Mining

Invest in people”s businesses

47 0 0 0 13 6. I met with Paul on Invest in people’s businesses. He is the CFO of a business start-up. He’s not sure if the next phase of his company’s financing is going to go through.

Although he believes in the business model and the mission of the company, some days he thinks he won’t have a job in three weeks. I met with David on Wednesday. While he’s a great saver and earns a decent buck, he isn’t wealthy. Because of the way small business investing is structured in this country, the likelihood of Paul and David connecting has been infinitesimally small.

It’s not just these two who are missing out. Because small companies drive job and economic growth, the economy of the country loses when Paul and David don’t connect. And because the current system of funding is biased, some small businesses are a lot less likely to get funding despite their worthy ideas. Recent developments could change all this. To raise their initial start up money, small business owners typically first use their savings, and then appeal to their friends and family.

If they get big enough and have certain ambitions and contacts, they can get venture capital funding or private equity funding, which is what Paul was waiting on. These sources of capital are all enhanced if you are affluent and well connected. Do your friends and family have extra money to invest in your business? Do you know anyone you can talk to at a bank? What about impressing people in the venture capital world? A lot of people with good ideas are shut out.