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February 27, 2009
Today's news
How to Create a Great Start-Up and How to Fail like One
Posted by Max Chafkin at 11:31 AM
What's in Obama's budget... The big news: President Barack Obama unveiled his budget yesterday. It's large--134 pages, $3.6 trillion, and a $1.75 trillion deficit--and it proposes dramatic changes, according to the Wall Street Journal. The budget includes the beginnings of universal health care, lots of money for clean-energy, and tax breaks for workers and the middle class. There are also some tax increases: couples making over $250,000 will see their taxes go up to 39.6 percent, the estate tax will not be repealed, and taxes on the earnings of venture capitalists and hedge fun managers will be treated as income.
...and what it means for small companies. The new budget probably won't be as scary for most companies as you might think. Obama’s tax hikes should not hit growing small businesses, says the AP. The president is not proposing increased business taxes, and he plans to eliminate capital gains taxes for small businesses. Who will be affected? Companies that report profits as personal income--like sole proprietorships--and that make more than $200,000 a year.
Paul Graham's 13 keys to a start-up. It's hard to imagine a more concise and enlightening breakdown of what it takes to run a great start-up than Paul Graham's latest essay. Here's one memorable tidbit, entitled "Get Ramen Profitable": "Ramen profitable means a start-up makes just enough to pay the founders' living expenses. It's not rapid prototyping for business models (though it can be), but more a way of hacking the investment process. Once you cross over into ramen profitable, it completely changes your relationship with investors." Here's another fun way to experience Graham's essay.
How to fail well. Jason Calacanis just posted his latest essay, which offers advice to companies facing failure. It details how to cut salaries, how to play hardball with your landlord, how to talk to your investors, and, if necessary, how to shut the company down gracefully. Despite the subject matter it's a surprisingly positive essay--and it should be inspirational for anyone facing long odds: "Remember that there is no shame in failure but there are honorable and dishonorable failures. If you’re going to lose the game, remember that it’s just that: a game. There will be another and another and another yet to play. Don’t lose your cool and don’t get depressed. Just get yourself back up, dust yourself off and get back in the game. The precursor to success is almost always failure."
In-flight wi-fi. That’s right, technology has reached further into the recesses of the airplane hull. For 60 days, passengers on Alaska Airlines between Seattle and San Jose will be able to check their email, log onto Facebook, and tweet about the food, or lack thereof. It’s a trial run for Row 44, a California company that uses Ku band satellites to provide the service, says Om Malick. If all goes well, Alaska will roll out the service to its entire fleet. Row 44 also a deal with Southwest Airlines, while its competitor, Gogo, which uses an air-to-ground system to provide the connection, has already launched on some American Airlines flights (for $12.95) and is coming soon to Air Canada and United. Is this an invasion of the last Internet-free frontier or will road warriors find their in-flight productivity increased?
Track your employees. According to Human Resource Executive , Google’s mobile GPS tool--called Google Latitude--is a low-cost way for employers to track their workers, especially those that don’t work in offices. Although delivery services have been using people-tracking GPS software for a while, other companies that couldn't afford the investment before might now consider playing big brother.
Business lessons from the Oval Office. Whatever your political leanings, it's hard not to appreciate Obama's skills as a politician and a manager. Forbes has a list of five leadership lessons from Obama's first month in office. His branding, long-term planning, and ability to manage the nation’s expectations have been especially noteworthy. But the article says he’s too worried about consensus-building and that he’s already damaged his reputation for due diligence in vetting his team. Meanwhile, Fast Company gives Team Obama the top spot in its annual list of the most innovative companies.
Twitter on Nightline. Still confused about Twitter? Nightline has a silly, if slightly condescending and somewhat dated, report on why Twitter matters. The highlight is an interview with Twitter's founders, Biz Stone and Evan Williams in their San Francisco offices. If you don't know what Twitter is, you could also check out Inc.'s story from last year.
