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4 Key Lessons in Entrepreneurial Finance
Dec 31st
As part of my entrepreneurship classes, I teach my students to raise capital. When people find this out, they often ask one question: What’s the most important thing I need to know about raising money? For entrepreneurs, four lessons are especially important.
1. For most entrepreneurs, seeking outside financing isn’t worth your time. Only a small fraction of new businesses obtain money from someone who is not a founder of the business. Therefore, unless your business has a lot of hard assets that can be used as collateral for a loan, or one of a handful of startups that has the super-high growth potential and exit plan to attract accredited angel investors and venture capitalists, seeking outside money is unlikely to be fruitful. You are better off developing a less capital-intensive business model and financing the startup yourself than you are spending your time trying to raise money.
2. Your personal credit and personal collateral matter a great deal when financing a startup. Data from the Federal Reserve’s Survey of Small Business Finances shows that the owners of one quarter of corporations less than five years old, and nearly half of sole proprietorships that age, personally guarantee the debts of their businesses. Given that only a minority of businesses borrows externally at all, this means that most of the capital that entrepreneurs borrow is personally borrowed or personally guaranteed.
With personal debt, the lender’s decision depends less on the potential of the business than on the entrepreneur’s credit and collateral. If you don’t have great personal credit and you have few assets to pledge against a loan, you will have a hard time borrowing to finance your new business, no matter how great your business idea is. So if you want to start a business, be careful about your personal credit.
3. You are more likely to get a loan than an equity investment from an outsider. Because venture capital and angel investments are sexier than bank loans and trade credit, the former gets the lion’s share of attention in books and articles about entrepreneurial finance. However, most of the companies that get outside financing obtain debt, not equity.
Only a tiny percentage of startups are financed by selling equity to accredited angels or venture capitalists. The statistics show that around 1 percent of companies get their financing from these two sources combined. Other informal investors – like friends, family and unaccredited angels – add a few percentage points to the share of businesses that get outside equity, but research shows that these sources are actually more likely to lend money than to take an equity stake. Therefore, unless your business is the type that angels and venture capitalists look for, you shouldn’t waste your time seeking equity investors.
4. Tapping trade creditors is where your odds of obtaining financing for the business itself are highest. According to analysis of the Federal Reserve’s Survey of Small Business Finance, next to having a checking account, trade credit is the most common financial tool used by small businesses. Because trade credit is offered by suppliers to help you buy their products, even the newest businesses can obtain it.
In short, unless you have a rare, super-high-growth business with plans to exit through an initial public offering or acquisition within five to seven years, your best bet is to minimize your capital needs and finance your start-up with your own money, money that you borrow personally, and trade credit.
Editor’s Note: This article was previously published at OPENForum.com under the title: “4 Important Lessons About Entrepreneurial Finance.” It is republished here with permission.
4 Key Lessons in Entrepreneurial Finance
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Entrepreneurial Finance in Recovery
Dec 28th
The Great Recession officially ended in June 2009–at least, so say the economists at the National Bureau of Economic Research. That means it’s time for me to start writing about entrepreneurial finance during the economic recovery. What has happened to small business finance since the end of the recession?
For the most part, entrepreneurial finance looks the same or slightly better now than at the end of the recession, but worse than before the downturn began. Take loan availability, for example. The National Federation of Independent Business’s (NFIB) index of loan availability was at the same level in September 2010 as it was in June 2009. However, the September figure was seven points below where it was in November 2007, the month before the recession began.
The patterns in venture capital look similar. According to the National Venture Capital Association, VCs increased investment from $4.3 billion in 707 deals in Q2 of 2009 to $4.8 billion in 780 deals in Q3 of 2010. Nevertheless, this level of activity remains below the $7.8 billion invested in 1016 deals in Q3 of 2007.
Valuations of VC-financed start-ups show this pattern as well. Data collected by Cooley Goddard, a law firm specializing in venture finance, show that the percentage of venture capital-backed companies experiencing up investment rounds rose from 30 percent in the second three months of 2009 to 58 percent from January through March 2010. However, in the third quarter of 2007, 69 percent of businesses that received additional VC investments experienced up rounds.
The number of venture capital-backed companies exiting has improved since the recession ended, increasing from 83 in second quarter of 2009 to 118 in the third quarter of 2010. However, the number of exits in the most recent quarter remains below the 134 occurring in Q3 of 2007.
