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There are plenty of profitable business ideas but you can’t get capital for them because they aren’t going to be billion dollar ventures with 10x returns. The p

by fogzen 9y ago

There are plenty of profitable business ideas but you can’t get capital for them because they aren’t going to be billion dollar ventures with 10x returns. The problem with entrepreneurship in America is lack of micro financing and support for starting small business - not lack of ideas or lack of people. How many more entrepreneurs and businesses could we create if financing was focused on capitalizing new business instead of only seeking the largest profit for the sake of enriching banks and already wealthy investors.

gfodor 9y ago
What you're referring to here are boring old commerical loans. Of course you're never going to get a bank to lend you money unless they can be sure you will repay the principal. If you're throwing money at risky ventures where you may lose your investment entirely it seems reasonable to expect a large amount of upside.
- fogzen 9y ago
  That’s my point... the financial system is built to reward the wealthy and does not focus on creating new entrepeneurs. Commercial loans aren’t provided for startups. Only the SBA engages in that and you have to prove you don’t have personal funds and/or be a minority to get them (I know I’ve tried.)
  - danieltillett 9y ago
    How do you prove you are a minority?
    - fogzen 9y ago
      Really depends on the specific loan program, but in general the majority of owners or employees must be black, Asian, Hispanic, or Native American. Not sure about the process of proving that though. There are loan programs for woman-owned businesses as well. http://www.mwbe.com/cert/certification.htm http://www.mwbe.com/cert/certification.htm
      - danieltillett 9y ago
        The black category seems rather open to abuse given everyone on the planet has origins in the black racial groups of Africa. I wonder if you could use a 23andme type genetic test to "prove" you have x% black or any other minority genetic background?
  - bmelton 9y ago
    Not that I'm suggesting you do or don't do this, or that it's right or fair, which usually has some form of 'eligibility' for awarding contracts to business, the usual workaround is to hire a figurehead CEO who is a minority (or disabled war veteran, or whatever other status the government determines worth worth investing in). I say figurehead because that's usually what they are, but there's nothing to suggest that you couldn't find an eligible co-founder or, to really work the system, find an eligible co-founder who is politically connected in some way.
    - fogzen 9y ago
      Thanks. I wasn’t looking for individual advice I just wanted to point out that the major barrier to entrepreneurship is not lack of ideas but a lack of access to capital for new businesses.
      - bmelton 9y ago
        FWIW, outside of the bay area, it's not nearly so easy to get access to capital anyway. Not trying to throw shade on anyone, but it seems far less likely that "ideas" that have no product, no users, etc. would be funded in the DC/Baltimore VC markets, but seem fairly routine over there. Bootstrapping seems pretty much the same everywhere. Pare down your living costs, build a true MVP in your spare time, start selling in your even sparer time until you can either show enough traction for a small business loan or hope to catch lightning in a bottle with virality. It isn't easy, it takes a lot of talent, persistence, and luck, but it isn't impossible, and if you can manage to build something people want, it isn't reserved purely to the capital class. Of course, it will always be easier for them to take the same idea, reach out to their network for capital, hire a team to implement it, and all of that increases their chances for success.
  - gfodor 9y ago
    How do you resolve this without coercion or theft? The only real regulation that I can think of that has reduced fairness and efficiency in startup investing (in favor of protecting the public) has been the accredation requirement, but that is relaxing and probably (for better or worse) going away. Any other mechanisms to increase risk taking by investors that they are currently unwilling to take today (which basically is what you are looking for) either seem to need to shift the risk elsewhere (ie, onto taxpayers, which is basically a proxy for forced risk taking) or through other regulations, backed by force. Do you have any reason to think the reason commercial loans don't work for startups has to do with anything other than the obvious: there is insufficient ability for startups to pay interest on the loan, and/or the default risk is too high? If you honestly think there is a market inefficiency here due to cultural bias or structural mispricing on the part of banks, then that sounds like an opportunity.

by fogzen 9y ago

gfodor 9y ago

What you're referring to here are boring old commerical loans. Of course you're never going to get a bank to lend you money unless they can be sure you will repay the principal. If you're throwing money at risky ventures where you may lose your investment entirely it seems reasonable to expect a large amount of upside.

fogzen 9y ago
That’s my point... the financial system is built to reward the wealthy and does not focus on creating new entrepeneurs. Commercial loans aren’t provided for startups. Only the SBA engages in that and you have to prove you don’t have personal funds and/or be a minority to get them (I know I’ve tried.)
- danieltillett 9y ago
  How do you prove you are a minority?
  - fogzen 9y ago
    Really depends on the specific loan program, but in general the majority of owners or employees must be black, Asian, Hispanic, or Native American. Not sure about the process of proving that though. There are loan programs for woman-owned businesses as well. http://www.mwbe.com/cert/certification.htm http://www.mwbe.com/cert/certification.htm
    - danieltillett 9y ago
      The black category seems rather open to abuse given everyone on the planet has origins in the black racial groups of Africa. I wonder if you could use a 23andme type genetic test to "prove" you have x% black or any other minority genetic background?
- bmelton 9y ago
  Not that I'm suggesting you do or don't do this, or that it's right or fair, which usually has some form of 'eligibility' for awarding contracts to business, the usual workaround is to hire a figurehead CEO who is a minority (or disabled war veteran, or whatever other status the government determines worth worth investing in). I say figurehead because that's usually what they are, but there's nothing to suggest that you couldn't find an eligible co-founder or, to really work the system, find an eligible co-founder who is politically connected in some way.
  - fogzen 9y ago
    Thanks. I wasn’t looking for individual advice I just wanted to point out that the major barrier to entrepreneurship is not lack of ideas but a lack of access to capital for new businesses.
    - bmelton 9y ago
      FWIW, outside of the bay area, it's not nearly so easy to get access to capital anyway. Not trying to throw shade on anyone, but it seems far less likely that "ideas" that have no product, no users, etc. would be funded in the DC/Baltimore VC markets, but seem fairly routine over there. Bootstrapping seems pretty much the same everywhere. Pare down your living costs, build a true MVP in your spare time, start selling in your even sparer time until you can either show enough traction for a small business loan or hope to catch lightning in a bottle with virality. It isn't easy, it takes a lot of talent, persistence, and luck, but it isn't impossible, and if you can manage to build something people want, it isn't reserved purely to the capital class. Of course, it will always be easier for them to take the same idea, reach out to their network for capital, hire a team to implement it, and all of that increases their chances for success.
- gfodor 9y ago
  How do you resolve this without coercion or theft? The only real regulation that I can think of that has reduced fairness and efficiency in startup investing (in favor of protecting the public) has been the accredation requirement, but that is relaxing and probably (for better or worse) going away. Any other mechanisms to increase risk taking by investors that they are currently unwilling to take today (which basically is what you are looking for) either seem to need to shift the risk elsewhere (ie, onto taxpayers, which is basically a proxy for forced risk taking) or through other regulations, backed by force. Do you have any reason to think the reason commercial loans don't work for startups has to do with anything other than the obvious: there is insufficient ability for startups to pay interest on the loan, and/or the default risk is too high? If you honestly think there is a market inefficiency here due to cultural bias or structural mispricing on the part of banks, then that sounds like an opportunity.