Washington and the Entrepreneur

A member of my Board of Advisors suggested that I post the article by Michael Malone from the December 21 Wall Street Journal, Washington is Killing Silicon Valley. The article is interesting on a number of fronts. First, it points out the role entrepreneurs have played in the job creation process. Second, it mentions that the exit strategy for too many business plans end with the magical words… “And then we’ll sell to Google.”

But what really interested me was the observation that because of the accounting nightmares in the last decade, Sarbanes-Oxley was created and this legislation “has essentially killed the creation of new public companies in America, hamstrung the NYSE and NASDAQ (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.”

This brings me to something I heard from my uncles many years ago…that when the government gets involved, you never know what exactly will happen. Now I have to believe that the writers of the Sarbanes-Oxley had all the good intentions in the world. Preserving and defending the investor is pretty noble, but unfortunately the old Law of Unintended Consequences has a way of rearing its ugly head and that’s what happened with Sarbanes-Oxley. And as we reflect on that, you have to wonder how the Law of Unintended Consequences will play out with the role the Fed and the U.S. Treasury has taken on in the current economy. That post won’t be written for some time to come.

Is This the Time to Start a Company?

I’m using the semester break as a time to play catch-up with some reading and came across a wonderful piece in the December Wired magazine. I’ve been telling my students that precisely because of the state of the economy, that this is a great time to launch or buy a business. In “Back to the Garage,” author Daniel Roth of the magazine comments that “With the world's economies apparently snowballing into a deep recession, it feels uncomfortably Pollyannish to see signs of hope. But for the bravest inventors and entrepreneurs, conditions are ideal to pounce on a business opportunity. In periods of economic turmoil, people are hungry and work cheap, and entrenched companies often concentrate on in-house cost-cutting instead of exploring new markets, which can explode with the next turn of the business cycle. “

As we watch the news or read the newspaper, we see examples of large corporation cutting back on everything from staffing, to marketing to R & D, which opens up opportunities for the entrepreneurial company. Now is truly a great time to launch a business. In the words of Priceline.com founder Jeff Hoffman, “Get up off the couch and start that company!”

Entrepreneurs and Marketing

Very interesting piece this week in the Wall Street Journal… The Secrets of Marketing in a Web 2.0 World. Anytime I see a business article with the words “secret” or “top ten” in the title, I usually avoid it much like I would a Cleveland Browns football game… but this article is different and worth your time to read. It’s particularly thought- provoking for entrepreneurs as we don’t have the staffing or budget of the big companies, so we have to find other ways to engage the customer and get them to be an agent of our marketing process.

Big News...The Recession is Here

It is now official…we’re in a recession. According to The National Bureau of Economic Research, the United States economy has been in recession since December 2007, which is when the NBER calculated that economic activity peaked. If you’d like to read the entire report, along with some interesting FAQ’s, follow this link and read about something your wallet has known about for awhile.

The Entrepreneur and the Credit Markets

Over the Thanksgiving holiday, we were in Santa Fe helping one of our daughters pack for a cross-country move. When I wasn’t buying boxes, packing them and then waiting in line to ship them, I had the chance to meet with a friend in the venture capital business. Listening to him talk about the difficulties that some of his portfolio companies were enduring thanks to the mess in the credit markets, spoke more clearly to me than hours of Congressional hearings. When the credit markets break (and I think we can now safely say that they are indeed “broke”), while it hurts all companies in the economic food-chain, it really hurts the entrepreneurs who are trying to start, grow or even sell their companies. The November 28 Wall Street Journal carried an article by Pui-Wing Tam that discusses the problems facing entrepreneurs and VCs alike. The article addresses entrepreneurial companies, but our current economic situation also hurts companies that don’t even consider themselves entrepreneurs. While visiting in Santa Fe, I noticed a number of small businesses that had been around for ten or more years, shutting their doors because of the slowdown in consumer spending. While our representatives in Washington deal with the banks, insurance companies and the automobile giants, the engine of growth in this country---the entrepreneur---is being ignored. It may be up to us to save ourselves…and our country. More about that on another post.