Since the recovery began, trade credit has rebounded the most of all small business finance measures. The Association of Credit Manager’s index of trade credit extended increased from 46.1 in June 2009 to 58.7 in September 2010, putting it just slightly below its level of 60.9 in November 2007.
On the other hand, some measures of entrepreneurial finance are actually worse now than at the end of the recession. For instance, in September 2010, only 27 percent of the small business owners answering the NFIB’s monthly survey reported that their borrowing needs were satisfied, 3 percentage points worse than in the last month of the recession. Similarly, the percentage of respondents to the Discover Small Business Watch experiencing cash flow problems in their businesses increased from 42 to 46 percent from June 2009 to October 2010.
Data from Angelsoft, the leading provider of angel investment tracking software shows continuing declines in the valuations of angel-group backed companies. In the first three months of 2010, the median valuation of an angel group backed company was $2.2 million, down from $2.4 million in the second three months of 2009, which, in turn, was below the $2.8 million recorded in the third quarter of 2007.
In sum, the story of entrepreneurial finance in the recovery is straightforward. While some measures have gotten better since the end of the recession, improvement has been limited, leaving most indicators well below where they were before the recession began.
Editor’s Note: This article was previously published at OPENForum.com under the title: “Entrepreneurial Finance in the Recovery.” It is republished here with permission.
Entrepreneurial Finance in Recovery
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Small Business News: Entrepreneurial Outlook
Dec 14th
Having an entrepreneurial outlook means looking at the world a bit differently. Everyday policy, trends even philanthropy take on a whole new meaning. But clearly an entrepreneurial outlook also reveals a different set of priorities as well. Here is a sneak peak at some of the most important of those priorities today. Have something to add? Leave a comment below.
Policy
Healthcare reform derailed? A change in U.S. healthcare that has concerned many small business advocate groups may be undone if a federal judge’s ruling that a major part of the legislation is unconstitutional. A federal judge says “Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause power to compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market.” LATimes.com
U.S. tax breaks on the way. A bill that will prevent tax increases beginning at the end of this year by extending tax cuts left over from U.S. President George W. Bush’s administration has passed the U.S. Senate. The move is considered important for small business as well by not only lowering taxes on those businesses but by giving potential customers more spending power. Yahoo! News
Trends
Can’t find a job? Why not make your own? A growing number of young people faced with a daunting job market and apparent lack of career prospects are doing the next best thing. Creating jobs by creating companies may be the new trend when coming out of college in an economy where much of the new employment may be generated on the entrepreneurial level. NYTimes.com
It may be time to start a business but not to buy or sell one. As might be expected, the rough economy has taken its toll on the numbers of businesses changing hands. That’s partly because sellers are waiting for improvement in their valuation or performance or both in an effort to get a sweeter deal at some point in the future. Of course, this is no time to get bummed out about this sort of thing. Start a business now or strengthen your existing business and you’ll be ready when the market comes around. You’re The Boss
Management
Keep evaluating and rewarding good performance.Hard economic times are NOT an excuse to stop looking for ways to reward your best employees. Nor is it a good reason to stop doing the evaluations upon which you make the decision of who you reward. Your employees can be your greatest asset. Fail to invest in them and you may see economic troubles descend upon you as well. LATimes.com
Self-development
How entrepreneurs can stay motivated.Nigerian blogger Samuel Ayodele has some inspiring suggestions for those with an entrepreneurial spirit. How do you get motivated and stay motivated to make your dreams come true. How do you get motivated and stay motivated to change the world. Mega Biz Flakes
Social Entrepreneurship
What social entrepreneurship holds for us all.Once thought of as a purely an altruistic venture outside the realm of true business, social entrepreneurship may be growing up and coming into its own. For a look at past, present and future, one post will bring you up to speed. From Ambition to Action
Startup
Can your business plan withstand the null hypothesis?Instead of spending all your time trying to prove that your great business idea will work, Dr. Jeff Cornwall would like to suggest you spend a little while trying to prove that it won’t. You may just discover some weaknesses in your plan that could end up costing money down the road. Or you could discover you really have no business at all. The Entrepreneurial Mind
Financial
The difference between ownership and employment. Do you know the difference between ownership and employment in your business? You should. How much would it cost to hire someone to do what you do? Is that the amount you’re making? Are you taking home something extra as the owner? Answer these questions and become a better entrepreneur. CFO Wise
Tech Review
A new way to collaborate has a very funny name.Dan Kenitz reviews DimDim, a software creating “easy, open and affordable web conferencing and webinars.” Check out Dan’s thoughts and an overview of the system’s general features. Online collaboration has become an important part of small business and entrepreneurship and securing the proper tools is critical for success. clickfie
Small Business News: Entrepreneurial Outlook
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Small Business News: Entrepreneurial Enlightenment
Oct 16th
Entrepreneurship is about enlightenment, gaining the information you need to create a better, more profitable more efficient small to medium-sized business. Researching about resources for your small business is an excellent way to start. Here at Small Business Trends we’ve taken the time to assemble a collection of resources and information to give you a lay of the land when working to improve or create a small business of your own. We hope you find this roundup of entrepreneurial enlightenment helpful.
