- First, kill Sarbanes-Oxley or make it voluntary. Right now.
- Allow entrepreneurs to more easily tap tax-free retirement accounts -- or better yet, let them create tax-free accounts specifically to fund themselves.
- Eliminate payroll taxes, which unnecessarily burden young companies.
- Make the tax system more forgiving for Angel investors -- or allow the creation of tax-free investment vehicles similar to what we now see with nonprofit foundations or 529 college savings funds.
- Lower capital gains taxes on investments in early stage companies and higher taxes on later stage deals.
- Help big business think small.
- Convene a presidential summit on entrepreneurship and small business. The last president to do so was Ronald Reagan in 1982.
Thursday, February 26, 2009
Tuesday, February 24, 2009
Technological innovations, especially high-level ones, usually have limited economic or commercial importance unless complemented by lower-level innovations. Breakthroughs in solid-state physics, for example, have value for the semiconductor industry only if accompanied by new microprocessor designs, which themselves may be largely useless without plant-level tweaks that make it possible to produce these components in large quantities. A new microprocessor’s value may be impossible to realize without new motherboards and computers, as well.
New know-how and products also require interconnected, nontechnological innovations on a number of levels. A new diskless (thin-client) computer, for instance, generates revenue for its producer and value for its users only if it is marketed effectively and deployed properly. Marketing and organizational innovations are usually needed; for example, such a computer may force its manufacturer to develop a new sales pitch and materials and its users to reorganize their IT departments.
Techno-nationalists and techno-fetishists oversimplify innovation by equating it with discoveries announced in scientific journals and with patents for cutting-edge technologies developed in university or commercial research labs. Since they rarely distinguish between the different levels and kinds of know-how, they ignore the contributions of the other players—contributions that don’t generate publications or patents.
They oversimplify globalization as well—for example, by assuming that high-level ideas and know-how rarely if ever cross national borders and that only the final products made with it are traded. Actually, ideas and technologies move from country to country quite easily, but much final output, especially in the service sector, does not. The findings of science are available—for the price of learned books and journals—to any country that can use them. Advanced technology, by contrast, does have commercial value because it can be patented, but patent owners generally don’t charge higher fees to foreigners. In the early 1950s, what was then a tiny Japanese company called Sony was among the first licensors of Bell Labs’ transistor patent, for $50,000.
Since innovation is not a zero-sum game among nations, and high-level science and engineering are no more important than the ability to use them in mid- and ground-level innovations, the United States should reverse policies that favor the one over the other, and it should cease to worry that the forward march of the rest of the human race will reduce it to ruin.
Immigration policies that favor high-level research by preferring highly trained engineers and scientists to people who hold only bachelor’s degrees are misguided too. By working in, say, the IT departments of retailers and banks, immigrants who don’t have advanced degrees probably make as great a contribution to the US economy as those who do. Likewise, the US patent system is excessively attuned to the needs of R&D labs and not enough to those of innovators developing mid- and ground-level products, which often don’t generate patentable intellectual property under current rules and are often threatened by easily obtained high-level patents.
Monday, February 23, 2009
I think there are exceptions to the rule when it comes to small tech companies. In this down economy there are real needed innovations that are very critical to significantly reduce IT costs. That empowers smaller companies to negotiate with the big guys because the technologies they develop can really jeopardize critical revenue streams of these firms while providing huge OPEX reductions for customers.
We recently moved a 3,000 user call center app for Wyndham Hotels from Sybase to Oracle where the customer didn’t need to change a single line of application code. The whole migration lasted one week compared to the multi-month/multi-year application migration process that Wyhdham might have embarked without deploying our product.
I truly believe that smaller/innovative companies that can significantly reduce IT costs in this economy are the exception to the rule and we will be in the driver seat when negotiating alliances with big IT vendors.
Wednesday, February 18, 2009
Josh Morgan for Golden Capital
FOR IMMEDIATE RELEASE
Golden Capital Network, California Business, Transportation and Housing Agency, California’s Small Business Advocate, and California Association for Local Economic Development Announce Statewide Initiative to Help Growth Oriented Businesses Climb Out of Economic Doldrums
Private and State Groups Coming Together for
Sacramento and Chico, California - Feb. 18, 2009— Golden Capital Network (www.goldencapital.net), along with the California Business, Transportation and Housing Agency, California’s Small Business Advocate, and the California Association for Local Economic Development today announced the California Business Ascent (www.businessascent.com), a statewide competition and mentoring program to identify, assist and encourage innovation-based, locally-owned companies throughout California.
“Local-businesses focused on growth are the key for
The California Business Ascent will include regional competitions in up to 25 communities throughout
The initiative is a unique new type of public/private partnership that includes both State government and local government leaders, and new types of private sector partners including entrepreneurs, angel investors, and venture capitalists. Through this process contestants will make important connections with investors, bankers, professional services providers, executives, policymakers and other entrepreneurs on a statewide basis. In-kind professional expertise and a substantial cash prize (amount TBD) will be provided to the winner of the competition.
