Dave Berg from Syracuse University sent over the following to me regarding the six shocks of entrepreneurship. Thanks Dave...very interesting and thought provoking.
Six Shocks of Entrepreneurship
By JAY GOLTZ
There’s nothing like a tough economy – and unemployment – to encourage people to take the plunge and open their own businesses. Some have more business experience than others. Some have more education than others. When I started my company, I went through a series of surprises and shocks and the occasional nightmare. With all of the recent interest in entrepreneurship, I thought I would highlight six warning signs that you are about to be broadsided by one of the classic and inevitable struggles of business ownership. If you hear yourself saying these words, take a step back and think about what you’re doing. My hope is that by being more aware you will be better prepared.
1. “Where’s all the business from our marketing launch?” Marketing can be very expensive, and it is difficult to know what will work. It can propel your company, or it can have minimal or no impact. There will be no shortage of people looking to take your money to help you with your advertising and marketing. The people who sell advertising are usually not marketing experts — they’re salespeople. It is their job to sell. It is your job to be discerning. If you can, test before you invest.
2. “The accountant must be wrong! We must be making money! We’re so busy I can hardly keep up.” You can’t just be a salesperson. You need to do the math. It’s about margins, cost accounting and discounting. It is about the bottom line, not the top line. Plenty of people are very busy right up until the day they run out money. Accounting can be exciting — exciting like finding out you are going broke, or exciting like driving a big profit.
3. “We don’t need customers like that!” Are you sure? Maybe you do. It is easy to take things personally and conclude that you don’t need a customer’s business. It is also easy to lose potential business worth millions of dollars from customers who may be demanding, wrong or just in a bad mood. There are only so many customers out there. I don’t want to lose their business or their friends’ business. It is not about ego, it is about money.
4. “Where’s all the money?” Cash flow is not the same thing as profitability. Cash gets stuck in places — inventory, receivables, fixed assets, debt repayment. Hence the lack of flow. You need to get a handle on your cash flow as well as your profitability. Companies go broke because they run out of cash. Cash is king. Cash flow is a dictator. It will dictate your success.
5. “He did WHAT?” Management is about setting standards, training, empowerment, motivation and holding people responsible. Not everyone is going to figure things out for themselves. Forget the phrase “common sense.” It may be common to you, but you are going to have to tell some employees once, twice, maybe three times. You eventually are going to have to decide whether it is you or them. Were they trained properly? Are you not clear? Are you not consistent? Do they not care? Are they unable? It’s not always an easy answer.
6. “Why is the new salesperson in the bathroom crying?” Twenty minutes earlier I had asked one of my veteran salespeople how the new salesperson was doing. She said she wasn’t catching on too fast. I said I was afraid of that. As soon as I walked away, my veteran told the newbie, “Jay doesn’t think you are catching on fast enough.” When you are the boss, you can no longer assume that any conversation have will remain private. Anything you say can and will be used against you.
Here’s the good news: Once you figure it out, business should get easier. Making mistakes is unavoidable. The key is to learn from them (or from mine) — and not repeat them. This might seem obvious, but I have to tell you, I have watched people do the same things over and over again with disappointing results. While I get tremendous satisfaction from good decisions and happy customers, there isn’t a day that goes by that I don’t look around and try to figure out what I could be doing better.
Jay Goltz owns five small businesses in Chicago.
Wednesday, March 31, 2010
Foursquare for All!
If you haven’t heard yet about Foursquare…trust me, you will soon. The company is not brand new, but it has become absolutely white-hot since the recent South by Southwest Conference (and if you don’t know about SXSW…come on, you are just not paying attention). I’m pleased to say that the serial entrepreneur Dennis Crowley who is the CEO of Foursquare, is a Syracuse University grad, which is giving us something to be happy about here in the land of the Orange now that basketball season is over. From a recent Wall Street Journal story about the company: Foursquare CEO: We’ll Hit 1 Million Members In A Few Weeks.
Foursquare, a mobile social-gaming application, encourages members to “check-in” at venues and awards the most frequent patron the title of mayor. It’s really all in the name of fun, but it seems some dirty politics may be developing around Foursquare mayorship.
And while New York-based Foursquare members compete for mayorships, investors are competing for a piece of the start-up’s next round of funding. Several news reports this week peg the company’s funding target at $10 million with a lofty valuation between $60 million and $70 million. Foursquare Chief Executive Dennis Crowley tells us he can’t yet comment on a new funding round, though he said we should check back next week after he makes a trip to the West Coast. The company is rumored to be considering Accel Partners, Andreessen Horowitz and Khosla Ventures - all in Silicon Valley - as potential lead investors.
So, why are VCs so enthusiastic about Foursquare? One reason is how fast the company’s membership is growing. Crowley said Foursquare attracted 120,000 users during this year’s South-By-Southwest festival alone and has grown to about 750,000 total users now.
Foursquare, a mobile social-gaming application, encourages members to “check-in” at venues and awards the most frequent patron the title of mayor. It’s really all in the name of fun, but it seems some dirty politics may be developing around Foursquare mayorship.