Leadership
Some meditations on leadership. From sports to politics and beyond, leadership can take any form. Whether your taking a leadership role as the head of your small to medium sized business or decide to allocate that responibility to someone else. Here are some qualities to help you find your inner leader or the leader in one of your employees. UPrinting
Branding
Social media branding for your non-profit. Branding and the social media tools that have revolutionized the process for small businesses are every bit as effective for non-profits. Get your volunteers involved inthe process and learn more about the basics of branding with social media small businesses have already learned. Here’s a slide presentation to get you thinking. VisibleLogic
Self-development
Luck or hard work? Or a bit of both. Tim Jahn poses one of the quinessential questions of entrepreneurship. Using Facebook co-founder Mark Zuckerberg as one example, Tim asks for opions on his blog (And we’re looking for them here.) Which element is the most important to help your business succeed. Think there’s another factor? Let us know. Beyond The Pedway
Finance
Bank of America is hiring 1,000 small business lenders. Entrepreneurs who have, up until now, had to deal with fairly tight small business lending in the aftermath of the credit crunch leading to the recession may soon see availability of lending at one of the nation’s largest banks. Still some experts say lack of small business loans is only one part of the problem faced by small businesses in getting the economy moving again. Bloomberg Businessweek
Policy
How to balance the budget without raising taxes. While entrepreneurs have certainly talked about the lack of credit in recent years another issue hampering small business growth is…well, lack of business or sales. B2B businesses understand that higher taxes paid by their business clients and customers mean possible cuts and purchase of less products and services. The same can be said for B2C businesses. But, as this video demonstrates, avoiding higher taxes is not that difficult no matter what the politicians say. National Review
Blogging
10 Tips For Running Your Business Like a Blog. A blog can be a powerful tool for any entrepreneur and, used correctly, can fill many roles in your strategy and the building of your business, from marketing to networking to branding. But it is important to remember that a blog can also be a business. Here are 10 tips for running it that way. Basic Blog Tips
Operations
Keeping your pipeline filled. The key to small business success is far more than managimg day to day operations. When today’s work is done there must be another order, client or customer…and another and another. An important part of an entrepreneurs job, especially when a business is starting out but even when it is expanding into new markets, has to do with keeping an eye on the horizon. What new projects will ensure your company’s future? Small Business Trends
Small Business News: Entrepreneurial Enlightenment
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Making Cities Entrepreneurial
Sep 20th
There’s an industry of consultants offering advice to city, county and state policy makers on how to generate more entrepreneurs in their locales. Much of this advice is based on research that looks at what’s different about places that have more entrepreneurs from places that have fewer of them.
Many governments are following this advice without looking deeply enough at the research behind it. A brief glance shows four problems with using much of the analysis to develop public policy.
1. The evidence doesn’t always support the theory. Consider, for example, the argument made by economic development guru and consultant, Richard Florida, that increasing demographic diversity will increase entrepreneurial activity. Florida’s own research fails to show that places with more diversity have more entrepreneurs. His diversity index, which measures the share of the population that is gay, and his melting pot index, which captures the foreign born share of the population, have no statistical relationship to the rate of new business formation when other factors are also considered. The theory that increased demographic diversity will lead to more entrepreneurship isn’t supported by the evidence.