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February 26, 2009
Today's news
A New SBA rule, Online Ads Lag, and Kevin Kelly's Start-up Life
Posted by Ryan McCarthy at 11:00 AM
Don’t quit your day job. At least not until your start-up pans out. That’s what the Wall Street Journal suggests. The WSJ profiles several entrepreneurs who juggled full-time and start-up work. For one thing, it helps to have a partner who isn’t a nine-to-fiver. Oh, and about your free time: "You check your personal life at the door," says Brian Spaly, who for a while worked full time at a private-equity firm while building Bonobos Inc., a designer and online retailer of men's slacks.
New SBA rule court hurt sellers, valuations. A new SBA rule could make it an even worse time to sell your business. Starting March 1, the SBA will limit "goodwill" financing to 50 perfect of the loan amount, the Washington Post reports.(The article suggests that, previously, the SBA would finance up to 80 percent of the goodwill portion of the loans it guarantees.) Goodwill, which is typically defined as intangible assets like customer loyalty and intellectual property, is always hard to value. But it's a key component of a small company's worth. For buyers and sellers of small companies, the new rule is sure to increase the importance of having hard assets. Business brokers, not surprisingly, are up in arms.
A report from the entrepreneurial front. Former Business Week reporter and current CEO of Emerald Packaging Kevin Kelly talks about the challenges his business is facing: "Just two years ago, our average customer paid us in 21 days. Today, that has stretched out to 30 days. One customer basically hasn't paid us in five months. And though we've been cozy with our bank for years, they recently tried to renegotiate our credit line. No wonder I'm drinking a glass of wine with dinner, a practice I cut out several years ago in a bid to trim my midsection." There’s video, as well.
Obama and entrepreneurs, continued. After his big address to the nation, what can we conclude about the president’s agenda and small business? Independent Street breaks it down. Healthcare reform, government investment in renewable energy, and efforts to get credit moving could all benefit small business. But Republicans are worried about the impact of higher taxes on entrepreneurship and job creation. For more of Inc.’s coverage on the stimulus and small business, see here and here.
Brace for the online fallout. Online advertising is expected to fall by five percent for the first quarter of 2009, according to the Wall Street Journal. That may not sound like much, but it could be bad news for a gaggle of Internet start-ups that are already struggling to get to profitability. It's been taken as an article of faith by many that online advertising would somehow buck the recession. In fact, as Sarah Lacy points out, analysts had previously predicting growth of 10 percent this year. This means that business plans that looked good six months ago may look a lot shakier today.
A new spin on the 10-minute break. Make them exercise! That's the advice of a UCLA physician, who says that companies should organize short, paid exercise breaks to help encourage workers to get in shape. Of course, getting workers healthier is a great way to keep health insurance premiums low, but it may also increase productivity, according to the NPR segment that describes the idea. At L.L. Bean's factory, workers take three 5 minute exercise breaks a day, which the company says gives the company the equivalent of 30 extra minutes of work from each employee.
Here's $300, kindly stop doing business with us. If you’re using an American Express card to cover any cash flow snags during the recession, you might want to take note. In a bid to rid itself of, well, customers, the company is offering a prepaid $300 credit card if you cancel your account, all under the guise as a helpful service to simplify your finances, reports the HuffPo.
Peanut recall hurts small companies. The Peanut Corporation of America’s salmonella outbreak sickened 660 people, the Times reports today, and the same outbreak is also ailing a swath of small businesses. One displeased businessman is Jay Littman, a Las Vegas chef who has a line of baked goods: “I take great pride in my work,’ Mr. Littman said. ‘My name and my picture are on my products.’ Now, at trade shows where he would like to do “goodwill,” he said he finds himself talking about the recall.”
An extra hot latte. Perhaps, you've heard your local greasy spoon boast about offering a "bottomless cup of coffee"? Well, brace yourself for a topless cup of joe. That's what's offered by the Grand View Topless Coffee Shop in Vassalboro, Maine. (The name pretty much says it all). According to the Boston Globe , topless employees will serve up the morning brew at this 18-and-over shop, that’s opening up despite community resistance.