And while New York-based Foursquare members compete for mayorships, investors are competing for a piece of the start-up’s next round of funding. Several news reports this week peg the company’s funding target at $10 million with a lofty valuation between $60 million and $70 million. Foursquare Chief Executive Dennis Crowley tells us he can’t yet comment on a new funding round, though he said we should check back next week after he makes a trip to the West Coast. The company is rumored to be considering Accel Partners, Andreessen Horowitz and Khosla Ventures - all in Silicon Valley - as potential lead investors.
So, why are VCs so enthusiastic about Foursquare? One reason is how fast the company’s membership is growing. Crowley said Foursquare attracted 120,000 users during this year’s South-By-Southwest festival alone and has grown to about 750,000 total users now.
Monday, March 29, 2010
The Importance of Team!
Fast Company magazine is rapidly becoming one of my favorite publications. The current issue has a number of interesting pieces, but one in particular that caught my attention is by Nancy Lubin and called, “Let’s Hear it for the Little People.”
From the article:
We're obsessed with leadership. Bookstores have entire sections devoted to leadership. Corporations spend thousands upon thousands of dollars on leadership retreats. At some universities, you can even major in leadership. Venture-capital money flows like water into the hands of founders who are labeled "visionary" and "at the vanguard." And what's sexier these days than the words "I started my own blah blah blah"?
I think we've got it wrong. We've overdone this whole leadership/founder/entrepreneur thing. And we're not spending nearly enough time crediting the folks who turn all that visionary stuff into tangible reality: the chief operating officers, the midlevel managers, the staffers. If the word didn't have a pejorative tinge to it, I guess you'd call them followers.
What I particularly liked about the piece is that it reminds us that while the lead entrepreneur is critically important to the success of the venture, it’s often times the rest of the team that insures that the entrepreneur’s vision is carried out. In my classes I always spend a considerable amount of time talking about the concept of the team for the new venture. You have to have a variety of different kinds of skills on the team, and most importantly, you want to be sure that you have people who are not like the lead entrepreneur. In other words, if he/she is a techy, the other folks need to be sales people, numbers folks, ops folks. I like to tell my students to look at yourself honestly in the mirror, and get people on the rest of the management team who are nothing like you. It’s nice to see that Ms. Lubin is giving some credit to those most often forgotten in the successful venture, the rest of the team.
From the article:
We're obsessed with leadership. Bookstores have entire sections devoted to leadership. Corporations spend thousands upon thousands of dollars on leadership retreats. At some universities, you can even major in leadership. Venture-capital money flows like water into the hands of founders who are labeled "visionary" and "at the vanguard." And what's sexier these days than the words "I started my own blah blah blah"?
I think we've got it wrong. We've overdone this whole leadership/founder/entrepreneur thing. And we're not spending nearly enough time crediting the folks who turn all that visionary stuff into tangible reality: the chief operating officers, the midlevel managers, the staffers. If the word didn't have a pejorative tinge to it, I guess you'd call them followers.
What I particularly liked about the piece is that it reminds us that while the lead entrepreneur is critically important to the success of the venture, it’s often times the rest of the team that insures that the entrepreneur’s vision is carried out. In my classes I always spend a considerable amount of time talking about the concept of the team for the new venture. You have to have a variety of different kinds of skills on the team, and most importantly, you want to be sure that you have people who are not like the lead entrepreneur. In other words, if he/she is a techy, the other folks need to be sales people, numbers folks, ops folks. I like to tell my students to look at yourself honestly in the mirror, and get people on the rest of the management team who are nothing like you. It’s nice to see that Ms. Lubin is giving some credit to those most often forgotten in the successful venture, the rest of the team.
Wednesday, March 24, 2010
There May Be No More Angel's in Your Outfield
Ran across an interesting post today on The Huffington Post from the Kauffman Foundation. In the piece, written by Robert E. Litan, the vice president of research and policy at the Foundation, he describes potential impacts to those entrepreneurs raising funds from angel investors.
From the article:
Tucked away in a few pages in the comprehensive financial reform bill outlined by Senate Banking Committee Chairman Senator Dodd (D-Conn.) are provisions that would raise the costs of angel investments in startup ventures. These provisions are both unnecessary and unhelpful at a time when policymakers should be looking for ways to make it easier to finance new businesses, especially the potentially high-growth, job-creating companies capable of attracting outside investors. Under existing law, startup companies can raise money easily and quickly from "accredited investors" -- individuals with substantial wealth or income.
There is no need for the companies or the investors to gain approval from any state or regulatory official. All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.
While the angel community is investing in deals, there are lots of opportunities for wealthy individuals other than just entrepreneurs, such as the distressed real estate marketplace. As an entrepreneur and an angel investor, the last thing we need is more roadblocks placed on the raising of funds from these angel investors.
From the article:
Tucked away in a few pages in the comprehensive financial reform bill outlined by Senate Banking Committee Chairman Senator Dodd (D-Conn.) are provisions that would raise the costs of angel investments in startup ventures. These provisions are both unnecessary and unhelpful at a time when policymakers should be looking for ways to make it easier to finance new businesses, especially the potentially high-growth, job-creating companies capable of attracting outside investors. Under existing law, startup companies can raise money easily and quickly from "accredited investors" -- individuals with substantial wealth or income.