2. The causality is often backwards. Again consider Professor Florida’s research. It shows that places with more amenities tend to have more entrepreneurship. But the direction of causality of this relationship is unclear. Does having more amenities lead to more entrepreneurship or does more entrepreneurship result in the creation of more amenities? Because the former interpretation suggests a policy action – build amenities – while the latter does not, policy makers have assumed that more amenities leads to more entrepreneurship and have built amenities in the hope of attracting more entrepreneurs.
3. The studies often focus on only a few types of new businesses. Consider, for example, a new report by Edward Glaeser and William Kerr with the catchy title “What Makes a City Entrepreneurial?”
In their study, the authors defined “entrepreneurship” as the formation of new independent manufacturing establishments with employees. While that definition sounds reasonable, these businesses account for only one percent of all new companies.
Drawing conclusions from a one percent sample wouldn’t be a problem if the places that have a lot of new manufacturing employers also have lots of other types of new businesses. But they don’t. Glaeser and Kerr write, “Our entry metric has a 0.36 … correlation with the 2000 self-employment rates at the city … level.” That is, cities with the highest self-employment rates aren’t the ones that have lots of new independent manufacturing establishments with employees.
Recent research conducted by Larry Plummer for the Office of Advocacy of the U.S. Small Business Administration provides further evidence for why drawing conclusions about entrepreneurship on the basis of new business formation in manufacturing is problematic. Looking at the rate of new independent establishment formation from 1990 to 2006, Plummer found that the rate in manufacturing correlated only 0.33 with the overall rate. Moreover, it correlated only 0.16 with the rate in retail trade, 0.13 with the rate in high tech, and 0.06 with the rate in business services.
Moreover, the top places for new manufacturing business creation are not the same as the superstars for new firm formation in other economic sectors. Of the 20 counties with the highest rate of creation of manufacturing establishments from 1990 to 2006, only one, San Juan, Colorado, was in the top 20 counties for overall rate of new business formation.
4. The factors that stimulate one type of entrepreneurship often dampen others. Consider, for instance, the factors that enhance entrepreneurship in manufacturing and high tech. Plummer’s study showed that places with more college graduates had fewer manufacturing start-ups, but more new high tech businesses. Many would argue that we should increase the number of college graduates in a region, even if that comes at the expense of number of manufacturing businesses started, especially if the rise in the number of degree holders leads to a boost in high tech start-ups.
In short, academic research doesn’t provide strong evidence of specific policies that increase rates of entrepreneurship in a locale. Maybe government officials should take the money that they are using to implement the academics’ recommendations and give it to the entrepreneurs they are trying so hard to create.
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Small Business News: The Entrepreneurial Way
Sep 16th
It’s time for a rejuventation in the entrepreneurial spirit both in the United A States and around the world. As Jeff Cornwall notes over at The Entrepreneurial Mind, indicators are certainly not good, and Jeff cites some fairly confincing stats and data showing that it’s time to chart a new course. Still, there is cause for hope. Because the key to any economy, no matter how dismall, is entrepreneurship and the kind of inventiveness seen in small business everyday. We hope you see it in the links below. We’ll present some sobering facts first, but the silver lining? Even out of some of the tough times, good things may come. Jeff’s numbers also show the growth of what he calls the “accidental entrepreneurs.” Let’s hope they and the rest of us can learn great things from what follows.