“The California Business Ascent provides a new economic development tool for cities, counties and local economic development corporations to add value to their locally-owned growth companies,” said Wayne Schell, president and CEO of the California Association for Local Economic Development, ”These companies represent a critical and growing part of California’s local and regional economies, and until now have been difficult to assist with more traditional types of economic development activities.”
Wavepoint Ventures (www.wavepointventures.com) is participating in the California Business Ascent by helping to engage
Cities and regions throughout the state including the Yolo region, Greater Stockton and
Other cities and regions interested in participating should contact the California Business Ascent initiative organizers at Golden Capital Network, 530-893-8828.
For more information about the California Business Ascent, please visit www.businessscent.com.
ABOUT GOLDEN CAPITAL NETWORK
Golden Capital Network is a non-profit networking, training and consulting group that fosters growth entrepreneurship and early-stage investing as an engine for economic growth.
Since 1999, GCN has coached and showcased more than 1,000 companies to more than 500 active angel and venture capital investors. GCN’s venture capital showcases are the largest and most robust events of their type. The GCN event formula has resulted in more than $1.3 billion raised by presenting companies. More information on Golden Capital is available at www.goldencapital.net.
ABOUT THE BUSINESS, TRANSPORTATION AND HOUSING AGENCY
Led by Secretary Dale E. Bonner, the Business, Transportation and Housing Agency includes 13 departments and several economic development programs and commissions consisting of more than 44,000 employees and a budget of $20 billion, a budget larger than that of almost half the states in the nation. The Agency's portfolio is one of the largest and most diverse in the State of
When I look at some of the investment areas including digital medical records, energy management, transportation and infrastructure, the big four (Oracle, Cisco,Microsoft, IBM -- MICO), okay big five if you include Hewlett-Packard, are not strong across all those areas and do not have enough time to build that expertise in-house.
Monday, February 16, 2009
Wednesday, February 11, 2009
I believe that most of the companies that venture capitalists are funding today will find an exit through merger or acquisition. And if we expect to achieve a return in a reasonable time frame of three to five years, we are probably looking at a sale price of $20 million to $100 million. This is the valuation range where most young companies are being acquired.
To compensate for these lower gross return expectations, we must establish initial valuations, usually in the single digits, that can provide an adequate multiple return and internal rate of return. Inevitably, this suggests that a true venture capital firm should be reverting to smaller-scale funds and restricting individual investments in early-stage companies to accommodate the realities of the exit opportunity.
Entrepreneurs themselves seem to be catching onto the new risk/reward equation and seem far more willing, at an early stage, to opt for a sale at a lower valuation and lock in their gains, figuring that they are young and can repeat the process later with another start-up.
If the scenario I have described strikes a chord of reality, then until someone solves the cost of going public and increases the liquidity in aftermarket trading, we as an industry have to downsize our expectation for exits as well as downsize the size of our funds.
Tuesday, February 10, 2009
Monday, February 9, 2009
Natasha Levitan, a San Jose filmmaker, is part of what work-site operators say is a new wave of U.S. freelancers who are going online to bid for contract work. Levitan, 31, has worked as a freelancer for most of the past several years, using local contacts and word of mouth to get jobs.
She joined eLance in April to help her build her client base and has gotten a few assignments through the site. She said it isn't easy to continually hustle for work, but at this point in her life, while she is single and can travel between jobs, "the positives outweigh the negatives."
A shake-up in the vendor landscape will likely follow the huge capacity increases of recent years, the current downward pressure on aggregate demand, and massive uncertainty in currency markets. Adding to the pressures are the strategic, government-sponsored initiatives launched by China and other nations to grab market share. Major mergers are more likely than not. New entrants will grow rapidly and some players could experience significant reverses. Successful CIOs will manage their vendor relationships as a portfolio so they will be well positioned as new winners evolve.
Friday, February 6, 2009
Some angels who are still investing have become pickier, making demands of start-ups that they would not have a year ago. When David Levine started Wireless Environment, which makes motion-sensor light-emitting diode bulbs, in November 2006, he quickly raised $135,000 from family members and business school friends, with few questions asked.
The angel investors he met with this fall, though, were far more demanding. “I could not believe the complexity,” he said. “For small investments compared to their net worth, they brought in financial advisers and a whole list of questions.”
Some angels are considering only low-cost companies that could become profitable without venture financing. Others are acting less like angels and more like venture capitalists, spending much more time than is typical advising companies, including taking seats on boards.
