Let’s Be Thankful for Those Who Invest in Entrepreneurial Ventures

By SBE Council at 22 November, 2022, 10:55 am

by Raymond J. Keating –

With Thanksgiving upon us, even during tough economic times – such as our current bout with stagflation and uncertainties about where the economy is headed – there’s a great deal to be thankful for in this country.

As SBE Council notes each year, we should all be thankful for the free enterprise system that provides the foundation and incentives for entrepreneurs to take on the significant risks and uncertainties involved with starting up and building businesses, including those businesses that produce and deliver the bounty on the Thanksgiving Day dinner table.

But there’s another group of people who play a vital role in free enterprise, and for whom we should be thankful, i.e., investors.

Entrepreneurs need financial capital to start up and build businesses, to invent and innovate, and to drive economic, income and employment growth forward.

Investment Capital Drives Startup Activity and Business Growth

Depending on the industry and the stage of growth, angel investors and venture capitalists are vital to funding entrepreneurial undertakings. Angel investors tend to be wealthier individuals who invest their own funds in a startup or early-stage business.

Meanwhile, venture capitalists can be individuals or a group of investors who invest in a developing business, and while some venture capitalists invest in startups, venture capital tends to go to businesses that have a bit more of a track record.

Also, online crowdfunding investment has flourished in recent years, with a larger number of investors providing smaller investment amounts, as opposed to more traditional angel and venture capital investing, for a new or growing business venture.

If we’re thankful for entrepreneurship, as we should be, then we must be thankful for those who invest in entrepreneurial ventures as well.

But there’s more. Traditional stock market investors aid entrepreneurship as equity markets allow businesses to gain access to investment dollars that fund business innovation, product development and growth, such as through initial public offerings or issuing additional stock. And by purchasing shares in secondary markets, like the New York Stock Exchange, shareholders participate in ownership (without participating in the direct operations of a firm), while sound and liquid secondary markets allow investors to easily buy and sell shares – that is, assuring ease of entry and exit – thereby providing the necessary confidence for companies issuing stock and for investors buying shares.

Yes, the idea that Wall Street is opposed to Main Street makes little economic sense.

So, let’s be thankful for entrepreneurs and the businesses they build this Thanksgiving, but let’s also be thankful for the investors who fund those entrepreneurs and businesses.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.