There is no need for the companies or the investors to gain approval from any state or regulatory official. All of this would change if Section 926 of the Dodd bill is included in any final reform legislation. That section would require, for the first time, companies seeking angel investment to make a filing with the Securities and Exchange Commission, which would have 120 days to review it. This would both raise the cost of seeking angels and delay the ability of companies to benefit from their funding.
While the angel community is investing in deals, there are lots of opportunities for wealthy individuals other than just entrepreneurs, such as the distressed real estate marketplace. As an entrepreneur and an angel investor, the last thing we need is more roadblocks placed on the raising of funds from these angel investors.
Thursday, March 18, 2010
Why Social Media is Important In Two Minutes
This morning I was giving a presentation to the SBA’s Operation Startup and Grow conference, and I wished I’d already had seen the YouTube video, “What the Hell is Social Media in Two Minutes” so I could have included in my presentation. Thanks to my good friend Allen Kupetz for sending this to me via his blog, The Future of Less. Here is the link to the video: http://www.youtube.com/watch?v=QLd9q88ohUs
A New Generation of Business Leaders Thanks to the US Military
If you haven’t seen the current issue of Fortune Magazine, take a look at the wonderful story on Battle-Tested: How a Decade of War Has Created a New Generation of Elite Business Leaders. The story tells how companies as diverse as Wal-Mart, Home Depot, Lowes, State Farm, Bank of America and others are finding that the next generation of business leaders is coming from the US Military. In addition, here is a link to another story that is on their website on the same subject: Warriors in the Workplace by Brian O’Keefe.
Having just come from a wonderful session hosted by the SBA, Operation Startup and Grow which is a veterans business conference in Upstate New York for veterans and members of the military community who want to start or expand their own small business, I can tell you that veterans are also becoming entrepreneurs. According to academic research, the best predictor of whether someone will start their own business is prior military service. Having had the chance to chat with a number of vets this morning, I’m also looking forward to seeing more vets’ enter the business world as entrepreneurs. No matter which way our veterans enter the business world, colleges like Syracuse University stand ready to help as our way of saying thanks for all that you’ve done for our country.
Having just come from a wonderful session hosted by the SBA, Operation Startup and Grow which is a veterans business conference in Upstate New York for veterans and members of the military community who want to start or expand their own small business, I can tell you that veterans are also becoming entrepreneurs. According to academic research, the best predictor of whether someone will start their own business is prior military service. Having had the chance to chat with a number of vets this morning, I’m also looking forward to seeing more vets’ enter the business world as entrepreneurs. No matter which way our veterans enter the business world, colleges like Syracuse University stand ready to help as our way of saying thanks for all that you’ve done for our country.
Wednesday, March 17, 2010
High Growth Firms, Jobs and Policy
The Kauffman Foundation has a wonderful new piece of entrepreneurship research out, that I finally had a chance to read today. It’s called, High Growth Firms and the Future of the American Economy. Besides being a wonderful title, the document speaks to a topic near and dear to many of us …policy implications for entrepreneurship. From the report:
The data generally show that:
• In any given year, the top-performing 1 percent of young firms generate roughly 40 percent of new job creation.
• Fast-growing young firms, comprising less than 1 percent of all companies, generate roughly 10 percent of new jobs in any given year.
A couple of other points of interest:
In 2007, the U.S. economy contained 5.5 million firms. About half a million of these were brand new (age zero, that is); another two million, or just over one-third, were five years old or younger. Some companies were expanding, some contracting, some standing still. By and large, job creation (about two-thirds) came from young firms, many of which were small and never got much bigger. Only a small number of firms, moreover, creates a disproportionate share of such additional jobs; these are the top-performing firms. For example, the top 5 percent of companies (measured by employment growth), or about 273,000 firms, creates two-thirds of new jobs in any given year. The top 1 percent of companies (about 55,000), generate 40 percent of new jobs in any given year.
Every year, roughly half a million new firms are started in the United States; not all of these will survive, of course, and survival rates across time are remarkably stable.4 In the first two years, roughly a third of these companies will fail and, in five years, just under half (48 percent) will remain.
The data generally show that:
• In any given year, the top-performing 1 percent of young firms generate roughly 40 percent of new job creation.
• Fast-growing young firms, comprising less than 1 percent of all companies, generate roughly 10 percent of new jobs in any given year.
A couple of other points of interest:
In 2007, the U.S. economy contained 5.5 million firms. About half a million of these were brand new (age zero, that is); another two million, or just over one-third, were five years old or younger. Some companies were expanding, some contracting, some standing still. By and large, job creation (about two-thirds) came from young firms, many of which were small and never got much bigger. Only a small number of firms, moreover, creates a disproportionate share of such additional jobs; these are the top-performing firms. For example, the top 5 percent of companies (measured by employment growth), or about 273,000 firms, creates two-thirds of new jobs in any given year. The top 1 percent of companies (about 55,000), generate 40 percent of new jobs in any given year.
Every year, roughly half a million new firms are started in the United States; not all of these will survive, of course, and survival rates across time are remarkably stable.4 In the first two years, roughly a third of these companies will fail and, in five years, just under half (48 percent) will remain.
