While jobs remain scarce for any one who's looking, one subset of the population suffers from a jobless rate of almost twice the national average: young people. As of September, 17.4 percent of the youth population aged 16 to 24 was unemployed, according to the Bureau of Labor Statistics.
This high rate of unemployment has lead some members of the business community to advocate abandoning the traditional path to employment. Scott Gerber, author of Never Get a "Real" Job and founder of the Young Entrepreneur Council (YEC), says it's better to become an entrepreneur first and create your own job. The current system is failing America's youth, he says, because of massive amounts of student loan debt and a lack of education about entrepreneurship. The YEC is working with a new investment vehicle called Gen Y Capital Partners that will allow young entrepreneurs to apply for funding for their own businesses. Gerber recently spoke with U.S. News about the YEC and the new program. Excerpts:
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What's your take on the current job market for young people?
America faces a crisis of losing its Millennial generation, and there are a lot of older generations out there that keep saying, "It's not all about young people." … That's a very narrow-minded view of a long-term economic recovery. The bottom line is by this generation getting lost, you're not just losing potentially the job seekers and the job creators that are 20-somethings. You're losing the job creators and the job seekers that potentially are the 30-somethings, 40-somethings, and 50-somethings of tomorrow.
How did you get started in entrepreneurship?
When I was in college I started a business my sophomore year. … I was producing professional projects in the entertainment industry. I was doing very well, and then I made a lot of amateur, stupid mistakes that entrepreneurship education and a peer group would have obviously helped me in not making, basically. I spent too much. I diversified too quickly. I scaled without knowing how to scale—all the different things, which lead me to basically bankrupting the company and only having $700 left to my name upon graduation. At that moment, I made the decision to say I'm not going to listen to my parents, who were saying, "Well, now it's time to validate your college education by getting a 'real job,'" and I decided instead to take all of those hard-learned lessons, all of those failures, and see how can I make my next business a success based on what I've learned. … I found a way to build a business that's still in existence today called SizzleIt that does a very simple service. It produces video sizzle reels for marketing agencies, and now has clients like Proctor & Gamble and Dolby.
It was certainly not easy, but what it taught me was that when push comes to shove, when desperation and necessity take over, people can do amazing things. And what can incentivize them and help them do more amazing things is if they have other people around them, like-minded individuals, that can help push them forward, to act as a brain trust and a mentor group that can push each other to the limits of imagination. That's why ultimately, longer-term I said, "Well, how can I give back because I've been so fortunate as an entrepreneur, how can I help the next generation understand what it's going to take in the new economy to become successful?" And that's why I founded the Young Entrepreneur Council (YEC).
What's the YEC, and what do you advocate for?
We advocate that entrepreneurship should be seen and supported as a viable career option for young people. We're not trying to select winners and losers. All we're trying to say is that we can remove barriers to entry to make entrepreneurship a real option. We believe not only on the government level, but on the private-sector level there are certain things that can be done, innovative partnerships, reforms in the government, and a variety of other things that can happen to really activate this generation that has been so almost let down, if you will, by our predecessors on multiple levels. ... Let's change the mindset of this generation from that of one that thinks you graduate and you must get a "real job" to one that says, "How do I go and create jobs?"
The YEC is an invite-only group of many of America's top young entrepreneurs. Our founders include individuals like Alexis Ohanian [cofounder] of Reddit, the founders of Living Social, and the founders of College Hunks Hauling Junk. Really we've almost covered every single market, vertical, and geographic location in the U.S. Our sole purpose is how do we combat youth unemployment and underemployment by teaching entrepreneurship and by helping to mentor the next generation.
Explain your latest partnership with Gen Y Capital Partners.
While we've been talking to thousands of entrepreneurs and 20-somethings over the last year, we've seen that there have been multiple barriers to entry for young people to enter the non-traditional workforce, the entrepreneurial workforce. That has been four things, mainly. The first thing has been college loan debt. We currently in this country have a trillion dollars in college loan debt and an 8.8 percent default rate as of last year. And that is going to set back not just this generation, but the generations of tomorrow, because once you lose your credit score you're in a lot of trouble. ... We noticed there was a lack of peer to peer mentorship. There a lot of amazing programs in the U.S., but we've found there are a lot of [young] people don't feel that these programs communicate with them. It's a lot of older generations talking about their experience, which is wonderful, but [there are] not a lot of the current American young entrepreneurs talking to their peers. ... The third thing we noticed was that the living expenses post-college, just like college loans, are forcing young people, because they have to pay the bills, to either a) become boomerangs and live with their parents, which is not a supportive environment, or b) they end up saying, "Well, I can't go do entrepreneurship right now because it's just not economically feasible." ... The last point was that we found that in America entrepreneurship education is sorely missed. In our latest national survey, we found that there is an obscene amount of young people that have never experienced a single entrepreneurship class in college, and of the people that did get an entrepreneurship education, the vast majority have found it to be useless in the real world.
Out of that came Gen Y Capital Partners, where we said let's take not just an approach to investing in companies, but a 360 [degree] approach to also stopping what ails the generation from becoming entrepreneurs in the first place. Ultimately, by removing the college loans from the equation by working with the White House's new reformed income based repayment [plan]. Basically, our founders will opt into income-based repayment, and then what we will do is pay whatever is remaining. So if you're familiar with the program, it [is capped at] 10 percent of your income. We'll now pay that remaining amount for up to three years to remove college loans from the equation entirely. ... We're having folks live in places like Cogswell College, and we're also providing education through groups like Princeton and Georgetown and another school roster that's going to be announced soon. Finally, from a peer-to-peer mentorship angle, we have some of the most incredible doers in this generation as members. … We have a great peer-to-peer mentorship program with the YEC. Our members will not only be able to mentor these folks, but eventually be able to potentially co-invest alongside Gen Y Capital Partners and their businesses.
How do you apply for funding?
When people go to www.GenYCap.com and they go to the "Apply" section, they'll be asked to supply their executive summary, and they'll also be asked if they want to submit an up to one-minute YouTube video pitch so they can be seen and heard about their business along with some basic information. Starting in 2012, we'll begin consideration on which businesses we'll invest in. … The average investments will be between $15,000 and $50,000 plus the loan reduction, and in select ventures we'll invest up to $250,000. … Our investment company will take an equity percentage based on the business and the investment that we make.
Corrected on 11/02/11: A previous version of this story incorrectly described how the income-based repayment program works. Students enrolled in the plan will have their payments capped at 10 percent of their discretionary income.