Equitable Entrepreneurial Ecosystems: Lessons from the Field
Accelerator for America (AFA) and the International Economic Development Council (IEDC) are excited to present the second publication in our two-part series exploring the needs and opportunities to drive more equitable entrepreneurship and small business growth in communities across the U.S. Our first piece, Small Business Capital: A Place-based Approach, published in October 2023, outlined existing disparities and addressed how local governments and place-based philanthropy partnerships can unlock opportunities and pave the way for equitable access to capital for entrepreneurs and small businesses. This piece, Equitable Entrepreneurial Ecosystems: Lessons from the Field, draws important lessons and current examples in action from local practitioners, funders, and national experts who participated in a series of convenings hosted by AFA and IEDC in January and February 2024
Delivering on the promise of inclusive economic growth is an ongoing commitment, not a one-time effort. To build equitable entrepreneurial ecosystems, economic development organizations must honestly evaluate practices, engage stakeholders, share power with partners, and stay focused on equitable outcomes.
Expanding access to affordable, flexible capital is crucial but must be part of a holistic approach that understands and centers the needs of diverse entrepreneurs. Long-term, multi-faceted strategies rooted in trust are essential. Small business organizations, economic development groups, CDFIs, governments, and philanthropies must work in collaboration to bring together their unique assets in ways that enable all entrepreneurs to thrive.
By building trust and investing intentionally, communities can create equitable entrepreneurial ecosystems that transform individuals, neighborhoods, and local economies. Promising models across the country offer adaptable solutions.
Change Begins Within
During IEDC’s 2024 Leadership Summit, leaders of its Equity Communities cohort came together to share their perspectives on advancing diversity, equity, and inclusion (DEI) in their organizations, their communities, and the economic development field. The discussion, moderated by AFA's Anne Bovaird Nevins, featured Dr. Kim Carter Evans of TruFund, Kwame Botchway of Village Capital and Lynne Stein Benzion of Montgomery County Economic Development Corporation – all active participants in the cohort. Complementing its Playbook for Equitable Economic Development, IEDC has been assisting ten organizations over the last two years through this cohort model to create and implement locally tailored Equity Action Plans. The organizations have engaged in virtual and on-site technical assistance, peer activities, and community of practice gatherings to share their experiences and best practices.
Evans, Botchway, and Benzion were clear that in order to address the existing racial disparities in areas like business formation and growth, and to achieve more equitable economic opportunities in their communities, they must start within their own organizations. Assessing what backgrounds and perspectives are represented across the staff, investing in training around DEI, and surveying employees to understand their experiences is only a starting point. Organizations must go deeper and look at how equity and inclusion shows up in their decision-making processes and the allocation of resources. For two of the organizations, this was their main focus during their participation in IEDC’s cohort work, which allowed them to experiment with and implement organization-wide strategies around DEI.
Lasting organizational change requires strong buy-in at the board level, as well as the staff leadership. Organizations must be willing to examine everything from the development of internal policies to the creation and delivery of external products and services. For example, examining procurement practices through an equity lens, even if it requires more time and effort to diversify the vendor pool, allows organizations to "walk the walk" in how they deploy their own resources.
They also noted that engaging external stakeholders in a community’s broader economic development ecosystem can shed light on how existing power structures impact a community’s ability to collectively work toward inclusive growth. Organizations may need to look at how they share power with partner organizations that can play important roles in creating a more equitable ecosystem, such as community development financial institutions (CDFIs) and community-based organizations.
Funders and philanthropy must also be engaged around the importance of investing their resources in targeted ways to proactively support communities and businesses that have experienced disinvestment and marginalization. As noted in Small Business Capital: A Place-Based Approach, in the absence of a growing, inclusive local economy that generates sufficient resources to meet community needs, place-based philanthropies are often called upon to fill the void by supporting health, human services, food access, and other critical resources. Funders have an opportunity to shift their investment strategies toward a virtuous cycle wherein place-based philanthropy can support equitable business growth that, in turn, supports community growth – a pivot from filling gaps in urgent community needs to becoming the catalyst for regenerative community wealth.
