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Kelly and Will Watters
Kelly and Will Watters, co-founders of WESTERN RISE, founded the company out of their apartment in Georgia and became the third generation of entrepreneurs in their families.

Starting up alongside the elephant in the room

Crushing student debt levels tend to defuse entrepreneurial dreams, but some are still willing to take on the outsized risks considering the potential rewards.

Having both been raised in entrepreneurial families, it wasn’t much of a surprise when Kelly and Will Watters decided to become third-generation entrepreneurs five years ago. When Will Watters identified a market for performance clothing that could be worn both for an active lifestyle and in the professional world, the married couple founded WESTERN RISE out of their apartment in Georgia.

What distinguished their startup experience from what they witnessed with their parents was their cautious approach to taking the leap into business.

“Both of us watched our parents start companies and grow them successfully, so it’s second nature to both of us, and we have pretty high risk tolerances,” Kelly Watters said. “But for us, it took a bit longer to pull the trigger on some riskier bets until we had more data, because we had to make sure it would work.”

Although the passion behind the idea burned brightly, the margin for error was much tighter than that the previous generations of their families, even without a mortgage, children, or a second car for the dual-income couple.

A key factor? Nearly $75,000 in student debt that Kelly Watters amassed between undergraduate and graduate school.

The unrelenting $800 monthly payment contributed to more than two years of continued full-time employment in tandem with the startup efforts. It also prompted a decision to pursue investors earlier than anticipated, a choice that led them to move from Georgia to Telluride, Colorado, where an investment from the Telluride Venture Accelerator awaited.

“I actually consider us lucky because I know many people with well over $100,000 in debt from their undergrad education, and Will had none because he benefited from a program in Georgia that pays your tuition at a state school if you maintain a certain GPA,” Kelly Watters said. “I have several friends who always talk about doing something on their own but have an aversion to it because they have such large overhead.”

An immense obstacle for many

At the end of 2018, the 44.5 million individuals in the U.S. with student debt owed an average of nearly $33,000 apiece, according to the Federal Reserve Bank of New York. Considering that, according to 2009 data, the average startup required $30,000 to go live, the aversion Watters hears from her indebted peers is understandable.

Meanwhile, business startup numbers lag pre-Great Recession levels and the percentage of self-employed individuals within the national workforce similarly lingers below pre-financial crisis averages. Applying a generational lens, one-quarter of new entrepreneurs in 2018 were 20-34 years old, a 27% drop from 1996 figures.

The influence of student debt on the young adult population is palpable, according to a 2017 study from Karthik Krishnan of Northeastern University and Pinshuo Wang of the University of South Florida, which found that:

  • Student debt is negatively related to the likelihood of starting a business.
  • Entrepreneurs are more likely to fall behind on student debt payments.
  • The likelihood of a startup’s success is diminished by student debt.

Among millennials, EY reported that in 2018, 50% were either making student debt payments or planning to take on more debt. And while 58% considered themselves more entrepreneurial than older generations, less than 4% were self-employed. Not having the financial means to make the jump was cited by 38% as the largest hindrance.

“I get together with a group of people from my masters program, and many of them are shocked that I’m able to start a practice – they simply don’t feel that they have that opportunity,” said Katelyn Daugherty, a co-founder of The Facility, a Denver-based health and wellness clinic specializing in functional medicine and chiropractic treatments. “Working for yourself, owning a business, and life goals like owning a house aren’t even on the table.”

Dr. Cullen Fahey, Dr. Mitchell Rasmussen, and Katelyn Daugherty MS.
The Facility’s Director of Chiropractic Medicine Dr. Cullen Fahey, Director of Functional Medicine and Director of Movement-Based Rehabilitation Dr. Mitchell Rasmussen, and Functional Nutrition Specialist Katelyn Daugherty MS.

Partnerships can be a necessity

What sets Daugherty apart from many of her former classmates is that she opened The Facility with Mitchell Rasmussen and Cullen Fahey in July 2019. Although her two co-founders are shouldering a combined six figures of student debt, the partnership was necessary for Daugherty, a nutritionist who juggled a full-time hospital operating room gig with her graduate studies to avoid taking on loans.

The trio needed $135,000 to acquire equipment to open the doors, and when a conventional bank said no, they turned to Denver-based Colorado Lending Source, a nonprofit community lender. There, they secured the funds through a Small Business Administration (SBA)-backed program.

