Why are Colorado's women and minority founders underinvested? Researchers launch study to find out

Kate Bailey is well aware that women and people of color who start businesses are often underfunded.

Bailey, founder of the women's coworking campus TARRA, in Denver, heard countless stories from new entrepreneurs. The new business owners say it is difficult to get growth capital. Some say that it's like not being allowed to join a private club.

Bailey's efforts to develop a program to help these businesses revealed another problem. Despite the abundance of data that shows that women and minorities founders are at a disadvantage when it comes to getting their company funded, almost no research or data exists to explain why this is.

Bailey's inquiries led to the launch last week of a research project lasting two years. She and researchers from the University of Denver are hoping that the findings will reveal where capital gets caught up. The researchers also hope to demystify this process for entrepreneurs who will be starting small and medium businesses.

This initiative is a collaboration of several organizations including Social Venture Partners Denver, Denver Economic Development & Opportunity and sponsors like J.P. Morgan Private Bank, Mile High United Way and others.

The study will be led by researchers from the Daniels College of Business at DU. It will officially begin June 1, with the first of five panel discussions. These will focus on a range of funding sources - including angel investment, venture capital, and microlending.

Each roundtable will include 10 business owners, of whom 50% identify as Black or Indigenous People of Color (BIPOC), and 80% are women.

Melissa Akaka is a professor of marketing at DU. She said that the idea was to collect qualitative data during these discussions to allow researchers to examine business owners' decision making processes, their success metrics, and their expectations within the funding ecosystem.

Akaka explained that "Qualitative Data is particularly useful when we do not know why or how something works." The panel discussion will allow for an exploration of the interrelated factors which show up in founders’ experiences, said Akaka.

Akaka, who isn't familiar with the startup scene, said that she was excited to get involved after watching women from her family and circle of friends launch their own business during the pandemic.

She observed a few things that may be reflected in the panel discussion. Akaka, who said that she stresses the importance a business plan to students in her classrooms, did not design their businesses with this priority in mind. These include having a balance in their family life, which allowed them to take care of others and limit their work hours.

Bailey noted that other women and BIPOC owned businesses have had difficulty getting funding because they prioritized other factors above profit.

John Sebesta is a Koch-endowed Chair of Entrepreneurship at DU and is leading the research. He said that the end goal of the project is to encourage entrepreneurs to fully engage in their bids to secure funding. It also provides an opportunity to redesign the funding ecosystems which excluded women and people from color previously.

Sebesta explained, "It is a way to say that there's untapped potential."

The project will enter a solution phase next year, based on the data collected in the first phase. This phase will address the funding challenges that were identified.

Bailey hopes that these solutions can be shared and scalable not only in Colorado but also in other parts of the nation experiencing similar growth.