Old Investors, Young Entrepreneurs

NEW YORK ( MainStreet) -- Maybe it's because tech icons Bill Gates, Steve Jobs and Mark Zuckerberg started young.

Or maybe it's because youth unemployment is at a staggering level -- twice that of the national average in some areas. But there is a renewed focus on nurturing young entrepreneurs these days, and some see the group as a good place to place bets on the future of business.
Can you identify the entrepreneur? It's Tori Molnar, 14, in the center, and the girls around her are some of her sales reps.

According to a Gallup poll published in October, 45% of students in grades 5-12 plan to start their own business, with 42% of respondents saying they plan to "invent something that changes the world."

Just last week the White House and Small Business Administration launched a Young Entrepreneur Series to connect aspiring entrepreneurs with resources in their communities to help them start or grow their own small business.

"Young Americans need to know that starting a business is a viable alternative to going to work for somebody else. There is a clear and urgent need to create more jobs for young Americans, and encouraging business ownership is an important way to meet that goal," according to a statement by SBA Deputy Administrator Marie Johns.

The SBA plans to hold five YES forums across the U.S. to reach its audience. The first one was held Monday in San Diego. A second was scheduled for today in Ames, Iowa.

"We're the most technologically savvy generation and the most educated generation in history," says Scott Gerber, founder of the Young Entrepreneur Council, an organization made up of the nation's top young entrepreneurs. "We've also grown up in an age and time of watching our parents get laid off and watching the new economy be unkind to our generation, so that entrepreneurism is now being seen by many as a viable career path. More young people are getting involved earlier."

Tori Molnar, the 14-year-old CEO and founder of for-profit Utoria and the nonprofit She Can Make Change, believes she is a good bet. She is preparing to launch a crowd-funding initiative for up to $10,000 on IndieGoGo .

"I'm committed. I already have this amazing company behind me. It's not like I am going into the business realm completely blind. I've also grown up in an entrepreneurial family which has given me the basic knowledge, and I can only grow from here," Molnar says.

Utoria launched Oct. 1. The company is a direct-sales company for 14- to 19-year-old girls selling everything from accessories to books to electronics. Molnar, who turns 15 in December, says she purposely made the product line large so "every girl would be interested in it," she says.

The products are sold by peers to their peers. Utoria encourages teamwork among reps as well as using social media to promote their business. Molnar says a second objective is to help teenage girls build confidence.

Molnar is also proud to say that it is the first direct-sales company to promote other small businesses as vendors. "We work with the company and the manufacturers to develop a six-month plan on how we are going to sell their product," she says.

But she certainly has plans for expansion, such as working with larger brands that were also started in the entrepreneurial spirit, including the sunglasses manufacturer Oakley, she says.

"We're looking to partner with these kinds of companies and develop products that are exclusive to Utoria because we got started by promoting small businesses. We didn't have the funds to private-label our own products. We searched out smaller companies we knew would want to partner with us. We realized that was our niche and we don't want to private-label. We want to keep going with promotion of the small businesses," she says.

While not all young entrepreneurs are as serious about their endeavors to attract investment capital, there are others that shouldn't be discounted just because of their age. The general assumption is that older workers make for better business owners because they already have practical experience. But youth lacks as many commitments as their older counterparts -- meaning if they are serious about an idea they can devote a significant amount of time to it.

"Certainly young people have more opportunity to start important businesses than they did before, and actually I think that when you're in college it's a great time to start a business -- it turns out that people in college have meal plans and places to sleep. If those are given, you can throw yourself into the business," says Nick Seguin, manager of entrepreneurship at the Ewing Marion Kauffman Foundation, the largest organization in the world dedicated to fostering entrepreneurship. Seguin started a digital consulting firm when he was 19.

Yet to impress investors, Seguin says it's important that the young entrepreneur is familiar enough with the mechanics of their business, is able to talk proficiently about the industry they serve as well as what they have done in the past six months to accomplish their goals.

"If a young woman is building a global telecom company at 28, what makes them the domain expert here? It's a huge market opportunity, that's great, but what makes you the one that I should place a bet on?" Seguin says. "The real question is 'Have you validated your business with customers?' What does your cash flow look like? The next iPhone app would be really big, but I'd rather somebody talk about solving a problem."

Investors are not only looking for traction but social validation. "A lot of investors will meet young entrepreneurs and ask, 'Who else have you talked to? Who else in my network can say you are who you are?'" Seguin adds.

Gerber, of the Young Entrepreneur Council, is an entrepreneur himself. Most recently he started Gen Y Capital Partners, an early stage venture accelerator for Generation Y entrepreneurs. The new venture began taking applications Nov. 1.

"It's important for our company and other companies to look at the bigger problems of why young entrepreneurs don't become entrepreneurs -- there are too many barriers" such as access to capital, Gerber says. "Not to say that banks are lending to anybody, but older generations have collateral and credit history."

The venture company plans to invest on average $15,000 to $50,000 (in some cases as much as $250,000) into early stage ventures by young people across multiple industries.

But Gerber says that young entrepreneurs have an even bigger problem that needs to be solved: how to unburden the group from the gigantic student loans that are inhibiting them from starting businesses.

The new fund combines income-based repayment options to pay the entrepreneur's federal student loan debt obligations for up to three years, enabling them to concentrate on the crucial start-up phase of a business. It will also offer some the opportunity to live on college campuses for us to two years as well as peer mentoring.

The company expects to invest in up to 100 start-ups over the next five years, and several hundred over the next 10 years.

"We hope to have long-term partnerships with these people," Gerber says.

"At the end of the day investors are investing in people -- that's obviously the case in all investments -- but specifically for young people if they really believe strongly in leadership at this age, they'll have a long career. You're putting a bet on these people," he adds.

-- Written by Laurie Kulikowski in New York.

To follow Laurie Kulikowski on Twitter, go to: http://twitter.com/#!/LKulikowski

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