February 25, 2009
Today's news
The Perils of Cloud Computing; Take Your Gun to Work Day
Posted by Nitasha Tiku at 10:45 AM
Judge OKs bringing weapons to work. In Oklahoma, everyday is bring-your-gun-to-work-day now, as long as you leave it locked in your car. A judge has overturned a law that allowed employers to prohibit their workers from keeping concealed weapons in their cars while at work. According to a Fox News, article, people on both sides of the issue say it raises the question: How well do you really know your co-workers?
Entrepreneurs the new Joe Six Pack? The The New York Times has a handy graphic comparing the number of times the word economy or economic was used in a presidential address. Obama’s address to Congress clocks in at 30, compared to 23 times from Clinton in 1993. But we also counted 3 uses last night of both entrepreneur and small business . Mostly in the context of opening up credit and getting stimulus dollars to the sectors that keep the economy running. But he also gave nod to the government’s role in fostering entrepreneurship, trying to put his administration’s interventionist policy in the historical context of building the railroads during the Civil War, building public high schools during the Industrial Revolution, and GI Bill in the wake of the depression. What policy changes would you like to see happen to catalyze entrepreneurship?
A cautionary tale about cloud computing. Bizbox generally advocates cloud computing for small businesses, but this morning they’re reporting on a recent four-hour Gmail crash that wiped out half Western European users’ day. Even so, they think the benefits outweigh the downsides—it’s not like you can avoid crashes by staying with internal systems. Inc. took a look at cloud computing in our January issue.
Sales had Glengarry Glen Ross, Advertising has Mad Men . . . Now R&D is getting it’s own prime time treatment with ABC’s upcoming Better Off Ted. At the center of the slapstick satire is single dad Ted Crisp who heads up the R&D department for the morally bankrupt Veridian Dynamics. Will we see Ted get sick of the compromises of corporate life and launch his own R&D start-up? Doubtful. But we like Hollywood’s fixation on work life outside the lawyer, doctor, fake psychic cop procedural. Which sector is going to find it’s way to small screen next? We predict a scrappy Silicon Alley tech start-up that’s stumbled onto the secret to social networking.
The learning company. Venture Hacks posts a talk given at UC Berkley on how to build a lean startup. Eric Reis, the founder of IMVU, a $10 million online chat company, urged students to build startups that are flexible enough to adapt to their customers' needs. "Many founders believe that early stage startups are endeavors of execution. The customer is known, the product is known, and all we have to do is act," writes Venture Hacks's Babak Nivi. "Eric takes a different approach. He believes that many early stage startups are labors of learning. The customer is unknown, the product is unknown, and startups must be built to learn." Reis posts his own thoughts here.
Make your business trips more productive. Use online meetings to screen potential clients before you ever get on a plane. That’s what Fortune Small Business recommends. They profile Cornerstone Information Systems, a software firm that, after instituting online meetings, has slashed its travel budget in half and seen revenues grow 30 percent for three years straight.
This year’s model. TechCrunch saw some familiar names in the World Economic Forum’s recently released annual list of Young Global Leaders: “200 to 300 outstanding young leaders from around the world for their professional accomplishments, commitment to society, and potential to contribute to shaping the future of the world.” Inc. magazine cover boy Kevin RoseBebo founder Michael Birch, and Premal Shah of Kiva all made the list. Active YGLs from previous include Jack Ma Yun from AliBaba, Philipp Justus from PayPal, and Salesforce.com’s Marc Benioff.
Inexpensive advice from MBAs. Believe it or not there are top-flight MBA students out there who will give you consulting advice for a relative pittance. The WSJ tells the story of the owners of Julian Krinsky Camps & Programs in King of Prussia, Pennsylvania, who used free student consultants from Wharton. Which isn't to say every program is free: "Fees for programs offered directly by schools vary widely, from about $300 to $10,000 for 500 to 800 hours of consulting, for the most part, though charges can go as high as about $20,000," writes the the WSJ.