Aydin Senkut, a former Google employee who has invested in 40 companies, is serving on the board of one of his investments, ImageShack, a media hosting site, and spends two hours a week working at the start-up. “Where I can really help is building the next growth stage,” he said.
Some angel investors are putting less of their own money on the line by finding other people to invest with them. Co-investments increased in 2008, according to the Center for Venture Research, and half of those surveyed by the Angel Capital Association said they would increase co-investing with other angels this year.
Thursday, February 5, 2009
As California's economy struggles to rebound from the collapse of the housing bubble, it is difficult to imagine what will lead us out of this hole. We had the dot-com boom and bust, and then a housing-led recovery that turned out to be a mirage. Is there some industry, some idea that can reignite sustainable growth in this once-golden state?Maybe not. And maybe that's the wrong way to think about the problem.It could be that there are six or eight or 10 major industries that together will form the foundation for the new California economy.
Peter Weber, a retired corporate executive and civic activist from Fresno, has studied what makes economies tick and is promoting a regional approach as a long-term strategy for California. He thinks local governments and the state should make the development of regional economic clusters their top priority.
You cannot wish one into place, nor invent one by merely by declaring it as such. Networks of people are the backbone of any industry cluster. If you don’t have the right people with the right knowledge and right access to a strategic business network, you won’t have a cluster form anytime soon. Innovation will sit on the shelf until someone with the knowledge and access identifies the opportunity and brings it forth. Take any notable example, including Silicon Valley, San Diego, Austin, TX, Research Triangle, NC, and you will find that human networks were at the core of the phenomenon.
This precisely why we say that any region wishing to develop any type of industry cluster should focus as much effort on cultivating general networks of innovation and entrepreneurship as deciding which cluster they want to be. Yesterday was biotech. Before that was nanotech. Today it’s clean tech, but yesterday was hydrogen and today is water, wind and solar.
This is an exaggeration, of course. All of these industries are still vibrant and active and provide expansive opportunity for companies and regions to capitalize on. The point is, private industry responds primarily to private market demands and technology flux, and it moves too fast and changes too quickly for government to easily influence it.
Policymakers should be aware of clusters, but understand to build one requires that economic policies help your entrepreneurial people with an affinity for the region find what works best there. Be aggressive to provide them access to things they need most: capital, talent, market intel and strategic relationships. Then let them be entrepreneurial. Let them find the industry that works best for what is available in the region in terms of people, technology, markets, innovation and opportunity.
On Feb. 26 leading technology cluster expert Doug Henton, from Collaborative Economics in Silicon Valley, will present a report on Solano County’s Life Science Cluster, anchored by biomedical giant Genentech. Another story about some smart people with an idea, the right knowledge and the right connections who decided this was a good place to build a company. Is that a cluster? It is now.
Wednesday, February 4, 2009
By Golden Capital Network CEO Jon Gregory
When it comes to economic development, which is a highly compelling current issue, it is clear the time for standing pat has also passed. Numerous studies and reports issued by credible organizations in the U.S. and abroad point to business innovation as the leading contributor to jobs and wealth creation, community prosperity, and economic competitiveness. Based on these reports, policymakers and civic leaders across the country, in metropolitan areas and small towns alike, are anxious to implement innovation-driven economic development initiatives to accelerate local economic recovery and growth.
The innovation-driven model represents a new approach for many communities and economic development practitioners that have historically focused on industrial attraction campaigns as the stimulus for economic development. While the industrial attraction approach -- and others like tourism development, downtown revitalization and micro-enterprise development -- are important components of an overall strategy, they should not represent the “end all” solution in today’s dynamic global economy where new industries rapidly emerge and grow (and other industries conversely decline). Because of this modern-day reality community efforts to support and add value to promising entrepreneurial companies similarly need to be high on the action agenda for economic development.
You’ve by now read all the compelling reports about innovation. And are enthusiastic and ready to move forward with your strategy to improve the local economy, today!!! Whoa bubba. Wait a minute. Sit down, relax and take a deep breath. I know I don’t have to tell you this, but bureaucracies can be resistant to change and slow to act. Fortunately, I’m here to tell you that you don’t have to play by the old rules. Local policymakers and civic leaders have within the realm of possibility a means to start fostering an innovation-focused economic agenda that doesn’t require a lot of financial resources or council approvals.
Three statements you may hear at the beginning of your efforts to make change should serve as red flags. The first statement is: “Let’s schedule a meeting with all of the nonprofit partner organizations in the community who deal with economic development.” The goal of such a meeting – to the start the process of creating collaboration – is, of course, good. But are the “usual suspects” the right partners to have involved in the collaboration? What resources do they bring to the table? What is their current agenda and is it in alignment with the objective of this effort, or will it really serve as an impediment or roadblock? And, perhaps most importantly, how long will it take them to obtain the necessary approvals from their board to participate? After all, your goal is to move quickly!