Uh...We're Not Teaching About This Here
We’re not exactly teaching this sort of thing in our Technology Entrepreneurship class, but it does fit the notion of finding a problem in the marketplace and then creating the solution. It also fits the bill of finding some big time investors to put some money into your product. Take a look at the article from Reuters today, entitled Toy Startup Has Some Big Backers.
Tuesday, March 16, 2010
Own Your Venture
Thanks to our friends at the Kellogg School of Management for sending information on Own Your Venture to us. The site has a very neat interactive tool that, according to the website, “Makes understanding the impact of raising money for an early stage venture transparent and easy to grasp. It is intended to take some of the confusion out of raising angel or venture money. The audience for this tool is broad, but we hope it will find its way into the hands of founders in particular, those who are just beginning to make decisions about how to finance their companies---simplifying the process so that they can focus on their big idea.”
Monday, March 15, 2010
Entrepreneurs and the Lending Squeeze
If you haven’t seen the outstanding front page article in today’s Wall Street Journal by Mark Whitehouse, Loan Squeeze Thwarts Small-Business Revival, you should get a cup of coffee and be sure to read it.
Some points that I thought were particularly interesting:
A year and a half after the financial crisis hit, the U.S. credit machine is still malfunctioning. During the boom, credit was too abundant. Now the pendulum has swung. With an eye toward limiting such swings, Sen. Christopher Dodd is expected to unveil a bill Monday that would be especially tough on big banks while preserving the Fed's regulatory role, but the bill's prospects remain uncertain.
For a recovery to take hold, hundreds of thousands of small businesses must find the confidence to expand and create jobs. But when they get to that point, the local banks they depend on—worried about borrowers' financial strength, scrutinized by regulators and slammed by souring real-estate loans—might not be willing or able to provide the credit they need.
While big companies have been able to borrow in bond markets, smaller companies rely mainly on bank credit, which has been shrinking. In 2009, total lending by U.S. banks fell 7.4%, the steepest drop since 1942. In all, the credit pulled out of the economy by banks since the downfall of Lehman Brothers in September 2008 amounts to about $700 billion, more than double the amount so far distributed under President Barack Obama's $787 billion stimulus program.
The dearth of credit for small businesses could have a big effect on prospects for restoring the 8.4 million jobs lost since the recession began. From 1992 through the beginning of the latest recession, companies with fewer than 100 employees accounted for about 45% of net job growth, according to Labor Department data.
Policy makers have been looking for ways to reopen the spigot. President Obama has proposed creating a $30 billion fund to support small-business lending. Last month, in an unusual show of solidarity, the Federal Reserve, the Federal Deposit Insurance Corp. and other state and federal regulators issued a joint statement urging banks to continue lending to credit-worthy small enterprises.
Making sure small firms get access to credit "is crucial to avoiding a Japan-type scenario of persistent stagnation," says Mark Gertler, a New York University economist who has done seminal research with Fed Chairman Ben Bernanke, then a Princeton University professor, on how troubles with bank lending can aggravate economic downturns.
Getting banks to lend more won't be easy, given the rising tide of defaults on loans made to finance housing developments, office buildings, shopping malls and other commercial real estate. Deutsche Bank expects banks to suffer at least $250 billion in losses on such loans, with about half coming in the next few years. Together with an estimated $250 billion in further charge-offs on home mortgages, that's more than double banks' current reserves against losses on all types of loans.
Some points that I thought were particularly interesting:
A year and a half after the financial crisis hit, the U.S. credit machine is still malfunctioning. During the boom, credit was too abundant. Now the pendulum has swung. With an eye toward limiting such swings, Sen. Christopher Dodd is expected to unveil a bill Monday that would be especially tough on big banks while preserving the Fed's regulatory role, but the bill's prospects remain uncertain.
For a recovery to take hold, hundreds of thousands of small businesses must find the confidence to expand and create jobs. But when they get to that point, the local banks they depend on—worried about borrowers' financial strength, scrutinized by regulators and slammed by souring real-estate loans—might not be willing or able to provide the credit they need.
While big companies have been able to borrow in bond markets, smaller companies rely mainly on bank credit, which has been shrinking. In 2009, total lending by U.S. banks fell 7.4%, the steepest drop since 1942. In all, the credit pulled out of the economy by banks since the downfall of Lehman Brothers in September 2008 amounts to about $700 billion, more than double the amount so far distributed under President Barack Obama's $787 billion stimulus program.
The dearth of credit for small businesses could have a big effect on prospects for restoring the 8.4 million jobs lost since the recession began. From 1992 through the beginning of the latest recession, companies with fewer than 100 employees accounted for about 45% of net job growth, according to Labor Department data.
Policy makers have been looking for ways to reopen the spigot. President Obama has proposed creating a $30 billion fund to support small-business lending. Last month, in an unusual show of solidarity, the Federal Reserve, the Federal Deposit Insurance Corp. and other state and federal regulators issued a joint statement urging banks to continue lending to credit-worthy small enterprises.
