.

[00:21:31] Calan Breckon: Okay, now we have the money, we are going venture capital route you decide to invest. I can only imagine that that doesn’t just stop there. It’s like here’s the money, go have fun. There’s got to be mentorship and other things benefits that come along with venture capitalism. So what does that look for you in chasing rainbows?

[00:21:52] Ben Stokes: Yeah, absolutely. So we are really conscious about that statement of not walking away after we’ve sent some money because at the end of the day, the founder’s success is our success. And they’re two us so correlated, like it would be silly of us to walk away from a founder after you’ve given them capital. So the way that we work with them is that we create this ecosystem playbook model with a key advisor from our pool of advisors. And essentially what we do is we set the founder up with that key advisor and help them so say they’re at point A today, so they’ve just raised the pre seed round and they want to get to a seed round. What are the expectations of a seed investor in terms of revenue numbers and things like that? I like to think about if you’re a tech company around about $100,000 a month in revenue and say you had a precede round, you’re around about $10,000 a month in revenue, how do you get from ten grand a month in revenue to $100,000 a month in revenue? And so what the key advisor does with those founders is actually build a strategy with them to actually look at that strategy to get to that point and then builds KPIs into that strategy. And so what they essentially give those founders is this reference point that they’re able to go out to when they are fundraising that next round to actually point to how they not only met those minimum requirements of those investors, but also how they got there as well from a strategy standpoint. And so what that actually does is actually helps the next round of investors know that this person not only is a good founder because they’ve actually met our minimum requirements, but they actually are really precise and strategic in the way that they got there as well. And so now if we’re investing more capital at this next stage, it’s going to be a lot easier for me to understand how they’re going to get to that $10 million mark or a million dollars a month in revenue, which is where a series A investor is usually looking to invest. And so thinking more and more around that strategy. And so what we do is obviously we create this ecosystem playbook model as I essentially said. But not only do we help those founders with that strategy, but then we make those introductions to investors as well when they are ready for that next round.

[00:23:49] Calan Breckon: Okay, good, because I was very curious as to what this looks like from the side of the investors. I’m assuming you have people on your side who are like, I just want to give the money and then get the money in return. And then there’s other people who are more hands on, who actually want to mentor, want to get in there and make sure that things are actually going appropriately.

[00:24:06] Ben Stokes: Yeah, I think it really depends on what stage you invest in as well. Obviously when you’re investing early stage, there is probably a little bit more education, a little bit more work with the founders to ensure that they do actually build that strategy and get to the point of where they need to be. If you’re talking about a later stage investor, it’s probably a different story because they’re looking at the scale and growth and execution. So if you break down each of the different stages of investment so precede, it’s really around the team and who the team are, are they actually able to do what they want to do? Do they have the experience and the capabilities? At the seed stage, it’s usually around the product is the thing that I look for. And is that product actually something not only do they have an MVP, but what is the feedback like?

Do they have a product that people actually want to use and buy and then at the series a stage, it’s really around the execution. Can they execute and can they scale this? Obviously timing affects all of those depending on that stage as well. But that’s kind of like the different things that I sort of look for at each of those stages. And so thinking about what different investors need and different investors want to see is really about, okay, cool, is the product the right product and is it something that has been built well? Is it the founding team and are they able to work out this problem and how to solve it? And then obviously the execution stage, it’s thinking around, okay, well can we scale this? What does that scaling look like? If we throw X amount of dollars at it, are we going to get from a customer acquisition cost we know what that is, to then being able to look at the lifetime value or return on that investment.

[00:25:42] Calan Breckon: Okay, so you come in, somebody starts with you, they go through all this process, make a lot of money, do really well. Let’s talk about exit strategy now because I know that that’s something really important and that kind of comes towards that not end because relationships continue and all that, but that’s really important. So let’s get into an exit. Strategy? What is it, why is it crucial? Why is it important for both founders and investors?

[00:26:06] Ben Stokes: Yeah, so, I mean, the way that a fund works, as I mentioned, is that we need to be able to return the capital that the investors initially invested in us and then obviously return multiples on that capital as well. And so thinking about an exit, like I said before, we’re looking at companies that can exit within five to seven years in terms of a precede company, obviously seed and Series A gets a little bit shorter than that.