In light of recent legal, political, and other challenges, Evans, Botchway and Benzion noted the growing pushback against DEI commitments and that their organizations are finding ways to navigate new objections and restrictions. This might include adjusting language or policies to target support for underserved communities by geography rather than race. These challenges have only reinforced the importance of embodying and embedding the commitment to DEI internally within an organization’s vision, mission, strategies and policies.
Most importantly, they recognized that delivering on the promise of more equitable and inclusive economic growth in communities is a continuous commitment and long-term journey rather than a “one and done” effort. By honestly evaluating internal practices, meaningfully engaging stakeholders, sharing power with partners, and staying focused on equitable outcomes – even in the face of challenges – economic development organizations can create more inclusive economies and opportunities for all.
Capital is Necessary, But Not Sufficient
“Culturally informed financial education” is how Dre Thompson, the CEO of the Tucson Industrial Development Authority, summed up a key part of her organization’s new approach to supporting local entrepreneurs. As part of AFA’s Economic and Community Development Practitioners' Network January 2024 convening, “Equitable Capital Access to Entrepreneurs,” Thompson, Dr. Dell Gines of IEDC, and other experts emphasized the need to meet small businesses where they are – in terms of how they operate their businesses and in terms of language, culture, and values.
Cash businesses, for example, may have a significant amount of capital for investments, but may not have a track record with the traditional banking system to qualify for funding. At the same time, in many cultures, incurring debt is considered shameful or can violate strongly held religious beliefs, an element that can be too-often-overlooked when organizations counsel entrepreneurs.
“We’re trying to put square pegs into round holes,” remarked Dell Gines, Chief Innovation Officer of the International Economic Development Council (IEDC). “When you look at the financial system as it's currently structured, it’s pretty clear it is not working for a large majority of Americans.” While access to financial capital may be a necessary element to small business growth, it should not be viewed as a sufficient one. Instead, access to financial capital should be viewed in conjunction with a collective set of activities with the entrepreneur at the center. This holistic approach to ecosystem-building encompasses human capital, social capital, culture, infrastructure, and policy, and can adapt to the unique needs of different entrepreneurs.
Kayla Jones, who runs the Economic Inclusion Fund of the Community Foundation for Greater Atlanta, also noted that the entrepreneurs she serves “are struggling to get capital from traditional banking institutions.”
“More accessible and flexible,” were principles that guided the Foundation’s work toward its current priority of innovation in how to drive dollars into communities most in need, she said, with the GoATL Economic Inclusion Fund offering $250,000 to $2 million in funding with flexible underwriting standards. These funds are specifically targeted to reach underserved and BIPOC (Black, Indigenous, and People of Color) entrepreneurs, as well as nonprofits, who face barriers to accessing traditional financing sources like commercial banks.
“We do focus on the relationship building aspect with the entrepreneurs to really understand their business and their capital needs,” Jones said. The Foundation also recognizes the importance of simultaneously addressing the broader needs of entrepreneurs, and by using is using 20 percent of the Economic Inclusion Fund to provide grants to business support organizations who offer wraparound technical assistance and mentoring.
Kevin Dick, President & CEO of the Carolina Small Business Development Fund, added that we must recognize that “Community Development Financial Institutions exist because of discriminatory practices in the banking system … in terms of how certain under optimized communities can access capital for small business growth, buying homes, and the like.”
These concepts are at the core of the Tucson IDA’s AVANZA Empowerment Fund, which supports the city’s growing Latino business community through loans of $500 to $250,000 that are not contingent on traditional collateral or credit scores for underwriting. Instead, risk management is based on IDA's direct experience with businesses through intake and character references. Access to capital is paired with six months of wraparound services that include executive coaching, business analysis and strategic planning, peer groups, and culturally informed financial education.
“We knew the outreach would have to be different. We knew the underwriting was going to have to be different,” said Tucson IDA’s Dre Thompson.
Kevin Dick of the Carolina Small Business Development Fund noted that like in Tucson, outreach to the Latino community is key. “The entrepreneurial growth has been right in line with the demographic shifts,” he said.
He also reinforced the emphasis on the importance of a more holistic ecosystem approach, noting that all entrepreneurs would benefit from education alongside capital access.
