Young entrepreneurs more likely to have had funding help from family

Young entrepreneurs are most likely to rely on their parents to fund their startup, as research sheds light on how social background can impact a person’s ability to start a business.

In a survey of 501 UK young entrepreneurs, VistaPrint found that Gen Zers (aged 16-26) are almost 10% more likely to get funding from family members, compared to millennials.

Youth entrepreneurism has seen a huge surge in the past few years. In 2022, 4,093 firms were registered by junior founders, representing a 400% uplift compared to 2021.

Despite this, the data suggests that young people who cannot rely on family support will have to wait longer than those from more privileged backgrounds to launch their venture.

Keep it in the family

According to VistaPrint, 22% of Gen Z founders will get investment from their parents or family members, compared to 13% of millennial company owner.s

The findings indicate that having a parent or older sibling who can assist with funding and knowledge is key to getting a business idea off the ground early.

Many famous CEOs you’ll have heard of made their first sale thanks to family connections. They include Nike founder, Phil Knight, Amazon’s Jeff Bezos, and self-proclaimed “self-made billionaire”, Donald Trump.

Mark Zuckerberg reportedly took a $100,000 loan from his father to start Facebook (this was mysteriously left out of his Oscar-winning biographical film, The Social Network).

Without this support, entrepreneurs are forced to go through traditional lending channels such as business loans or business grants.

However, this involves a lengthy application process that requires a greater investment of time and resources compared to funding from friends and family.

Family matters

VistaPrint’s data also shows that full-time Gen Z business owners are more likely to have started their company with a family member.

This is potentially because young people aged 16-26 are more likely to be in full-time education, and have less time to dedicate to the day-to-day operations of running a company.

On average, 41% of business owners aged between 16-26 will start a business with their family members, compared to only 24% of millennials.

If a young founder is lucky enough to have a parent with experience running a company, this can be a significant advantage for growing their business and building a leadership style.

They might also have a network of business connections to help fast-track their kid a few rungs up the corporate ladder. For example, Bill Gates’s mum apparently introduced him to executives at IBM, which helped him to forge a deal for his first operating system MS-DOS.

How to start a business with no family funding

There is nothing wrong with using family connections or money to launch a company. As shown, many of the world’s best-known business people did the same.

For those who cannot rely on this route, however, it can be discouraging to see how much faster it takes for these business ‘nepo babies’ to register a company.

Having this early advantage could also be one of the reasons that CEO salaries for working class founders are shown to be £16,749 less than peers, an example of the Class Pay Gap.

The grind still pays, however. VistaPrint still found that young business owners in the UK are making £51,000 a year, on average, against the average UK annual salary of £34,000.

Founder Joe Seddon had no connections to rely on when launching his company. He told us about the challenges of starting a business with no family or friends funding.