No fear for the repo man. As the recession deepens, business is good for the Repo Man. The Boston Business Journal reports that “the business-to-business collections industry has never been stronger.” The figures: for the year ended Sept. 30, accounts placed for collection reached $13.5 billion, surpassing the previous record for collection volume in 2002. “We aren’t bluffing like a lot of collectors,” said Dan Potts, vice president of receivables management at Westbury, New York-based Nassau Asset Management. “That creates a very important piece of leverage.” More writing on the wall: 30 brand-new Infinitis were seized from a Chicago dealership.
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February 24, 2009
Strategic Planning, Furloughs, and Raising Money
Posted by Max Chafkin at 11:30 AM
Do you have a strategic plan? VC Fred Wilson writes about how he's been urging the startups he advises to think big: "We've been asking many of our companies to do a deep strategic planning process. The most developed of them already do this as a matter of practice. But many of the younger companies have been largely focused on product and engineering issues and have not stepped back and thought deeply about the big picture." The idea, he says, is to make sure that you're spending your money wisely, and, if necessary, to make a strong case to investors for more funding.
Your obligatory does of bad news. Let's get it over with early: Consumer confidence is abyssmal. SBA defaults are skyrocketing—up 52 percent for franchise businesses since last year. Pizza parlors are getting killed. And companies that got billions of your tax dollars last year, need billions more.
Wait, the U.S. is the world's biggest manufacturer? Okay, now that that's done, here's some good news: The U.S. is still the world's leading manufacturer by value of goods produced. American manufacturing hit a record $1.6 trillion in 2007. "The United States makes things that other countries cannot," reports the AP. "Today, 'Made in U.S.A.' is more likely to be stamped on heavy equipment or the circuits that go inside other products than the televisions, toys, clothes and other items found on store shelves. U.S. companies have shifted toward high-end manufacturing as the production of low-value goods has moved overseas." (Via The Big Picture).
More companies try furloughs. The Wall Street Journal says that furloughs, which were once used mostly by industries like construction, are becoming increasingly popular as a way to avoid laying off white-collar workers. The article says that companies considering a furlough should go easier on lower-paid workers, who may need the money more than executives, and that they should help furloughed workers sign up for unemployment benefits.
To catch a (data) thief. Digital Daily looks at a new study released by the Ponemon Institute that shows that 59 percent of workers who lost or left a job last year admitted to stealing confidential company data. The most common items pilfered were customer contact lists that could be leveraged at a new job. And most did so by nabbing paper documents and hard files. So, how do you spot a potential theft in your midst? Look for those with a dim view of your company. Larry Ponemon, chairman of the Ponemon Institute told eWeek, “Clearly the responses show that obtaining future employment was a significant motivating factor, but when we see a high percentage of individuals who took information knowing full well they were acting in violation of company policy, that hints strongly at the presence of malice.”
Sign of the times. How do you know that corporate America is in bad shape? When a site called The Big Money launches a small business column. It's by a former journalist who now runs a web company and who has discovered that entrepreneurship is harder than he had imagined. For instance, government regulations are a pain, nobody can afford sushi, and there's precious little speculation about Twitter. See, it's even worse than you thought.
Falling Angels in California. With the venture capital industry in the doldrums, many startups will be forced to look to angel investors to get them through the downturn. Unfortunately, it looks like professional angel groups are also scaling back. The Tech Coast Angels say they invested11% less money in 2008 than the year before, the LA Times reports. And it’s not for a lack of start-ups. A recent pitch competition attracted twice the normal number of entries. Still, despite the reduced activity, the Angels aren’t quitting, according to Tech Coast Angels president: "People recognize that the best time to invest is when there is a bit of panic in the market. We're very much open for business," said Al Schneider. For a comprehensive directory of angel investors, check out Inc.'s guide.
Cellulosic Ethanol Forges On. With oil prices depressed, the renewable energy industry has been hurting. But a small cellulosic ethanol company, ZeaChem, is still moving forward. GigaOm reports that the company will start work on a 1.5 million gallon per year plant in Boardman, Oregon this year. ZeaChem also raised $34 million in January from larger energy companies and other investors.