“Having the money is great, but if you don’t know how to manage it properly, if you don't know how to use it to scale your business, it really isn’t a useful tool,” he said. Within the entrepreneurial ecosystem, CDFIs like Carolina Small Business Development Fund often engage in ongoing advising to help businesses understand financials, address pain points, make connections, and access knowledge capital.
It is particularly powerful when local governments, CDFIs, and the private sector can come together. Sponsored by the City of Charlotte’s Business Inclusion Office, the Carolina Small Business Development Fund and Merriwether & Williams Insurance created a partnership to support small construction businesses with access to bonding and financing for City contracts. This program supports both the capital needs and the specialized risk management and technical assistance required for minority-owned and women-owned firms to successfully compete for the growing opportunities in public infrastructure development projects.
While expanding access to affordable, flexible capital is crucial, it must be part of a holistic approach to build an equitable entrepreneurial ecosystem. This requires culture shifts in capital providers and the whole ecosystem to better understand and adapt to the needs of diverse entrepreneurs.
It Takes a Trusted Village to Build an Ecosystem
The importance of trust-building was paramount in the conversation on Equitable Entrepreneurial Ecosystems convened by AFA with national experts and experienced practitioners in February 2024 through its Economic and Community Development Practitioners’ Network. Featuring Zytha Kock of IEDC, Kersy Azocar of Greenline Capital, Augie Gastelum of Retail Arts Innovation Livability (RAIL) CDC, Lily Hamburger of Invest Detroit, and Gary Walton of the State of Alabama, the discussion centered on the interconnected nature of financial, social, and human capital when it comes to creating more equitable opportunities for entrepreneurship and small business growth. The conversation also acknowledged that business ownership is not the only path to building wealth in communities of color and raised the importance of investing in inclusive workforce development in high-growth industries.
The discussion emphasized that an equitable entrepreneurial ecosystem serves not only small business owners themselves, but the neighborhoods and communities surrounding their businesses. Establishing cross-sector partnerships among governments, economic development organizations, community-based nonprofits, philanthropies, CDFIs, and others is critical. These partnerships are most effective when they involve power-sharing and co-design of investment strategies and initiatives with entrepreneurs. To grow and thrive, entrepreneurs need support for their businesses and for their overall wellbeing – this can include mental health resources, family support, and tools for financial planning for the future, especially in the face of economic uncertainty.
Kersy Azocar of Greenline Access Capital described a holistic approach to meeting entrepreneurs' needs, which reach far beyond funding. Greenline offers culturally-sensitive and trauma-informed support to the entrepreneurs who they serve, the majority of whom are Hispanic or Latino. This focus on long-term relationship development to earn the respect and trust of a small business owner over time, which ultimately allows the organization to successfully connect them to the right resources for their unique situation. For example, when one entrepreneur's food truck was stolen, Greenline had the trust of the owner to help tell their story in the media and leverage the organization’s "social capital" to support a grassroots fundraising campaign that raised nearly $20,000. Combined with Greenline’s assistance in identifying and applying for a local grant, the business was able to replace the truck and get back up and running.
Lily Hamburger of Invest Detroit’s New Economy Initiative (NEI), shed light on how convening and fostering collaboration has been core to NEI's approach to ecosystem-building. For over 10 years, NEI has brought grantees and partners together to align efforts, reduce duplication, and spark innovation. This required a major shift from a culture of organizations competing over limited philanthropic dollars to one of collaboration. Again, trust was a critical element of this effort.
One example is a shared data collection pilot program where place-based community development organizations contribute information about their activities and outcomes (that would otherwise remain siloed) into a shared platform. The goal is to build a more robust, data-driven picture of neighborhood needs that can inform decisions about investments and programming. Another example is a shared application platform used by four different lenders.
Augie Gastelum of RAIL CDC in Arizona echoed the importance of community engagement in creating more equitable opportunities for entrepreneurs to sustain and grow. He shared insights into RAIL CDC's work in majority-BIPOC, lower-income neighborhoods within the cities of Mesa and Tempe, emphasizing that entrepreneurial ecosystem-building is inherently place-based work. The first step is building trust and bringing the community together around a common vision, whether for a commercial corridor or a whole neighborhood.