Policy
An economy in critical condition? More specifically, Jeff suggests it’s the economy for entrepreneurship that may be on vitals, but since most economic growth and recovery is dependent upon small business and entrepreneurship that’s pretty much the whole economy. Though businesses not politicians create jobs, Jeff gives a good indication where the finger of blame for this sorry state of affairs can be pointed. The Entrepreneurial Mind
Here’s some more data. NFIB’s chief economist Bill Dunkelberg sums the problem up best. “What businesses need are customers, giving them a reason to hire and make capital expenditures and then they may have the need to borrow to support those activities. Washington doesn’t seem to understand this. Their proposals to improve the economy typically focus on easing credit conditions or giving businesses incentives to spend. These policies are unlikely to help most small businesses whose main problems remain poor sales and uncertainty over the economy.” National Federation of Independent Business
How does your country stack up for entrepreneurship? The GEM creates an annual global report of the state of entrepreneurship. Their findings compare nations on many levels to get a read on which economic climates offer the best opportunities for entrepreneurship and thus in the rebuilding of the global economy. Look for data on your specific countryto learn more about where you stand. Global Entrepreneurship Monitor
Tips & Tools
Do you use these free tools for entrepreneurs. You may have heard the old expression, “If it’s free, it’s for me.” And that’s just how entrepreneurs should feel about thesed 11 tools. A shout out to Mike Holmes of MicahealGHolmes.com who was good enough to share this link at the BizSugar community. As Mike explains, it’s important for entrepreneurs to maximize every opportunity while minizing their costs, and if you’re not using these tools yet, the list can be a great place to start. Business Insider
Signs & Wonders
The writing on the wall. We try to be optimistic about the economy and about entrepreneurship and small business here at Small Business Trends, but David Rosenberg, chief economist and strategist at Gluskin Sheff, and other experts do point to gloomy predictions about the state of the economy. Still, if small business and entrepreneurship are the best answers for financial recovery obviously David’s “13 signs” we’re in a depression should not be a deterent. Business Insider
Don’t worry. Be happy. And before we start wailing and nashing our teeth, let remember that not everyone even amongst big time analysts is all that sure the economy is really in such a sorry state. Take James Altucher, a managing partner of Formula Capital, who counters Rosenberg’s gloomy predictions point by point in a come back that should give many hope and should spur on entrepreneurs and small business. WSJ
What we can do
Sign this online petition For National Entrepreneur Day. OK. Maybe signing another online petition doesn’t sound like much of a solution, but raising awareness of the importance of entrepreneurship, not just in the U.S. but also worldwide, is a pretty important thing. Our good buddy and strong supporter here at Small Business Trends Joel Libava brought this to our attention but, when you visit the main page from his blog post, you’ll find there are plenty of other big guns onboard too. The Franchise King Blog
Don’t be boring! And when starting on your own entrepreneurial journey, one thing is absolutely certain. As Seth Godin points out in this wonderful video rsurrected from back in 2003, recession, economic downturn or no, the most important factor in getting your business to succeed may not be price or quality but just getting people to pay attention. As Alastair Kay, who posted Seth’s message on his own blog recently, notes, ” It might be better to be bad or bizarre than boring.” SiteStream
Small Business News: The Entrepreneurial Way
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Small Business News: Entrepreneurial Innovation
Aug 28th
A level of innovation rarely possible before is happening thanks to new tools and a rapidly changing business environment. Read through our Friday roundup and become inspired by the possibilities for your entrepreneurial innovation. These tips could change your business.
Online Elements
Can’t get Twitter followers? It’s not as hard as you may think, but there may be simple things you are doing wrong that are keeping folks from following you on Twitter. Or worse yet, starting to unfollow? Before things get any worse, consider this simple guide. The Torch
It’s all about your content. When Stoney deGeyter talks about a Website that “gets some action”, he’s talking about one that causes readers to make a purchase, download some information, make a request or contact you. In short, your Website should call your visitors to action and the content should make it happen. Search Engine Guide
Facebook may be a huge benefit for small business, but… Unfortunately, according to small business blogger and consultant Joel Libava, it’s also a gigantic privacy issue to the point where Libava has begun to question whether it’s really worth it. What could Facebook learn from small business about the importance of customer service? What would you do if you got a letter from a customer like this? The Franchise King
Marketing Magic
Online and offline work hand in hand. We’ve reported before about the continuing importance of using print marketing independent of online marketing efforts. Here is some important data about the impact “old-school” catalogs can have on increasing online sales. SeeWhy
Do you use e-mail marketing? Well if so you may want to consider this advice about how to create irresistible e-mail subject lines, perhaps the most important line you will ever write in a marketing e-mail. From the guy who knows all about irresistible copywriting, Brian Clark. Copyblogger
Don’t collect spam lists. Nick Simpson claims to have many e-mail lists with thousands of subscribers who all eagerly receive his messages and have never complained of being spammed. So, what is this guy doing that other e-mail marketers are not. Professional Online Marketing
Expert Advice
Small business online advertising. Want to know the key to online advertising for your small business? To begin with, geo-targeting will help you hit the audience in your region and avoid high advertising costs that waste your resources while audiences outside your regional market. sm4biz
Should you hire a lawyer or got it alone? Just how important is an attorney to navigating the intricacies of your small business startup? An attorney will certainly bring a level of expertise and information to your startup efforts. But hiring an attorney during the startup phases of your small business will also add to your overall costs as you figure out your budget and business model. Business.Gov
Business Basics
What are the greatest challenges facing your online business? Well, it may not be any of the things you think. Certainly the same challenges that face any small business startup apply. But when you decide to work at home, you may also face a range of challenges different from those of other entrepreneurs. Here is a list with some ideas for coping. BizFilings.com
The Small Business Trends interview. We’re proud to share this interview with Anita Campbell, editor of Small Business Trends, about our online publication reaching an estimated 300,000 readers per month. Hope you find it entertaining and informative. Thanks Anita! PostLing
Small Business News: Entrepreneurial Innovation
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Entrepreneurial Brain Drain
Aug 16th
Cities, states, and regions often battle to get the best and the brightest young people to live and work in their locales. Part of this competition involves attracting talented individuals, but another part involves keeping them in the place where they were born and raised, fighting what many observers call “brain drain.”