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February 23, 2009
Today's news
A VC Bailout, Microloans, and Great Presentations
Posted by Ryan McCarthy at 9:35 AM
Should venture capitalists get part of the stimulus package? That's the question posed by the argument made by Thomas Friedman in The New York Times. One prominent venture capitalist, Fred Wilson, thinks thinks there's way too much money in the VC world to begin with. "And the top 20 firms in the venture capital business are the least in need of a bailout of any group I've ever thought about," writes Wilson on his blog. "These firms, the Sequoias and Benchmarks and Accels and Kleiner Perkins etc etc can raise a fund anytime they want. Accel raised a ton of money last fall in the midst of the worst global financial meltdown in my lifetime."
How to give a great presentation. Chris Brogan has a nice breakdown of the elements that go into a stellar presentation. Some good advice: "I absolutely loathe the “I’m going to tell you this; I am telling you this; I told you this” method of presentations. We don’t watch movies that way. Only some books have a table of contents up front (fiction doesn’t do that often). It’s just not fun seeing the “Title, Agenda, About Me” method. We’re too used to it."
And, if you needed another reason to read our magazine, you might want to check out Chris' video review of the latest issue of Inc.
How Twitter got started. The LA Times catches up with Twitter co-founder Jack Dorsey and examines a early diagram that would form the basis micro-blogging service. Twitter, reports the LA Times, "has its conceptual roots in the world of vehicle dispatch -- where cars and bikes zooming around town must constantly squawk to each other about where they are and what they're up to."
Consumers –and businesses – thriving paycheck to paycheck. According to the WSJ, some businesses – especially those that sell household goods and food – are paying more attention to consumers’ paycheck cycles. Because of the downturns, thousands of consumers tend to spend more immediately after payday and much less immediately before. Which is why some businesses are tweaking inventory and promotions to match these new spending habits. One New York food and beverage maker interviewed for the story sells pricier multi-pack snacks at the beginning of the month, while pushing sales of cheaper smaller packs by the month’s end.
Microloans to come from the government. One of the stimulus bill’s components is $255 million for the SBA’s emergency microloan program. Owners who already have bank loans will be able to apply for microloans up to $35,000 from banks. The SBA will completely guarantee the loans and will also full subsidize whatever interest is charged. The goal is not funding growth, but to encourage entrepreneurs to pay down existing loans. More here.
10 questions to ask yourself before you start a business. The economy is driving a lot of people to consider entrepreneurship. But before you file the forms to incorporate, ask yourself these questions from the Wall Street Journal. Can you accept financial risk? Are you passionate about your concept?
February 20, 2009
Today's news
Your Stimulus, Oscar Gold, and Measuring Buzz
Posted by Ryan McCarthy at 10:01 AM
What's in the stimulus bill for you? Slow down -- the bill clocks in at 1,000 pages. The New York Times posed this question to a few small business owners and they came up with some interesting answers. Some pointed to the tax credit for hiring disadvantaged workers, (including a demographic oddly referred to as "disconnected youths"), or a provision that would boost SBA lending. Still, it's not all rosy. The Times spoke to Leonard Steinberg, a tax specialist in West Windsor, New Jersey, whose clients are "mom and pop retailers, limited liability companies and S corporations — corporations that elect to have their income pass through to the shareholders." Those type of companies, according to Steinberg, won't see any direct benefit from the stimulus. Ouch.
A visual guide to the credit crisis. Still confused about what took down the economy? This video good place to start (Via The Big Picture).
And the Oscar came from…The WSJ has a piece on the 71-year-old family-owned manufacturer, R.S. Owens & Co. which makes the coveted shiny gold statues doled out on Oscar night. Each little man weighs 8.5 lbs. and measure 13.5 inches tall, according to the article. The owner of the Chicago-based R.S Owens won’t disclose how much they get for each statue and denies any insider-knowledge of Oscar winners. The company does get two tickets to the event each year, a prize awarded to outstanding employees. (For a deeper look into the world of R.S. Owens, take a look at our story from 2003)
Entrepreneurship may be declining. Case Western Reserve University professor Scott Shane has some disturbing research that indicates that at least one sector of entrepreneurship is waning. As summarized at a Independent Street , Shane argues, that while there’s a general perception that entrepreneurship has risen in recent years, data from the Bureau of Labor Statistics says otherwise. The U.S. self-employment rate has fallen from by .6 percent in the last decade. Keep in mind that this is just one way of measuring entrepreneurship, and that BLS figures on employment are often not the whole story.
