That problem still takes place in capitalism. It's just that, instead of having to convince people for funding, you risk going into bankruptcy when you try your business idea

Capitalism is still seeking funding, but there is more freedom in how to get it. You can self-fund or seek investors and the option to fund publicly via crowdsourcing. Funds that are invested in a company is the only cost that you are liable for. E.g. If you invest £1000 the maximum you could lose is that £1000. (unless it is an LLP I think).

Bankruptcy is a protection of capitalism in that the owner cannot be liable for the debts of the company. Yes, there are scummy abusers of this protection, but it is a protection no the less

Great, so you run you business in capitalism, and run the other cafe into bankruptcy because that's wonderful for everyone, very efficient and humane. How about the local council decides that the other cafe is shit, and they give a warning to the place that they need to improve the quality of their work?

Lets assume that the council actually gives a crap on the quality actually issues this warning? This implies the council has the final say on how a business should be run, further proving that individualism is restricted.

What if it still doesn't improve? I'm assuming they'd shut down the business for ignoring the warning? So in this hypothetical there is no cafe and no jobs. When in capitalism there is at least a competing better store left over with presumably the same number of jobs.

Do they fire the manager and the staff and replace them? I suppose this is job neutral still and probably the quality improves, but ignoring the difficulties finding a replacement then it will be the same store and same equipment used. There is no development or improvement or creativity because there isn't any incentive or "freedom" to do so because the council has the final say on how your store is run.

This can very easily be compensated by bigger, not so local, councils. Maybe specialized in more weird and experimental business ideas. Located in densely-populated ideas so that one of these weirder businesses can give cover to a high amount of population.

I'd consider this worse as it widens the divide of urban and rural areas.

Again it is still the taxpayer that is taking this risk, and not the individual, so there is no reason why a council would bother with anything that isn't an easy win for the public approval (or a selfish grift done under the table).

For example: A council member that a approves a sex shop could easily be labelled a pervert by his opponent in the next election so why would he take the risk on it?

I'm sure there are other businesses too that are punished in this system as the need to go through government means it needs easily positive public approval before it is considered, and there is no option to do it on your own as private owned businesses aren't allowed.

Really, you seem to be coming up with increasingly-complicated problems

Have you considered that its maybe because it is an increasingly-complicated issue?

I could accuse you of giving increasingly-easy answers too. Though to be honest I don't think that. I think you have thought through the benefits in great detail but not reflecting on the negatives and who could get hurt.

My point is that all of these problems can be outsourced to direct democracy instead of "consumer democracy", in a more efficient, fair, and risk-free way for everyone

I don't think it is that simple. As I said before democracy is the will of the majority and thus only majority-approved cases are considered leaving little room for freedom of expression (or at least in terms creating a business and diversity of products)

Democracy is NOT "efficient", but it is "effective". It is a slow tedious process with 9001 rules, with the goal that the end of it, the only possible candidates are people that serve the majority's best interest. It works well for governments (well...for the most governments) but it results in an economy only serving majority interests. Capitalism with all it's flaw still provides products to the minority as long as demand outweighs production. It is a fair, and risk-free way for the majority, not everyone

Saying that I don't think the current state of capitalism is acceptable in anyway. It has turned into large companies bullying smaller ones via mass produced goods/ large user bases/brand recognition/etc, and thus accumulating power and wealth in which no human should have.

Capitalism thrives with competition, as new ideas and higher quality products are a survival pressure for the businesses to thrive. However there is little/no survival pressure to treat employees well (aside from rare/ high skill jobs) and also large companies do not have any significant competition meaning they have no need to incentivise better consumer experiences. In fact it turns to the opposite where they try to squeeze value from customers instead. This is made worse with how public trading incentivises investing in a small company then demanding unsustainable growth until it is sold at the peak market price and left to rot.

"Pure" capitalism left us with this mess. But I think proper regulation to tweak these survival pressures are key to turning things around.

All employees should have the right to affect the profitability of a company, either through unions or otherwise. This incentivises a company to treat the employees well.

Investers in the stock market should be liable for selling "at risk" stock for up to 3 months since the transaction date and the buyer of this stock can then sue for any damages from the base price. This incentivises investors to invest in stable long-term businesses rather than "pump and dump" a new fad.