Most of the discussion of brain drain focuses on people who work for others. That’s understandable given how most people are employed.
But a recent working paper by Chad Moutray of the Office of Advocacy of the U.S. Small Business Administration, examines the issue of brain drain among the self-employed. Looking at what happened to the 1993 cohort of college graduates over their first ten years post graduation, he draws conclusions about the problem of entrepreneurial brain drain.
For the most part, Dr. Moutray found that kepping talented young entrepreneurs isn’t all that different from holding on to skilled young employees. He explains, “In labor mobility, the self-employed are very similar to their wage and salary counterparts.”
The study did show one unique pattern for young self-employed people, however. Unlike their salaried counterparts, getting married and having children doesn’t keep the young, self-employed in town.
But home ownership does. In fact, Moutray found that owning one’s own home reduces the odds that the young self-employed will move by as much as 24 percent, twice the effect of home ownership on the mobility of those working for others.
This finding is based on correlations, so we don’t know if home ownership is really causing the self-employed to stick around. A third factor, like the strength of the local job market might be keeping the self-employed in town and encouraging them to buy houses.
But the home ownership effect is big enough that policy makers should investigate it further. If the link between owning a house and sticking around were causal, policy makers could keep young self-employed people around by setting up programs to help them buy their own homes.
Given the recent tightening of mortgage loan standards, particularly on entrepreneurs with highly variable income, such programs would be particularly timely.
View full post on Small Business News, Tips, Advice – Small Business Trends
America is Losing its High Tech Entrepreneurial Edge
Aug 2nd
Observers have long pointed to the United States as a shining example of entrepreneurship and innovation. In 2006, the Economist magazine gushed, “No country has mastered innovation and entrepreneurship as effectively as America.”
Perhaps that was once true, but it’s not anymore.
In a speech introducing the President’s new National Advisory Council on Innovation and Entrepreneurship, Secretary of Commerce Gary Locke said, “America’s innovation engine is not as efficient or as effective as it needs to be, and we are not creating as many jobs as we should.”
Recent data suggests that Secretary Locke is right. A study by the Information Technology and Innovation Foundation looked at the progress at innovation that 40 countries made over the past decade. The U.S. came in dead last. That is, whether they were ahead or behind us at innovation in 1999, the 39 other countries examined gained ground on us over the past ten years.
Fortunately, we were doing pretty well at innovation in 1999 so we still came in sixth in 2009. But the trend doesn’t bode well for the future.
Other studies also show our less-than-stellar innovation performance. A recent report by the Organization for Economic Development and Cooperation (OECD) looked at the per capita rate at which inventors in 38 nations filed for triadic patents – patents for the same invention filed in the United States, Japan, and Europe. The data shows that, in this event, we’re out of medal contention in eighth place, well behind countries like Switzerland, Japan, and Sweden.
Of course, while American business overall may be lagging in its innovativeness, our entrepreneurs might still be top of the heap at innovation.
The OECD data suggest not.
Looking at two measures – the share of companies less than five years old that file patents and the share of patents that went to companies under the age of five – across 13 industrialized countries, the United States came in third, after Norway and Denmark. While a respectable showing, it’s not where we need or want to be.
Moreover, the numbers have been getting worse, not better. As I explained in an earlier post, data from the U.S. Patent and Trademark Office shows that in 2001, 25.9 percent of U.S. patents went to small entities. By 2009, that number had dropped to 19.9 percent.
