Where the Jobs Are: Entrepreneurship and the Soul of the American Economy

Chapter 6

“Not All Good Ideas Get Funded Anymore”

Starting a new business requires money. In the initial days of a start-up, capital needs may be limited to the bare essentials—money to purchase supplies, computers, and other office equipment. Falling costs for computers, software, and other office technologies in recent years, together with the establishment, distributional, and promotional powers of the Internet, have dramatically lowered the cost of getting a new business off the ground. Starting a new business from scratch costs, on average, about $30,000.1

But that’s just the beginning. As new businesses begin to grow, capital needs multiply. Entrepreneurs need money to pay bills, to move out of the garage or dining room into office space, and, hopefully, to begin paying initial employees. Most importantly, entrepreneurs need capital to further develop their product or service idea, research the marketplace, and develop and implement a strategy for identifying and targeting customers.

Because such costs typically arrive long before the first dollar of revenue, capital and credit are the lifeblood of any new business. Difficulties in accessing sufficient capital and credit at reasonable terms can delay or prevent the launch of a new business, disrupt the further growth and development of an existing business, or even kill an otherwise healthy and viable business.

While securing financing has always been a major challenge for entrepreneurs, our roundtables made clear that circumstances ...