We hear a lot of platitudes this time of year about supporting our troops and being thankful for the sacrifices of U.S. veterans. It’s an easy thing to say. Less easy is actually putting your money where your mouth is, but now, thanks to the StreetShares social lending platform, you can—in the form of investing in veteran-led startups.
StreetShares, based in Reston, VA, is the creation of Mark Rockefeller, who spent nine years in the Air Force. The company launched in June, about a month after it closed a $1.2 million seed round led by Accion Venture Lab.
After he finished his military service in 2008, Rockefeller spent a little time on Wall Street. He was frustrated by the number of military veterans transitioning back into the private sector right as companies were slashing jobs and banks were tightening access to capital for would-be startup founders.
Rockefeller wondered where “Main Street” entrepreneurs of any variety would find startup cash, let alone veteran entrepreneurs newly rejoining civilian life. (Veterans, statistics show, are 45 percent more likely to be business owners than those not in the military.) Also complicating veterans’ quest for funding is the challenge of building credit while on active duty, when it’s hard to stay put in one place.
“It was a big change from our grandparents’ generation,” Rockefeller explains. “There were lots of small banks back then to make modest loans, so I started StreetShares to deal with the problem.”
Describing it as “Shark Tank meets eBay,” he says StreetShares is a network connecting small-business owners looking for loans directly with potential accredited investors. Every small business is given space on the site to present their pitch a la Kickstarter. Investors then bid to back a portion of the projects, and the more they bid, the lower the interest rate on the loan.
StreetShares takes the bids, combines them into a single unsecured loan between $5,000 and $50,000, and services the loan. To be eligible to borrow, applicants must be U.S. citizens in business for at least a year and earning revenue; it’s not required that applicants be veterans. Rockefeller hopes that once federal crowdfunding legislation is straightened out, he’ll be able to allow unaccredited investors to bid, too.
“As the borrower pays back the money, it goes to our investors,” Rockefeller says, though he points out that money isn’t usually the sole motivating factor for StreetShares funders. “Most of our investors are interested because they get a combination of financial and social returns.”
Rockefeller says we’re in an age where there are “very exciting things” going on with veteran entrepreneurs, especially when it comes to the kinds of business ideas being nurtured in incubators that focus on veteran businesspeople.
“Part of it is that these are very talented people who are coming off active duty and want to work for themselves, plus there’s a job shortage,” he adds. “The movement of veteran entrepreneurs is only going to increase as more people come off active duty. Plus, there’s a general trend toward alternative lending platforms.”
Rockefeller says 20 percent of veteran-owned small businesses service federal contracts, and many of those contracts stipulate that a veteran bidding on the job must be given preference, giving them an advantage. “We’ve funded media startups, IT startups, environmental startups—it’s just all over the place,” he says. “Veterans are very creative and have a great can-do attitude—when they apply those skills, they get to the marketplace.”
Marian Kahn is one such veteran. The metro Detroit resident opened up a medically based weight loss clinic in Royal Oak, MI. Initially, she got a Small Business Association loan, but she “severely underestimated” her needs, she says. She heard about StreetShares in an online discussion group for veterans, put her pitch on the site, and ended up securing a $15,000 loan.
“It’s very encouraging that someone believed in what I was doing,” Kahn says. “Being fellow veterans, it’s nice to support each other.”
Rockefeller echoes that sentiment: “We’re on track do $10 million in our first year. We have some neat investors, some wealthy folks that really care about veterans,” he says. “For investors, it’s a pretty rare opportunity, and they’re pretty excited about it.”
