One of the largest hurdles standing between would-be entrepreneurs and their ideas is access to capital. Without it, it becomes extremely hard to fund your dreams to fruition.
To be sure, no one is entitled to money just because they have a great idea. In fact, acquiring funding is one of the primary goals of an entrepreneur. But a lot of these hurdles do not exist simply because of wealth disparity. The real trouble lies in the abundance of government regulation, which limits who is allowed to invest in certain business ventures.
Under the guise of caring about investors being swindled and losing money, the SEC has heavily restricted who is allowed to invest in certain projects based on income and net worth. Equity-based funding, as it is called, allows investors to use “angel investors” and other venture capitalists to make up the funds that young investors cannot come up with themselves. But because of these regulations, less than one percent of these start-ups are legally allowed to be funded by these willing venture capitalists.
And the worst part is, even when these young entrepreneurs are able to gain funding, government licensing provides further hurdles. And while it doesn’t fix the problem of excess government licensing, technology has made investing much easier than ever before thanks to crowdfunding.
Crowdfunding
In a world where government regulations make it increasingly difficult to start companies, young Americans have used technology to get ahead in the business world. One of the means which has allowed Millennials to make use of their entrepreneurial spirit is “crowdfunding.”
Sites like Indiegogo and Kickstarter, among others, allow young entrepreneurs to fund their projects through small donations given by many investors. While this is similar to GoFundMe, which is often used for charitable efforts as well crowdfunding ideas, these sites are primarily used to fund ideas, rather than cause.
Whether it is an alarm clock floor mat that prevents habitual snoozing by making users get up and stand on it in order to shut off the buzzing, or a documentary film project about obscure wrestlers, interested investors can become backers of whatever projects or products they are drawn to. In many instances, investors get some sort of kickback, whether it be the product itself or some other sort of swag. This helps investors feel personally connected to the project they are funding.
Crowdfunding is also a real-time manifestation of market demand. If you create a great product, people will donate. If your idea isn’t so great, you will most likely fail to earn the money necessary to bring it to market.
No More Debt
Crowdfunding provides funding opportunities for entrepreneurs, start-ups, and small businesses that are often overlooked by conventional lenders and have a hard time accessing traditional forms of credit. But through crowdfunding, raising investment capital is possible without having to go into debt in order to do so.
Many young Americans are already bound by massive amounts of student loan debt. To tack on additional debt in order to turn their ideas into sustainable companies would not only be impractical but in many cases, financially unfeasible.
As Forbes mentions:
“Although about 67% of entrepreneurs use funds from their own savings to get their projects off the ground, it is difficult to build a company with personal savings alone. When it comes to outside funding, the most common form is based on debt, as about 52% of all entrepreneurs take out bank loans.”
Going into debt is far from ideal for these young investors. Crowdfunding allows young adults to take control of their own futures while simultaneously creating businesses and products than benefit many Americans.
But the government has tried relentlessly to regulate crowdfunding, creating further financial burden for young innovators and discouraging innovation that has the potential to positively impact the lives of countless Americans.
Everyone deserves the freedom to turn their dreams into success stories. It’s time we put opportunity back into the hands of entrepreneurs and allow them to operate freely without the fear of overbearing regulations.