And so when I think about that more and more, thinking about what the expectations are for me as a general partner of a fund, what we’re looking for, for founders is to actually think, okay, well, not only is this company scalable, but what is the best exit strategy for them? Is it IPO or is it getting acquired by another company? And usually acquisition is probably the thing that most companies are doing these days within that time frame. I feel like that seems to be the fastest way that people are sort of like getting their company or having an exit. I was going to mention that obviously is a much longer ordeal. However, we’ve got a company that’s looking to IPO next year, and so depending on how that process looks for them, but I see that founder actually achieving this because they are very different, which I love. But I would imagine maybe one of the only companies in my portfolio that would IPO. All the rest would be going for an acquisition.

[00:27:27] Calan Breckon: For listeners who don’t know. Could you just explain what IPO is?

[00:27:31] Ben Stokes: Initial public offerings. That’s when you float on the stock exchange.

[00:27:34] Calan Breckon: Got you. So that takes it from being a private company to being a public company.

[00:27:39] Ben Stokes: That’s correct. Yeah.

[00:27:40] Calan Breckon: Got you. Which usually brings in a lot more money.

[00:27:43] Ben Stokes: It does, yes. But at that point, all of the early investors have already sold their stock. Right? So usually, like, an investor will wait to the point of IPO. As soon as that is done, then they will assign their shares to be sold.

[00:27:59] Calan Breckon: Awesome. Okay. SEO exit agreement is really important. You get to the finish line, and then what happens once that kind of is done? Is it’s like, oh, here’s your company, have a great time. What do those relationships look like for you? I know you’re a new fund, so you maybe haven’t gotten to those places yet. What do you hope that looks like?

[00:28:18] Ben Stokes: So one of the things that I’m really conscious of is how do we create wealth generation, not only for the investors and people within the LGBTQ+ community, but also for the founders as well. And so my goal would be for our founders to not only work with them for this company, and then obviously when they exit, I would love to keep that relationship going by either having them invest back into the fund, which would be amazing. And I’ve actually had a couple of companies who I invested in my earlier as an angel investor, who have now invested in my fund, which is amazing, but then think about, well, maybe that founder will start a new company or maybe they’ll do something else. And so we’d love to be on that journey with them as well.

These relationships are not short term relationships. When you go in to have an investor on your cap table, that relationship is usually a relationship that’s going to last seven to ten years, if not more. And so it’s really important to understand who the right people are that you are bringing into that fold as well.

[00:29:16] Calan Breckon: Definitely. I want to ask how long is the time frame that you usually go between initial contact and then deciding that you’re going to work with people? Because like you said, if it’s going to be a seven to ten year relationship minimum, how much due diligence do you put into that beginning part?

[00:29:32] Ben Stokes: Yeah, so we have four stages of investment diligence that we do. So the first meeting will be that 30 minutes meeting that I mentioned earlier. The next meeting is an hour long meeting with either myself or Patrick, and then the third meeting is actually where we bring in a key advisor plus the other general partner. So if Patrick’s been the one doing those first conversations, then he’ll bring me in or vice versa. And then the last meeting after that is an internal meeting where we essentially vote whether or not we would or will not make that investment. And we have venture partners as well who may be at the stage before that who are sort of looking for new deals as far.

[00:30:09] Calan Breckon: Okay, so that could be a couple of weeks to a couple of months time frame.

[00:30:12] Ben Stokes: Yeah, exactly.

[00:30:14] Calan Breckon: Got you.

[00:30:15] Ben Stokes: It really depends on also whether or not the founders have met what we’re looking for as well. Sometimes we have founders who are really great founders, but they’re not ready for investment yet. And so we would push them to go and focus on revenue or focus on something else and come back to us. And so, yeah, anywhere between a couple of weeks all the way through to three to six months. Yeah.

[00:30:37] Calan Breckon: Okay, awesome. Is there any times where it’s like, maybe they don’t have revenue, but they have either great idea or acquisitions in the pipeline that they’re like? These are companies I want to acquire to build XYZ that you would look at.

