Tucked on the sixth floor of the Daniels College of Business sits Professor John Sebesta. Sebesta’s beat is social entrepreneurship—a field that aims to improve the business world through innovation, empathy and putting people over profit. Sebesta has researched, worked with, lived with and formed connections with minoritized entrepreneurs from across North and South America.
Throughout the past two decades, the entrepreneurial ecosystem has become an increasingly complex environment. Many aspiring entrepreneurs face significant challenges—particularly founders who are women or come from minoritized backgrounds. Sebesta has dedicated much of his career to addressing these obstacles, from his early work in social entrepreneurship in Guatemala to his current focus on funding disparities in the U.S. Through his experience, he has identified several key issues and proposed actionable solutions to build a more inclusive and supportive ecosystem for entrepreneurs.
Funding Disparities in Entrepreneurship
Venture capital funding is notoriously difficult to secure, and the statistics paint a stark picture for women and minoritized entrepreneurs. In 2022, only 1.9% of venture capital funding went to startups founded by women; an even smaller 0.5% was allocated to Black-founded startups. These figures highlight the entrenched disparities in access to capital, which disproportionately affects those outside the traditional entrepreneurial demographic.
Sebesta points to three main challenges contributing to these funding gaps:
- Information Overload: Entrepreneurs often struggle to navigate the overwhelming amount of information available, making it difficult to identify the right resources and investors.
- Divergent Business Models: There is often a disconnect between the business models that entrepreneurs present and the expectations of Entrepreneurs may focus on social impact or sustainability, while investors typically prioritize scalable, asset-heavy ventures.
- Mismatched Funding Structures: The traditional venture capital model is not designed to support businesses that don’t fit the mold of high-growth startups, leaving many entrepreneurs without suitable funding options.
To address these challenges, Sebesta advocates for a multifaceted approach that includes both structural and cultural changes within the entrepreneurial ecosystem. He highlights several potential solutions:
Building a Guiding Platform
One of Sebesta’s key proposals is to create a platform to help entrepreneurs better navigate the funding landscape. By providing education, resources and introductions to aligned funders, this platform could simplify the process and reduce the information overload many entrepreneurs face. He is working to collaborate with local organizations such as the Denver Economic Development Office and other partners to make this platform a reality.
New Investment Structures
Traditional funding mechanisms, such as venture capital, are not always well-suited to entrepreneurs focused on social entrepreneurship or smaller-scale, sustainable businesses. Sebesta is exploring alternative investment offerings that could better support these types of ventures. By developing new structures that integrate social and economic goals, it may be possible to bridge the gap between entrepreneurs and investors who share similar values.
Increasing Diversity in Investment Roles
Sebesta emphasizes the need for more women and minoritized investors in the ecosystem. Having a more diverse pool of investors can help address the biases that currently limit access to funding for underrepresented founders. Encouraging successful entrepreneurs from these groups to reinvest as angel investors and contribute to the ecosystem by writing checks is critical for fostering broader economic and societal benefits.
The Future of Entrepreneurship
Looking ahead, Sebesta is optimistic about the potential for change, even though progress can be slow. He believes that by diversifying the demographic of investors and creating new, inclusive investment structures, the entrepreneurial ecosystem can begin to overcome its existing limitations. Universities, with their research capabilities and creative student bodies, play a crucial role in this transformation. By bringing current research into the classroom and encouraging students to think critically about new funding models, academia can help shape the future of entrepreneurship.
At the heart of Sebesta’s vision is the belief that entrepreneurship should not only be about financial success, but also about creating positive social and economic impacts. By addressing funding disparities and supporting a more diverse range of entrepreneurs, the ecosystem can become a more inclusive and equitable space, where all innovators have the opportunity to thrive.
There are a few steps Sebesta says can be taken immediately to create more inclusive and equitable spaces:
- Match Entrepreneurs with the Right Funding: Create a system to better align entrepreneurs with funding sources that match their business models and goals.
- Collaborate with Partners: Work with the Denver Economic Development Office and others to build a platform that guides entrepreneurs through the ecosystem efficiently.
- Develop New Investment Structures: Explore alternative investment offerings that support public good-focused businesses.
- Engage Successful Entrepreneurs: Encourage women and minority entrepreneurs to reinvest in the ecosystem by becoming angel investors.
By taking these steps, the entrepreneurial ecosystem can become more accessible and equitable, driving both economic and societal progress.
As students at the University of Denver, understanding the ins and outs of the entrepreneurial ecosystem is just the tip of the iceberg. E@DU believes entrepreneurship is for everyone, and can provide help, inspiration or mentorship: from the Innovation Lab to the Maker Space to a diverse network of small-business owners and investors.
Whether a paint-slinging artist or student jam band, small business or tech start-up, E@DU and its headquarters at The Garage are here to help navigate the entrepreneurial ecosystem and turn dreams or hobbies into a paid reality.