An important way to build trust and sustain momentum is to identify and implement "early win" projects that make a visible impact and help make the case for larger investments. Gastelum also noted that entrepreneurs need one-on-one, culturally competent technical assistance that addresses industry-specific knowledge. RAIL CDC has implemented a "Consultants of Color Collective" that engages BIPOC professional service providers to provide consulting services to entrepreneurs who share their lived experience and background. Gary Walton of the Alabama Department of Commerce, and former AFA team member, brought a multi-faceted perspective to the discussion, drawing from his experience in academia, national intermediary organizations, and state government. Gary raised the importance of connecting entrepreneurship and workforce development strategies. Business ownership is challenging and not the right path for every individual, but many people can gain valuable skills through high-quality workforce programs that incorporate entrepreneurship skills, are aligned to growing industries, and directly connect to local employers.
Increasingly, states are trying to be more intentional about bridging their innovation economy and entrepreneurship initiatives with local strategies for inclusive economic development that support regional and local entrepreneurial ecosystems through funding, technical assistance, and policy change. For example, the State of Alabama recently launched Innovate Alabama to support university commercialization and provide acceleration services to high-growth companies. The goal is to ensure that the state's investments in innovation and entrepreneurship also expand economic opportunity and inclusion.
Zytha Kock of IEDC rounded out the discussion by focusing on the lessons learned from IEDC's Equity Communities initiative. She highlighted that more economic development organizations are embracing ecosystem-building frameworks not just for entrepreneurship specifically, but for inclusive economic development more broadly. This has catalyzed new partnerships with organizations outside the traditional economic development sphere as well as a shift in the approach to those partnerships.
Instead of economic development entities independently coming up with strategies and then seeking partners for implementation, ecosystem-building starts with stakeholder engagement and collective visioning. This approach requires deep listening to the needs of entrepreneurs and a willingness to co-create solutions. New strategies also need new ways of measuring success and impact. Through its Equitable Economic Development Playbook and Equity Impact Investment initiatives, IEDC is creating the tools and strategies for the economic development field to center equity as a core outcome.
Finally, local governments can play a key role as either a supporter or an obstacle to equitable ecosystem-building work. Cities can provide funding to community-based organizations to engage and support small businesses, and can dedicate their own staff to help entrepreneurs navigate city processes like permitting or procurement. Cities must ensure that their regulatory processes or enforcement actions do not cause overly burdensome delays, disruptions, and costs that make it challenging for entrepreneurs to succeed.
Creating more equitable entrepreneurial ecosystems requires long-term, multi-dimensional approaches built on a foundation of trust. Communities seeking to do this work should center on entrepreneurs and their surrounding communities, foster robust partnerships, be open to sharing power, and hold themselves accountable to those who have been most underserved by the traditional systems of access and opportunity. Small business-serving organizations, economic development organizations, CDFIs, local and state governments, philanthropies, and other partners must bring their unique assets together to create environments where all entrepreneurs have the opportunity to thrive. Promising models and early successes across the country offer solutions that communities can adapt to their local context and unique needs. With trust-building and intentional investment, equitable entrepreneurial ecosystems can yield transformative outcomes for individuals, neighborhoods, and local economies.
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Please join IEDC for its FREE Equitable Economic Development Playbook Webinar Series where participants dive into crucial topics at the intersection of economic development and social equity. Across these engaging virtual sessions, panelists from diverse backgrounds and sectors will share their insights, experiences, and innovative approaches to addressing key equity-focused challenges.
Gain valuable perspectives on preserving and supporting BIPOC legacy businesses that have been vital threads in the fabric of our communities for generations. Explore strategies for fostering strong connections between economic development initiatives and anchor institutions like universities, hospitals, and major employers – unlocking new avenues for inclusive growth. The series will also examine the critical issue of climate equity, discussing how to ensure a just transition towards sustainable practices that lifts up underserved populations rather than exacerbating existing disparities. From green jobs to resilient infrastructure, panelists will share their visions for an equitable future.
Learn more about IEDC's work on Race and Equity in economic development here. Join in this crucial dialogue to collaboratively envision and work toward communities of shared prosperity.