If a million families each has a $1,000 to invest in new business, how would you envision the money to be invested collectively? what would be the process?

The money would distributed mostly as people purchasing things rather than as upfront investment (although it's far from unheard of for startup capital to come from people's local communities where those communities have the resources to enable this). It would be harder to start a business, but easier to maintain a sustainable business model built on actual demand.