Making sure small firms get access to credit "is crucial to avoiding a Japan-type scenario of persistent stagnation," says Mark Gertler, a New York University economist who has done seminal research with Fed Chairman Ben Bernanke, then a Princeton University professor, on how troubles with bank lending can aggravate economic downturns.
Getting banks to lend more won't be easy, given the rising tide of defaults on loans made to finance housing developments, office buildings, shopping malls and other commercial real estate. Deutsche Bank expects banks to suffer at least $250 billion in losses on such loans, with about half coming in the next few years. Together with an estimated $250 billion in further charge-offs on home mortgages, that's more than double banks' current reserves against losses on all types of loans.
Tuesday, March 9, 2010
Form a Board of Advisors...Now!
Mistakes, we all make ‘em and for those of us who are entrepreneurs, we definitely make our share. A while back, I was talking with a friend at Rollins College who was doing some research on the entrepreneurial process. I can’t remember his exact question, but he was asking me something that had to do with mistakes that I made when I owned my companies. After a bit of thought, I told him that it was that I never formed a Board of Advisors for my company. That conversation came to mind this week when I saw the article in the NY Times How to Create an Advisory Board. While I don’t agree with everything in article (not sure you need to pay people to sit on the board(other than expenses), and I’m not sure you have to put a written agreement in place, but I do agree that you should get people on it from your network(think of your attorney, accountant, and other more senior entrepreneurs, but remember to bring in someone young who will bring new to the group new thinking about new technology) who will help and challenge you; this is not the time for sycophants. So take the time...and form a Board of Advisors!
Always On and Clean Tech
It feels like my brain is going to explode. I spent the last couple of days at the Always On Going Green Conference in Boston, and it’s all about clean tech. For me, this is something I’ve been hearing about for sometime…mostly from the perspective that the venture capital world has been throwing lots of money at this space. For me the conference has been a wonderful primer teaching me about state of all things clean tech and I have to admit that I have much to learn. Clean tech, as described by Connecticut Innovations, is anything dealing with the conservation of energy, the preservation and protection of the environment or elimination of harmful waste; all good, but as was mentioned many times today, very expensive goals.
Sitting through the conference it’s been interesting hearing about the regulatory, financial, and consumer issues regarding the expansion of clean tech. I heard about water issues in China (water is one of the top items on China’s long term plan), I heard about wind farm issues here in Massachusetts, and about the challenges of going from having a pilot plant that might cost $25 million and is funded by the VCs to a much larger production plant that has to be funded more traditionally via debt and shareholders’ equity.
I heard from some great young companies such as Black Gold Bio Fuels, 1366 Technologies Inc. and Great Point Energy. I heard that the consumer in a lot of the new electrical issues is playing second fiddle to the commercial/industrial markets (40 percent of electrical demand is taken by consumers, while the commercial/industrial market takes 60 percent), I heard from the Governor of Massachusetts Deval Patrick say that a crisis can be a wonderful platform for change and I even heard folks talking about something that I was thinking of 15 years ago when I was doing work in Asia in the themed attraction industry (that you have to choose your partners very carefully, aligning yourself with your partner’s goals and not with just your product goals). But I also saw that the clean tech world isn’t doing a particularly good job of telling their story. It was driven home as we talked today about nuclear power and the challenges facing it. The technology is good, clean and renewable, yet if you stopped on the street in Boston and asked 20 folks what they thought of nuclear, 19 of them would probably talk about Three Mile Island which happened in 1979. For nuclear, as for much of the clean tech space, there is a story waiting to be told to the American people and that’s a story that most American’s want to hear.
Sitting through the conference it’s been interesting hearing about the regulatory, financial, and consumer issues regarding the expansion of clean tech. I heard about water issues in China (water is one of the top items on China’s long term plan), I heard about wind farm issues here in Massachusetts, and about the challenges of going from having a pilot plant that might cost $25 million and is funded by the VCs to a much larger production plant that has to be funded more traditionally via debt and shareholders’ equity.
I heard from some great young companies such as Black Gold Bio Fuels, 1366 Technologies Inc. and Great Point Energy. I heard that the consumer in a lot of the new electrical issues is playing second fiddle to the commercial/industrial markets (40 percent of electrical demand is taken by consumers, while the commercial/industrial market takes 60 percent), I heard from the Governor of Massachusetts Deval Patrick say that a crisis can be a wonderful platform for change and I even heard folks talking about something that I was thinking of 15 years ago when I was doing work in Asia in the themed attraction industry (that you have to choose your partners very carefully, aligning yourself with your partner’s goals and not with just your product goals). But I also saw that the clean tech world isn’t doing a particularly good job of telling their story. It was driven home as we talked today about nuclear power and the challenges facing it. The technology is good, clean and renewable, yet if you stopped on the street in Boston and asked 20 folks what they thought of nuclear, 19 of them would probably talk about Three Mile Island which happened in 1979. For nuclear, as for much of the clean tech space, there is a story waiting to be told to the American people and that’s a story that most American’s want to hear.
Thursday, March 4, 2010
SBA and Women Entrepreneurs
From today’s NY Times, and the article S.B.A. Readies Remedy for Bias Against Women in Federal Contracting.