The second red flag is: “This sounds like a good idea, let’s hire a consultant and do a feasibility study.” As I’ve already stated, numerous reports, studies and articles have concluded innovation is an integral part of the process for any community or region seeking to enhance its economic condition and competitiveness. If you go down the traditional feasibility study route, the process is likely to take a minimum of 6 months, at best, to cycle through. Can you afford to wait that long?
Venture capitalist and angel investor Roger Akers of Akers Capital suggests a different approach: “To begin this process, I would first call on successful entrepreneurs and CEOs, and all of the regional lawyers, investment professionals, senior University leadership, venture capital companies, angel group leaders, appropriate non-profits and economic development leaders to attend a two-day workshop to be educated in the current and needed capabilities of the region relative to new business formation and development and why it is so important.” A single focus group with 8-12 private sector leaders in the innovation sector can get you the information you need to move forward in 2 weeks (at most). There are many projects requiring extensive feasibility studies. This isn’t one of them. You don’t have the luxury of time on your side.
The third red flag is: “Let’s include your project during the next cycle of potential funding applications the city (or county) could consider submitting for a grant later this year or next year.” Leverage state, federal and foundation grant resources to fund high-impact projects in your community. But putting important community projects put on hold while waiting for the big-ticket funding source is wrong.
An excellent example of a proactive civic leader is Charlie Brown, executive director of NoRTEC, a consortium of workforce investment organizations in rural Northern California. Charlie has been very successful accessing state and federal resources over the past couple of decades. He didn’t wait for significant grant funding to get started; he has been building a coalition of leaders around the notion of innovation as a regional economic differentiator, and supporting incremental, smaller activities along the way. When his organization was able to access State and Federal dollars through the federal WIRED initiative a couple of years ago, he was in a much stronger position to maximize the impact of that effort.
Getting started on an innovation-based economic development initiative doesn’t require a lot of money. Don’t underestimate the ability of local sponsorships, contributions and volunteer services to get great things done! Move forward with the grant proposals that your staff or community organization partners want to prepare. But view that as your lever, rather than as deciding factor of whether to proceed or not.
Below are ten activities you can act on tomorrow that can start fostering innovation-based economic development in your community:
1. Recruit a blue-ribbon committee of innovation leaders to immediately give your effort credibility, generate fresh ideas and identify a private sector champion
2. Secure sponsorships from private sector leaders
3. Engage local media in your efforts to generate visibility
4. Re-direct staff time and energy from lower value activities to your new high priority strategy
5. Use your influence to recruit community-based organizations to go to work in support of your initiative
6. Educate your elected colleagues and other civic leaders about the idea of innovation as an economic driver
7. Launch a series of informal network events that occur onsite at your successful innovation-based businesses or other venues in the community
8. Begin a speaker circuit, making presentations about innovation economic development at service club and civic group meetings and local schools
9. Initiate a brown bag lunch outreach campaign: visit with the CEOs of as many innovation-based businesses in your community as possible and find out how you can help these companies
10. Create a Mentor’s Roundtable from your most successful CEOs
Peter Gardner, a partner in the Venture Capital fund Wavepoint Ventures, offers a few suggestions: (1) identify a low-cost office space in the City to provide incubation and shared services for local early-stage companies; (2) organize a local angel investment group that can provide capital and mentoring to local entrepreneurs; (3) initiate a monthly breakfast meeting with local entrepreneurs, business leaders, select City employees and professional service providers to discuss challenges to growth, and potential solutions, and then incorporate this market feedback directly into City policymaking.
Bill Reichert, Managing Director of Garage Technology Ventures says: “I would initiate the ‘Ourtown Innovation Challenge’ calling on all businesses, organizations, and citizens to contribute their ideas and recommendations regarding ways to stimulate innovation and entrepreneurship, ranging from ways to streamline government to ways to attract more resources to the community.”
He continued, “I would start the planning for an Innovation and Entrepreneurship event to be held in one year to celebrate the individuals and the organizations that have done the most to help innovation and entrepreneurship in the area, and to provide a showcase for entrepreneurs seeking to launch their own innovative companies or non-profit organizations.” Reichert concluded with a statement about the impact these efforts can have. “In combination, these initial efforts will create a string of PR opportunities for the ongoing initiative. By enhancing the visibility of the initiative locally (and getting visibility statewide), I would hope to bring a combination of public and private resources into the community to participate in some way – at a minimum, sponsoring the annual event.”
There’s no time like the present to get things moving. Worst case, you will have dramatically elevated awareness of innovation as the true economic driver in your community that sets the stage for many good things to emerge. Best case you will have a fully functioning, sustainable innovation program in place that fosters business formation and growth from your entrepreneurs that doesn’t require a lot of public money. In either case, don’t let yourself get bogged down in the minutiae!