Jobs and Growth are
today’s world biggest problems.
Our collective aim
should be Eudemonia.
Entrepreneurship and positive creativity are certainly the best means to
Startups are the essence of the solution, but still the well known early
stage funding problem called “Valley of death” is the biggest obstacle
they face. Start-up America, Start-up Britain and other initiatives are
trying to give a solution but yet, not satisfactory. See what Kauffman
- Democratize the process of
Make it look easier and be easier for people to go pursue.
This is not an
American only problem... the contrary, is our worlds most compelling
problem today, Growth... It affects everyone... Young people 18 - 35
unemployment rates reach and exceeds in some regions numbers like
45%!!... Occupiers are almost everywhere... There is a systemic problem
around the world...
So lets see how
thinks are today...
Just the 2-4% of the highest growth startups found a source of funding
in their early stage steps other than own capital, FFF (Friends-Family-Fools) and bank loans
(entrepreneurs commons research from inc 500|5000 list), that
simple statistic proves a simple fact:
To start a business you need to have your OWN capital.
That fact also dictates a failure…
95% of population doesn’t have enough funds to startup.
That results to all of us waiting the wealthy 5% of the population, to
have all the ideas or want to fund our prosperity… something that
doesn’t happen in the magnitude needed because profit is not enough
motive, as necessity is, when you are in the top… as a proof of the
numbers see EU's statistic chart below:
Monitoring Report 2009, Social Situation Observatory, Income
Distribution and Living Condition page 75
Considering that the median income for the year 2006 was 13.187€, it’s
clear from the above chart that almost 95% of EU population needs at
least 15 to 25 years of savings to accumulate a mere 40K€ to 80K€,
subtracting the cost of the rest of survival needs an individual has
like food, clothing, transport, house etc..
But hey, we live in a Democracy, we should all have the opportunity to
startup… if we had a good idea, shouldn’t be the lack of capital our
barrier to startup…
So what are the today's, solutions for the early stage funding problem
or the so called “equity gap”…?
There are two approaches in the world on how to fund start-ups... The US
way and the European (or Governments way)... The differences are boiling
down to two simple things...
Source of Assessment and Source of Capital...
The US way is based on assessment and capital coming from the private
sector... whereas in Europe, part of the assessment and big part of the
funding is being provided from the public sector. Something in between
of the two is the “risk sharing” method, which is more like the US since
all assessment and half of the funding comes from the private sector, a
fact gives the same results as the US way.
Both are having pros and cons.
Recently is being invented a third way...
Its Participatory Entrepreneurial Assessment, Assisting and Funding... It’s using
the private sector to Assess and Assist, while Funds are coming from the
Public sector in full…
The model is called iDea Framework and it combines the pros of the
American way, such as, free will, personal risk factor, market driven
triggers, mentoring, incubating and unconstrained entrepreneurial
freedom without the use of Angels and VC’s, along with the pros of the
European way which is the investment of public money on start-ups,
without public servants being involved or wealthy ones with the
assessment and funding of start-ups. All that, while on the same time
having strong Democratic
authorization and accountability of the model by activating the whole
community in the process.
By keeping investors on the first steps of the process in a distance, its not "super profiting" the only motive in the equation,
although while keeping profiting as a main target in order whatever we
do to be sustainable, we add another human driver not existed until today; our
necessity to innovate, change our life's and create jobs and prosperity for our communities.
All that, while
investors are in distance are not get crowd out but instead of being "Pushed"
by the community to invest they are
just "Pulled" to
invest because the mechanism makes the startups compelling and investor
friendly... So everyone is involved in the right moment for the right
Additionally is our
Democratic responsibility to fix what we have today.
It’s all about Equal opportunities… Aristotle the Greek philosopher said,
2300 years ago:
"There is nothing more unequal than the equal treatment of unequal
US approach does not fix the inequalities of incomes and the shortage of
real equal opportunities people are facing due to lack of own startup
capital… neither European approach can be as effective as US is in the
long run because it misses real private motives and risk sharing method
is dysfunctional as the US way is, since all the triggering are directly
connected to what the top and wealthy 5% are doing…
So if we want both to happen, effectiveness and real equal opportunities
for all, we
need a third way.
Entrepreneurial Assessment Framework (iDea Framework) is the answer.