The Small Business Administration on Tuesday unveiled a proposed rule that would finally implement a law intended to increase the share of federal contracts to women-owned firms. The law, originally passed by Congress in 2000, allows federal agencies to set aside contracts for small businesses owned by women in industries that the S.B.A. determines “are underrepresented with respect to Federal procurement contracting.”
According to the S.B.A. (pdf), the agency has found 83 industries (pdf) where women-owned small businesses are “under-represented or substantially under-represented.” In those industries (defined by the North American Industrial Classification System, or NAICS, which comprises 313 broad industrial categories), a federal contract officer can restrict competition for contracts worth less than $3 million, or $5 million for manufacturers, to women-owned firms. Generally speaking, women must control and own at least 51 percent of the company and be United States citizens as well as “economically disadvantaged.” In industries where women are substantially under-represented, however, the S.B.A. can waive the disadvantaged requirement.
“We’re very pleased to see the S.B.A. finally moving,” said Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, which says it has 500,000 members, mostly small-business owners. “Women own nearly one-third of all businesses in the United States, but we only receive 3 percent of federal contracts.” Or more precisely: not more than 3.4 percent in 2008.
Federal law sets a goal — not a requirement — that 5 percent of all government contracts go to women-owned firms. Last fall, the U.S. Women’s Chamber concluded that the $12 billion difference between the goal and reality in 2008 amounted to the “largest shortfall ever.” The 5 percent goal has never been met since it became law in 1994, which is what prompted Congress to create contract set-asides 10 years ago.
However, by some accounts, the Bush administration had little interest in the law. Ms. Dorfman said that in 2004, then-S.B.A. Administrator Hector Barreto told her that “the S.B.A. had no intention of implementing the program.” (Mr. Barreto, now chairman of the Latino Coalition, a Hispanic small-business advocacy organization, did not return a phone call seeking comment.)
After Mr. Barreto resigned in 2006, his successor, Steven Preston, moved to establish the Women’s Procurement Program, as it was known — but with limitations. For one thing, federal agencies were put in the awkward position of having to individually certify that they had discriminated against women-owned businesses in the past before the program would apply to them. Moreover, the S.B.A.’s proposed rule initially determined that women were under-represented — and set-asides could occur — in just four industries. The Bush administration’s final proposed rule (subsequently withdrawn by the incoming Obama administration) expanded this to 31 industries.
The rule proposed by the Obama administration this week further expands the field to 83 industries, and removes the department-by-department certification. Backers of the program in Congress greeted the S.B.A.’s proposed rule with guarded optimism. “After three Congressional reports, numerous Congressional hearings, two proposed rules, one highly deficient final rule, and nearly a decade of delay, today’s announcement is long overdue,” said Senator Olympia Snowe of Maine, the ranking Republican on the Small Business Committee, in a statement released by her office. The Democratic chair of the committee, Mary Landrieu of Louisiana, described the announcement as “a step in the right direction.”
The Small Business Administration on Tuesday unveiled a proposed rule that would finally implement a law intended to increase the share of federal contracts to women-owned firms. The law, originally passed by Congress in 2000, allows federal agencies to set aside contracts for small businesses owned by women in industries that the S.B.A. determines “are underrepresented with respect to Federal procurement contracting.”
According to the S.B.A. (pdf), the agency has found 83 industries (pdf) where women-owned small businesses are “under-represented or substantially under-represented.” In those industries (defined by the North American Industrial Classification System, or NAICS, which comprises 313 broad industrial categories), a federal contract officer can restrict competition for contracts worth less than $3 million, or $5 million for manufacturers, to women-owned firms. Generally speaking, women must control and own at least 51 percent of the company and be United States citizens as well as “economically disadvantaged.” In industries where women are substantially under-represented, however, the S.B.A. can waive the disadvantaged requirement.
“We’re very pleased to see the S.B.A. finally moving,” said Margot Dorfman, chief executive of the U.S. Women’s Chamber of Commerce, which says it has 500,000 members, mostly small-business owners. “Women own nearly one-third of all businesses in the United States, but we only receive 3 percent of federal contracts.” Or more precisely: not more than 3.4 percent in 2008.
Federal law sets a goal — not a requirement — that 5 percent of all government contracts go to women-owned firms. Last fall, the U.S. Women’s Chamber concluded that the $12 billion difference between the goal and reality in 2008 amounted to the “largest shortfall ever.” The 5 percent goal has never been met since it became law in 1994, which is what prompted Congress to create contract set-asides 10 years ago.
However, by some accounts, the Bush administration had little interest in the law. Ms. Dorfman said that in 2004, then-S.B.A. Administrator Hector Barreto told her that “the S.B.A. had no intention of implementing the program.” (Mr. Barreto, now chairman of the Latino Coalition, a Hispanic small-business advocacy organization, did not return a phone call seeking comment.)
After Mr. Barreto resigned in 2006, his successor, Steven Preston, moved to establish the Women’s Procurement Program, as it was known — but with limitations. For one thing, federal agencies were put in the awkward position of having to individually certify that they had discriminated against women-owned businesses in the past before the program would apply to them. Moreover, the S.B.A.’s proposed rule initially determined that women were under-represented — and set-asides could occur — in just four industries. The Bush administration’s final proposed rule (subsequently withdrawn by the incoming Obama administration) expanded this to 31 industries.