[00:30:51] Ben Stokes: I think it’s more around the fact of the founders, actually. So who are the founders and do they have the experience to be able to bring this product to market quickly and then to focus on their revenue? So we invested in a company called Hello Wonder, which is an AI platform for kids to go and search the Internet safely. And so that tool. They haven’t got revenue yet, but the founders, one of them is ex Disney and Pixar for 20 years, focusing on their gaming. And then the other two founders of that company are both AI specialists from Google. And so with ten plus years experience. And so the three of them together makes a really strong, compelling team to invest in. Got you is really amazing. So I got to see the product and experience it and then looking at the other side of when they are now slowly onboarding and actually doing their go to market. And so they are a company that hasn’t necessarily got revenue coming or a large amount of revenue coming through the door. But I know as soon as they do have that, it’s going to be take off.

[00:31:51] Calan Breckon: Yeah. Just by what you said, I was like, oh, that’s definitely very needed.

[00:31:55] Ben Stokes: Yeah. I’m super excited about that company, actually. I know they’re going to do some really great things.

[00:32:00] Calan Breckon: Nice. Okay, so thank you so much for walking us from start to finish. Kind of what it looks like working in a venture capital world, what that looks like for you. I want to dive in just a tiny bit because there’s been a lot of news down in the states around specific organization that is coming after LGBTQ organizations, people of color organizations, kind of on this reverse discrimination charges of like, oh, well, you’re not giving access to white people. You’re not giving access to straight people. This is discrimination. What’s your experience been in this? And are you fearful or do you have any nervousness around chasing rainbows and getting to that place where people might start coming after you?

[00:32:41] Ben Stokes: In that regard, I would welcome it, to be honest. And the reason I say that is because if they actually looked at the data, they would realize that less than 0.5% of all venture funding has ever gone to someone who identifies as part of the LGBTQ+ community. Let me sit with that just for a SEC. 0.5% of all of the capital. So if they’re going to attack me over me wanting to invest in a really highly overlooked and under invested in population, then go ahead. And then on the other side of that, just thinking about founders who go back into the closet whilst fundraising, so 75% of founders go back into the closet whilst fundraising because they believe being part of the LGBTQ+ community is going to be a bad mark against their name. And we have seen this represented when founders have shared stories around general partners at other funds who have used vice clauses such as a sin clause, which means that you can’t invest in weapons and gambling and things like that, to openly discriminate against an LGBTQ+ founder if they’ve got different religious or political views. Now, to be honest, again, crazy, right? Absolutely crazy to think about that. SEO the way that ourselves as a fund is that we do invest in LGBTQ+ founder companies. But the way that we pose it is that we ask the question, do you or someone in the founding team identify as part of the LGBTQ+ community? Yes or no? That’s it. I don’t know who. I don’t need to know who either. I also don’t care. And so the idea essentially is that we’re ensuring that we are investing in companies that do have LGBTQ+ representation in the founding team, and that really is our mandate. And the reason why is because we build it. And data shows that they have better outcomes. So LGBTQ+ founders create 36% more jobs, have 114% more patents, and have 44% more exits. So for me, and I’m a simple mouse guy, this actually makes it’s a highly underrepresented or overlooked group within venture capital who have really great returns. So why not invest more into that space to get better returns?

[00:34:51] Calan Breckon: Do you have any theories onto why that is? Because I definitely have a theory as to why that is.

[00:34:57] Ben Stokes: I do, actually, and mine’s probably a little bit jaded, but my theory is that LGBTQ+ founders have a certain chip on their shoulder, right? And that is to prove that we’re just as good, if not better than everyone else, because we have to work twice as hard for half the respect. And so what that also means, though, is that we go twice as far. And so I think that I look at myself, right, I grew up in this quite a religious community and stuff like that, and everyone went to church and all of that sort of stuff. And I was constantly told that I was never going to amount to anything because I was gay. And now I run one of the most prolific early stage LGBTQ+ funds in the world have been named 40 under 40 on two different lists, one of the top 100 investors in the world.

