Micro-Lending in the U.S.A.
I hear talk about micro-lending not in developing nations, but here in the U.S.A. It’s a great idea.
Recently, LinkedIn founder Reid Hoffman proposed that the SBA and other investors give loans of up to $50,000 to small entrepreneurs. Here’s what he said:
Why? Because models of investment besides just venture capital can stimulate the economy. Let’s not neglect entrepreneurs who create coffee shops, florists, taxi services or other small businesses that help the economy thrive at the local level. Sometimes, a coffee shop becomes Starbucks. These don’t require venture funding; they just need a small business loan to get started and grow. Micro-lending has proved viable around the world — let’s do more of it at home. If a service like Kiva.org (disclosure: I’m a board member) can succeed in 12 countries, it can succeed here too.
Also, Y Combinator just got backing from Sequoia Capital and angel investors Ron Conway, Paul Buchheit and Aydin Aenkut to launch a $2 million fund. Y Combinator is one of several seed-investment funds that invests $5,000 to $20,000 in startups, taking a 5% to 10% stake. As you can tell from the small size of the investments, these are tiny companies of the kind that rarely get venture funding. Also, unlike VCs or many traditional angels, Y Combinator isn’t after controlling stakes.
Of course, Y Combinator doesn’t focus on the type of small business Hoffman is talking about. He means plain-Jane, non-techie, locally oriented ventures–the majority of small businesses today. In any case, boosting small ventures and startups with small amounts of money to help them survive–and grow–in this economy is an important idea. I hope Obama, as well as private investors, take it to heart.