New Fund Eases Way for Gen Y Entrepreneurs

Generation Y is facing a crisis.

With nearly a trillion dollars in student debt, jobs scarce, and many twentysomethings moving back home for lack of affordable housing, the thought of starting a business seems difficult, if not absurd, to many. A new seed investment fund, Gen Y Capital Partners, officially launched this morning and is looking to change that.

Founded by Young Entrepreneur Council founder Scott Gerber, the fund is targeting would-be entrepreneurs with $10 million and an untried system for funding startups with sums of $15,000 to $50,000 a pop.

Gerber calls his latest brainchild an effort to build on government programs, resources at the nation's universities, and private investment to help the rising generation build new companies.

“We can truly create a new way to incubate these businesses, removing the key barriers to entry,” said Gerber, who is based in New York City, but says Gen Y Capital Partners will make investments in budding entrepreneurs from around the country. “This is a national game here.”

Part of that new way to incubate businesses involves helping young entrepreneurs burdened by student-loan payments ignore those loans for three years while they get their businesses off the ground.

The students-turned-entrepreneurs will first have to enroll in the federal Income Based Repayment Program, which, beginning in 2014, caps repayment of student loans at 10 percent of earned income and forgives the remaining debt after 20 years.

In addition to paying student loans, Gen Y Capital will offer young entrepreneurs:

• Housing and instruction on university campuses to give fledgling company leaders access to some of the best brains available, and a free place to stay for two years. So far, Cogswell Polytechnical College in Silicon Valley, California, has signed on for both housing and instruction. Princeton and Georgetown universities have agreed to provide instruction.
• Mentorship from members of YEC, an invitation-only organization of successful millennial business leaders, and other entrepreneurs. “You have an army of America’s top entrepreneurs at the ready,” Gerber said.
• Equity investment in companies similar to the kinds of investments made by such established accelerators and incubators as Paul Graham's Y Combinator and the TechStars accelerator programs. The amount of equity Gen Y Capital will take in startups will vary by investment.

Gerber said one thing that makes Gen Y Capital a different kind of seed investment effort than Y Combinator or TechStars is that it’s not just focused on the most savvy of young entrepreneurs creating completely new technologies. Instead, he said, the fund will try to give a hand to, “the 99 percent,” who might have good ideas but are hampered by such roadblocks as student debt.

The fund is expected to invest in up to 100 new businesses in the next five years, and several hundred over the next decade. Since announcing the fund’s existence today, Gerber said Gen Y Capital had already had responses from dozens of would-be entrepreneurs this morning. The fund won’t begin taking online applications until November 1 and will start considering funding beginning January 1.

“We feel that the way that we invest in these young people will systematically change the way investment is done,” Gerber said. “This is an important project. It’s not just about Gen Y Capital Partners being successful.”

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Kent Bernhard Jr. is News Editor of Portfolio.com