“Without me, they couldn’t have gotten this loan, but I can’t practice without them,” she said. “It’s a balance as all three of us needed each other to get to this point.”

To secure the financing, Daugherty put her home up as collateral, kept working at her hospital job for a few months, and has yet to take a salary.

“On paper, no one wanted to lend to us. We look terrible,” she said. “We had to go in and do a pitch in which we demonstrated our passion and showed our vision.”

Although their efforts proved successful, Rasmussen and Fahey’s student debt still looms large.

“Our success is short-lived, in a sense,” Daugherty said. “As we make money, they’ll have to pay more on those loans, and I see that being a challenge for all of us because we’re all going to have to bear it.”


  • 50% were either making student debt payments or planning to take on more debt.
  • 58% considered themselves more entrepreneurial than older generations.
  • >4% were self-employed.
  • 38% reported not having the financial means to start a business was the largest barrier.

    Source: EY >

Funding a constant challenge

A decade ago, the average student debt load hovered around $20,000, according to the New York Federal Reserve. As the Great Recession and its aftermath worked through the system, however, Colorado Lending Source executive director Mike O’Donnell said traditional lenders adopted a mindset that hasn’t subsided.

“Banks and even the SBA became much more dependent on credit and collateral in making business lending decisions,” O’Donnell said. “But at this point it’s safe but lazy to say a credit score is so important, especially for younger applicants who are already impaired and have lower credit scores due to a bunch of debt.”

As an alternative, Colorado Lending Source developed a microlending platform that allows entrepreneurs such as Kelly and Will Watters to acquire much-needed capital early on.

“Those loans are not primarily based on collateral and credit, but on character and capacity,” said O’Donnell, who acknowledges that his organization is not as closely regulated as a bank and can price for risk.

He added that it also prefers applicants that have built a leadership team – or at least an advisory group, have thoroughly weighed a potential path to success, and have completed a startup fundamentals course such as the Ice House Entrepreneurs Program or CO.STARTERS.

Additionally, when assessing a student debt-laden applicant, he values those who are conscious of the big picture and are making sacrifices such as living with their parents or relying on an old car for transportation.

In other words, intangibles that mitigate some of the risk for the lender and entrepreneur alike.

“We had one borrower who had been out of school 15 years, and didn’t have much of a credit score because she’d made some mistakes early on, but she was sharing rent on a house, building up her business, and working a third job,” O’Donnell said. “That showed us she had the passion, commitment, and drive to be successful.”

Ultimately, optimism tempered with pragmatism

For those pushing forward with an entrepreneurial dream despite an intimidating personal balance sheet, a dose of pragmatism helps.

As Nick Armitage started envisioning his own brewery, he barely considered how his nearly $40,000 in student debt would affect his plans. After all, he and his wife, who held a full-time job, were current on their mortgage, had a bit of credit card debt, and had paid off two car loans.

Yet as he dug into the financial realities of starting up Peculier Ales in Windsor, Colorado, and talked to other entrepreneurs, what he learned gave him pause. As did the $3 million price tag on his initial brewhouse designs.

“Even the most drastic moves on my end like putting another mortgage on the house and emptying my savings wasn’t going to get us there,” Armitage said. “It definitely made me reach out to investors knowing I couldn’t carry all the financials on my own.”

Today, having secured a mix of equity investments and equipment loans for a $600,000 facility, he’s optimistic that the brewery’s eventual success will ultimately render the student loan question moot.

“The situation definitely has a negative affect on entrepreneurship as a whole for people my age, but it also drives people in different directions,” said Armitage, who returned to school in his late 20s to earn a bachelors degree in chemistry with a minor in brewing science. “But I don’t want to work in pharmaceuticals in some big company and work my way up.

“What I’m doing is a risk, but it’s a chance to better provide for my family in the long-term.”

“The Risk Optimistic” is about belief: the assurance that taking a chance is worthwhile, even without knowing the outcome. It’s also the belief that if we value and support risk – in policy, community, and culture – we benefit from each person’s ability to make choices to achieve success. With this initiative, Kauffman kicks off 2020 with insights, stories, and opportunities to explore what it means to take risks, and own your own success, however you choose to define it.


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