We aren’t investing in high tech start-ups the way we used to. In an earlier post, I pointed out the unhealthy trends in the U.S. venture capital industry. The number of deals made, capital invested, and exits are all down from their levels back in the mid 1990s, before the Internet bubble hit.
Venture capital accounts for less of U.S. economic activity than that of many other countries. As the figure below shows, in 2008, the U.S. invested a smaller share of its gross domestic product in venture capital than ten OECD countries, and a larger share than only twelve of them.
While the U.S. still remains a solid player at high tech entrepreneurship, the trend over the past decade makes it difficult to say that “no country has mastered innovation and entrepreneurship as effectively as America.”
America is Losing its High Tech Entrepreneurial Edge
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Small Business News: The Entrepreneurial Odyssey
Jul 3rd
The greatest of all opportunities lies before us. Rescue the global economy from its sluggish torpor or worse yet from a possible double dip recession. Statistics say it won’t be the first time. Traditionally, small businesses have always dragged the economy from recession back to prosperity by creating jobs and growth. While weak consumer spending with the threat of tax increases even on the middle class remain major obstacles and talk of government stimulus is mere distraction, it’s time for small business owners to lead.
Self-development
On quieting the lizard brain. It may be a prehistoric survival mechanism, but the fear and anger it can generate…and the resistance to changing course and doing something revolutionary can sabotage your business venture and your future as an entrepreneur. How do you ignore that primitive drive that holds you back from doing what is necessary? How to you silence the lizard brain and move forward with your new business venture without fear? Remem Me
Got what it takes to run a small business? Though small business owners come in all shapes and sizes and from every walk of life, there may be several characteristics they all have in common. A recent report indicates successful small business owners may all share at least six significant traits no matter what kind of business they may run or what their motivation in getting into their own business. How do you measure out? Inc.com
Policy
What’s the answer to jobs that won’t come back? Certainly increased entrepreneurship and small business activity is the key to job and economic growth. But how can small business grow effectively with restrictive tax increases threatening to stall growth and further damage consumer spending. Small businesses need lower taxes encouraging consumer spending instead of loans to stimulate growth. Yahoo! Finance
SBA funding drying up? If government stimulus is the answer, the economy may be in big trouble. Loans backed by the Small Business Administration are already slowing down as money from the program runs out of money. But what does our economy have to show for the loans and what does it say about the success of government stimulus in the long run to cure problems in the economy instead of relying on entrepreneurs and small businesses. CNNMoney.com
Why small business hasn’t some to the rescue. In a turnaround of early rhetoric about too-big-to-fail companies that needed to be bailed out at tax payer expense and an costly and potentially damaging overall of the financial industry, many experts and policymakers now seem conscious that small businesses are vital to pull the national and global economy out of recession. So what’s holding things up? Consumer spending, that’s what. Los Angeles Times
Taxing schizophrenia? While the government talks a good game when it comes to stimulate growth in small business through more loans and some tax breaks, the fact is that taxes will go up soon erasing any progress the stimulus effort may have made. Experts agree that the best chance of repairing the damaged economy and putting unemployed people back to work is to lower taxes period. So how long will it take Washington to do what’s needed? The Heritage Foundation
Tech
Your small business and the cloud. If you haven’t heard of cloud computing, you’ve probably been living under a dialup modem for the last few years. But how can cloud computing help your business operate less expensively, more efficiently and appear bigger with more resources by utilizing this growing trend. Daily Dose
SEO for the online small business With the increase in business being done online, including an ever growing emphasis on search marketing, Search Engine Optimization is no longer something small business owners can ignore. What does it take to master SEO for your small business? Here are six tips to help get you started. Keoteric eSolutions
What do customers look for on a Website? Small business owners have many considerations when working to get their companies online. But possibly the most important consideration is perhaps the one they don’t immediately consider. What are your customers looking for when they arrive at your company’s Website? Here are ten important things to consider. Entrepreneur.com
Events
Want to aide small local business and the economy in the process? Check out the Buy Local Week campaign launched by the Council of Smaller Enterprises in Northeast Ohio. The event promises some interesting opportunities for small businesses and local customers alike and could easily be replicated in other communities. Could you set up a Buy Local Week campaign for the small businesses in your town? Positively Cleveland
Small Business News: The Entrepreneurial Odyssey
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