Generational Poverty and Its Impact on First-Time Entrepreneurs

Generational poverty, defined as the continuous experience of poverty for at least two generations, presents unique challenges for aspiring entrepreneurs. Generational poverty often comes with barriers to eduction, capital, and other resources – not always understood or appreciated by first-time entrepreneurs (myself included). By understanding these challenges, new entrepreneurs can develop strategies to find the support they need to be successful.

  1. Limited Access to Financial Resources

One of the most significant challenges faced by entrepreneurs from low-income backgrounds is limited access to financial resources (Desai, 2011)1. Without adequate capital, aspiring entrepreneurs may struggle to invest in necessary equipment, inventory, or marketing efforts, hindering their ability to launch and grow their businesses. Moreover, these individuals may have difficulty securing loans or grants due to poor credit histories or lack of collateral.

*Pro Tip: Get very familiar with SBA loans and follow to understand what different programs may be available to you.

  1. Social Capital Deficits

Generational poverty often results in a lack of social capital, which is crucial for entrepreneurial success (Granovetter, 1983)2. Aspiring entrepreneurs from low-income backgrounds may have limited access to professional networks, mentors, and potential customers or investors. This lack of connections can hinder their ability to navigate the entrepreneurial landscape and access vital resources and opportunities.

*Pro Tip: Read Keith Ferrazzi’s Never Eat Alone and strengthen your REAL LIFE social network.

  1. Psychological Barriers

The psychological impact of generational poverty can present additional challenges for first-time entrepreneurs. The scarcity mindset, which often develops as a result of growing up in poverty, can limit an individual’s ability to make sound financial decisions and adopt a growth mindset necessary for entrepreneurial success (Mullainathan & Shafir, 2013)3. Furthermore, individuals from impoverished backgrounds may experience low self-esteem and self-efficacy, negatively affecting their motivation and persistence in pursuing entrepreneurial goals (Bandura, 1997)4.

*Pro Tip: Watch Naveen Jain’s Tedx Talk on the Mindset of Abundance.

  1. Educational Disparities

Educational disparities associated with generational poverty can also affect an individual’s entrepreneurial potential (Reardon, 2011)5. Limited access to quality education and resources may result in gaps in knowledge and skills necessary for successful entrepreneurship, such as financial literacy, business management, and marketing strategies.

*Pro Tip: I’d argue that everything you need to know is now available for FREE and online. The real disparity here is that the lack of formal education creates a lack of social connections and social capital that can be used to speed up your success. There are some fantastic entrepreneurial learning opportunities out there that also provide a real life social element to their learning. My favorite from the last year is the Y Combinator Start-up School.


Generational poverty presents significant challenges for first-time entrepreneurs, including limited access to financial resources, social capital deficits, psychological barriers, and educational disparities. Entrepreneurs from impoverished backgrounds should be aware of these challenges so they can tackle them head-on. By breaking the cycle of generational poverty, aspiring entrepreneurs can create new opportunities for themselves and for their families in the generations to come.


  1. Desai, S. (2011). The role of entrepreneurship in economic growth. Undergraduate Economic Review, 7(1), 1-12.
  2. Granovetter, M. (1983). The strength of weak ties: A network theory revisited. Sociological Theory, 1, 201-233.
  3. Mullainathan, S., & Shafir, E. (2013). Scarcity: Why having too little means so much. Times Books.
  4. Bandura, A. (1997). Self-efficacy: The exercise of control. W. H. Freeman.
  5. Reardon, S. F. (2011). The widening academic achievement gap between the rich and the poor.