The rule proposed by the Obama administration this week further expands the field to 83 industries, and removes the department-by-department certification. Backers of the program in Congress greeted the S.B.A.’s proposed rule with guarded optimism. “After three Congressional reports, numerous Congressional hearings, two proposed rules, one highly deficient final rule, and nearly a decade of delay, today’s announcement is long overdue,” said Senator Olympia Snowe of Maine, the ranking Republican on the Small Business Committee, in a statement released by her office. The Democratic chair of the committee, Mary Landrieu of Louisiana, described the announcement as “a step in the right direction.”
Boomers as the New Entrepreneurs
The media really loves the 18 to 25 age demographic…hey, what’s not to love about that group. After all, for most of us boomers, that generation is our kids…and we’re the hovering helicopter parents. But today’s NY Times is talking about another demographic that’s close to the boomers heart…and that’s the boomers! Take a look at the article about the new group of entrepreneurs, boomers 55 and older. The article is Starting Over at 55.
Angels and Pinheads????
One of the blogs I’ve recently started reading is Angels and Pinheads…and in full disclosure I started reading it just because I thought it had a pretty cool name. But then I started following his posts regularly because I liked the voice Steve Murchie brought to the blog and his thoughts on all things related to angel investors. If you’re not reading it, you should and here is his latest which deals with an issue that faces many of the small angel funds that are popping up around the country:
One might not expect rural burgs like Mankato, Minnesota, Mason City, Iowa, and Fargo, North Dakota to be hotbeds of angel investing activity. Nor might one expect really good innovation around the challenges of angel investing in small groups to come from the same areas. Think again!
The RAIN Source Capital network has put together a really interesting program for small angel groups to form funds, and provides these funds with “a process for due diligence, legal templates, management support, access to deal flow and other resources.” Bravo! This is a great way to help angels organize effectively without a lot of overhead. So far they have 23 affiliated funds in six states. These also host annual get-togethers for networking and educational purposes.
One thing I like about this approach is the focus on local interests: unlike a number of the high-profile emerging angel activities which are centered only on sexy Web 2.0-ish technology plays, RAINs investors have supported medical devices, enterprise software, industrial fabricators, and a woodworking tools company. These companies may not have the stratospheric exit potentials of a SaaS developer, but they are the companies that fuel the local economies.
One concern I have (as I do with all angel funds) is the process for selecting investments. I don’t know anything about the specifics of the RAIN model, but having looked at fund structures over the past few years, there is the inevitable potential for political stalemate trying to make selections; i.e., if a majority or super-majority vote is required for a GO decision, it can stall pretty easily. I’d be interested in hearing from entrepreneurs or investors with direct experience.
On a related note, I’ve heard rumblings that one of the angel groups I really respect from the Northeast is putting together a sidecar fund. I’m convinced that groups driven by individual decision-making but supported by a sidecar fund that diversifies risk and increases upside potential for the members are going to become the norm. Among other things, the fund structure helps with long-term sustainability. More on that later.
One might not expect rural burgs like Mankato, Minnesota, Mason City, Iowa, and Fargo, North Dakota to be hotbeds of angel investing activity. Nor might one expect really good innovation around the challenges of angel investing in small groups to come from the same areas. Think again!
The RAIN Source Capital network has put together a really interesting program for small angel groups to form funds, and provides these funds with “a process for due diligence, legal templates, management support, access to deal flow and other resources.” Bravo! This is a great way to help angels organize effectively without a lot of overhead. So far they have 23 affiliated funds in six states. These also host annual get-togethers for networking and educational purposes.
One thing I like about this approach is the focus on local interests: unlike a number of the high-profile emerging angel activities which are centered only on sexy Web 2.0-ish technology plays, RAINs investors have supported medical devices, enterprise software, industrial fabricators, and a woodworking tools company. These companies may not have the stratospheric exit potentials of a SaaS developer, but they are the companies that fuel the local economies.
One concern I have (as I do with all angel funds) is the process for selecting investments. I don’t know anything about the specifics of the RAIN model, but having looked at fund structures over the past few years, there is the inevitable potential for political stalemate trying to make selections; i.e., if a majority or super-majority vote is required for a GO decision, it can stall pretty easily. I’d be interested in hearing from entrepreneurs or investors with direct experience.
On a related note, I’ve heard rumblings that one of the angel groups I really respect from the Northeast is putting together a sidecar fund. I’m convinced that groups driven by individual decision-making but supported by a sidecar fund that diversifies risk and increases upside potential for the members are going to become the norm. Among other things, the fund structure helps with long-term sustainability. More on that later.
