Funding the Next Generation of Start-Ups

According to the Center for Venture Research, Angels (and Angel Syndicates) invested $23.1 Billion in the US in 2005. This represents 55% of the Seed and Start-up Capital Market. But, less that 1% of companies actively seeking Angel Financing receive funding (the number is probably closer to .5% or 1 in 200). This doesn’t take into account the people who would like to start a business, but don’t have the time or resources to actively search for funding. The result is many of the best ideas never getting off the ground.

Many people in the Investment community feel that’s the way it should be; that it’s only prudent to wait and see tangible results before making an investment. While I certainly understand their point of view, this unfortunately leaves the entrepreneur with a tough dilemma. They need money and resources to grow their business. But, to get the money and resources they need to show growth and increased customers and revenue. While bootstrapping aided by family and friend funding is an option for some, many people just don’t have those financial resources at their disposal. Is their a solution to this entrepreneurial dilemma or is that just the way it is and will be in the future?

First, I think we need to promote and teach entrepreneurship at a younger age. The teen demographic is hot in the US. Who knows better what teens want than other teens? If we give these young bright minds the tools and resources to start their own businesses, you will see some amazing new ideas. Colleges like Cornell and Harvard have had success with their incubator and licensing programs, and we need to incorporate entrepreneurship into the general curriculum throughout the country. While accredited investors are often hesitant to invest in unknowns, they are more likely to throw their money and time behind a program at their alma mater. Entrepreneurship can only be theorized in a classroom; you really need to get students into the real world to make it worthwhile. Also, I like the idea of a tax credit for entrepreneurs, which I have seen floating around the internet. Government Agencies (Counties, Cities, and States) should also assist entrepreneurs by providing low cost office space, technology, and consulting services. Angels and large Angel syndicates need to step up to the plate and really give back to their communities. And entrepreneurs must work together, bartering their time and services with each other (the Internet and emerging technologies are making this easier).

While the past decade has seen an exodus in manufacturing and technology jobs from the US, our future success lies in how well we promote entrepreneurship and innovation. If we all work together, the future will be bright.