I feel like I’m doing all right.

[00:35:53] Calan Breckon: I definitely agree. That was part of my theory as well, is that we have something to prove to other people. And also, I think part of that is a lot of us are a lot scrappier because we don’t have the friends or family to go to for our first seed rounds. It’s like, we don’t have that, and maybe we haven’t had that for a long time. Maybe we got kicked out. Maybe we didn’t have that. Access came from places where we didn’t have that. So we had to learn how to just do it and get through and push through and make it happen.

[00:36:19] Ben Stokes: I also think that the failure is not an option as well, right, because we don’t have the luxury of failing. And I like to think of it in terms of the way that we’ve had to overcome so much in our personal lives, being able to take what we’ve learned in our personal life and apply that to business actually is almost like a piece of cake compared to what we’ve had to overcome in our personal lives. Right. And so thinking about it from that perspective, I also think that there’s so much transferability of those skills that we’ve learned, and those skills are soft skills or innate skills that we’ve learned along the way. And so I think being able to think scrappily, being able to think outside the box, being able to problem solve and troubleshoot is one of those things that makes LGBTQ+ founders so gritty and actually able to achieve the things that they’re looking to do as big time.

[00:37:06] Calan Breckon: I fully, fully, fully agree. Well, Ben, this has been an absolutely magical and enlightening episode. I want to thank you so much for joining me. I’m going to make sure that the link to booking with you is in the show notes, but where else can people find out about you? Chasing rainbows.

[00:37:21] Ben Stokes: Yeah. So you just head to our website, chasingrainbows VC that has all the information there. We’re also fundraising at the moment as well. So if there are anyone who’s interested in learning more about the companies that we invest in, as well as learning a little bit more about our fund, there’s also a link on our website there for people to book in and schedule some time to have a chat around investing in the fund as well.

[00:37:45] Calan Breckon: Awesome. Amazing. I forgot to ask this. Are you kind of like all North America? Are you us based? Canadian based.

[00:37:51] Ben Stokes: All over? We are headquartered in San Francisco. That’s where we’re currently located, although we do so I’m in San Francisco, Patrick’s in La. We’ve got two venture partners in New York as well as one in Florida. So we’re kind of quite spread out in terms of the team.

And the way that our fund is structured is that we can invest up to 20% of the fund outside of the US. So we can invest rest of the world with that. So we can invest in any part of the world for that. Up to 20%.

[00:38:23] Calan Breckon: Awesome. Truly international. Well, the LGBTQ community is very international.

[00:38:29] Ben Stokes: We need to have access. Exactly. Sexuality doesn’t stop on the borders of Mexico or Canada, so I think that works well. The other thing as well to note, and I mentioned this earlier around not asking the question and part of the reason why we don’t ask who or identify who is part of the LGBTQ+ community is from a safety perspective as well. So particularly for founders who may be in countries like Ghana, where it’s now a death sentence potentially for being LGBTQ+, we want to ensure that we aren’t outing anyone to keep them safe.

[00:39:01] Calan Breckon: Yeah. Which is very important. Well, Ben, thank you so much for being on the show today. This has been magical and yeah, I hope you have a great magical day.

[00:39:09] Ben Stokes: Yeah. Thanks so much. I really appreciate you asking me along.

[00:39:11] Speaker A: Well, I don’t know about you, but I definitely learned a lot in today’s episode. I want to thank you for tuning in today. Don’t forget to hit that like and subscribe button. And if you really enjoyed this episode, please give me a star rating. I would very, very much appreciate it. The Business Gay podcast is written, produced and edited by me, Calan Breckon. And if you’re looking for free SEO website audit, you can head on over to and set one up with me. Or just click the link in the show notes. That’s it for today.

Peace. Love. Rainbows.

Calan Breckon
Calan Breckon

Calan Breckon is an SEO Specialist and host of "The Business Gay" podcast. He has worked with companies such as Cohere and Canada Life and has been a guest on the "Online Marketing Made Easy" podcast with Amy Porterfield as well as featured in publications like Authority Magazine and CourseMethod.

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