Wednesday, March 3, 2010
The Invisible Entrepreneurs
Joanne Lenweaver, our director of the Women Inspiring the Spirit of Entrepreneurship (WISE) Center, gave me a great article by Nan Langowitz, Associate Professor of Management and the Director and Cofounder, Center for Women's Leadership at Babson College. The article is Myths and Realities of Women Entrepreneurs, and here are the opening two paragraphs:
Quick, think of an entrepreneur! Did you think of Michael Dell or Sam Walton or Ben and Jerry? But what about Anita Roddick (The Body Shop) or Sandy Lerner (Cisco) or Kay Koplovitz (USA Networks)? In three separate studies of women entrepreneurs I’ve conducted over the past few years, we’ve learned a good deal more than what the business press imparts. In a research study completed last year, we studied the coverage of women entrepreneurs in the business press. The most immediate finding was that coverage is extremely low. Indeed, other scholars have coined the phrase "the invisible entrepreneurs" to describe media coverage of women business founders and their companies.
The number of women entrepreneurs is increasing at an extraordinary rate, growing at four times the national pace of business formation between 1997 and 2002. Women owned firms now account for nearly 40 percent of U.S. businesses. But just what do we know about women entrepreneurs, and where do we learn it from? For most business people, what they know about women entrepreneurs tends to be what they learned in business school or what they read in the business press
Right after talking about the article with Joanne, I went through my office to find all of the popular business press publications I could find…and guess what, out of 22 publications, only four had a woman on the cover. As I read through Professor Langowitz’s article, I thought about all the fantastic women entrepreneurs that I know…they are in a variety of fields from time share to air conditioning and heating from the head of an ad agency to the head of a modeling agency and everything in between. I know women who run restaurateurs, manufacturing businesses, technology companies, a company that deals with helping you scrapbook your trip and an awesome woman who runs a company helping plastic surgeons do a better job of marketing their services. If I could find these entrepreneurs, I wonder why the popular press can’t.
Quick, think of an entrepreneur! Did you think of Michael Dell or Sam Walton or Ben and Jerry? But what about Anita Roddick (The Body Shop) or Sandy Lerner (Cisco) or Kay Koplovitz (USA Networks)? In three separate studies of women entrepreneurs I’ve conducted over the past few years, we’ve learned a good deal more than what the business press imparts. In a research study completed last year, we studied the coverage of women entrepreneurs in the business press. The most immediate finding was that coverage is extremely low. Indeed, other scholars have coined the phrase "the invisible entrepreneurs" to describe media coverage of women business founders and their companies.
The number of women entrepreneurs is increasing at an extraordinary rate, growing at four times the national pace of business formation between 1997 and 2002. Women owned firms now account for nearly 40 percent of U.S. businesses. But just what do we know about women entrepreneurs, and where do we learn it from? For most business people, what they know about women entrepreneurs tends to be what they learned in business school or what they read in the business press
Right after talking about the article with Joanne, I went through my office to find all of the popular business press publications I could find…and guess what, out of 22 publications, only four had a woman on the cover. As I read through Professor Langowitz’s article, I thought about all the fantastic women entrepreneurs that I know…they are in a variety of fields from time share to air conditioning and heating from the head of an ad agency to the head of a modeling agency and everything in between. I know women who run restaurateurs, manufacturing businesses, technology companies, a company that deals with helping you scrapbook your trip and an awesome woman who runs a company helping plastic surgeons do a better job of marketing their services. If I could find these entrepreneurs, I wonder why the popular press can’t.
Monday, March 1, 2010
Cool College Startups from Inc. Magazine
Nothing I like better than promoting college entrepreneurs, so take a look at Inc. Magazine’s College StartUps 2010 in the article, Fast Learners Cool College Startups 2010. I’m particularly pleased that the lead student profiled in the story is Syracuse University’s own, Ryan Dickerson. Ryan is a resident tenant at the Couri Hatchery which is a part of the Falcone Center for Entrepreneurship here at the Whitman School of Management at Syracuse University. Ryan’s product is called the Rylaxer which is a “bed transforming pillow made of foam with a lumbar support.”
Ryan Dickerson, Rylaxing
Like most college students, Dickerson, a junior at Syracuse University, found himself wedged into a small dorm room that fit little more than a bed and a desk. The son of an interior designer, he set out to optimize that space. The idea? Turn the bed into a couch during nonsleeping hours. And, in 2009, the Rylaxer was born. The ergonomic, "bed transforming pillow" is made of foam, with lumbar support, and it comes in two sizes and a variety of colors, plus a cheetah print. Rylaxing has an online store, but for now the company is Syracuse-centric: The pillows are made in town and sold primarily on campus. A year from now, though, Dickerson hopes to be selling them at colleges nationwide, through an army of brand ambassadors.
Congratulations Ryan!
Ryan Dickerson, Rylaxing
Like most college students, Dickerson, a junior at Syracuse University, found himself wedged into a small dorm room that fit little more than a bed and a desk. The son of an interior designer, he set out to optimize that space. The idea? Turn the bed into a couch during nonsleeping hours. And, in 2009, the Rylaxer was born. The ergonomic, "bed transforming pillow" is made of foam, with lumbar support, and it comes in two sizes and a variety of colors, plus a cheetah print. Rylaxing has an online store, but for now the company is Syracuse-centric: The pillows are made in town and sold primarily on campus. A year from now, though, Dickerson hopes to be selling them at colleges nationwide, through an army of brand ambassadors.
Congratulations Ryan!
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