Measuring buzz. YouNoodle, the website that purports to use a computer algorithm to put a dollar value on any start-up, has launched a new service. YouNoodle now ranks 27,000 "high potential" startups by how much buzz their getting. To determine the ranking YouNoodle looks at media stories, blog postings, and social networking activity. Right now Craigslist and Facebook claim the highest rankings. See how your start-up rates here, and check out our story on YouNoodle in Inc.'s December issue.
How NOT to attack a competitor. Look no further than the silly and misguided letter that Intuit sent to it's competitor Mint. (We wrote about Mint and its founder Aaron Patzer in our young entrepreneur feature back in October). Intuit doubted Mint's growth claims and that it had so quickly accumulated over 930,000 users. So they decided to write a letter demanding to know how Mint defined the term "user." TechCrunch got a hold of Intuit's decidedly passive aggressive challenge, as well as Mint's response. TechCrunch's summary is right on point: "The bottom line here is that Mint is growing so quickly (it will soon pass one million users—no doubt spurred by the bad economy and tax season), that its competitors literally can’t believe it."
How to revitalize the Rust Belt. Saving the Big Three won’t revitalize the Midwest -- that’s a job for thousands of small businesses. That’s the argument is making the rounds among many economists and big thinkers, and BizBox has a pile of links backing it up. For one, Youngstown, Ohio has launched a nonprofit incubator to support entrepreneurship, drawing on Pittsburgh’s example. (No word on whether or not Bruce Springsteen has plans to rewrite his elegy to Youngstown's faded industrial glory.)
Deals haven't died. We've all heard about the death of venture capital, the lost IPO market, and shrinking credit. But companies, even those in smaller cities, are actually being sold. Some highlights: The Austin American-Statesman reported today on the sale of Mirage Networks, a network security software company. (Mirage had raised $40 million in VC funding). In Nashua, Maryland, Integrated Labeling Systems, which makes RFID technology, was also sold, the Nashua Telegraph reports. And in Portland, Oregon, Gleukos, an all-natural sports drink maker, was sold for an undisclosed amount, according to the Portland Business Journal.
February 19, 2009
Technology
In Defense of Yelp
Posted by Max Chafkin at 6:14 PM
The web is abuzz right now about the East Bay Express's vicious takedown of Yelp, the somewhat controversial website that lets regular people post reviews about restaurants, dentists, and pretty much any other kind of business.
The charge: Yelp, which makes money by selling ads to businesses it covers, is punishing companies that do not buy ads by artificially elevating bad reviews. The article trumpets this as "Extortion 2.0" and explains it thusly:
During interviews with dozens of business owners over a span of several months, six people told this newspaper that Yelp sales representatives promised to move or remove negative reviews if their business would advertise. In another six instances, positive reviews disappeared — or negative ones appeared — after owners declined to advertise.
This sounds pretty bad—and lots of bloggers are hopping mad. After all, Yelp is supposed to be about giving power back to consumers and rewarding companies that provide quality products and services. Yelp's ads are supposed to work pretty transparently. For a few hundred bucks, you get to pick a review that will be listed at the top of your Yelp page as your business's "favorite review" and you get listed at the top of the search page as a "sponsored result". This seems fine, but if Yelp is actively manipulating other reviews and using this as leverage to sell ads, that would be ethically questionable—or as the article would have it, "coercive, unethical, and, possibly, illegal."
Like I said, bad. But, take a look at the article's sourcing and the charges seem a lot less convincing. The Express talked to one former Yelp contractor who is quoted anonymously. Worse, the guy seems to own a restaurant now. (Is that a conflict of interest? Uh, yes.) Moreover, the Express found one—count em!—case in which a company that did not advertise was subsequently given a bad review by a Yelp employee. Almost all the evidence comes as testimony from 12 angry business owners—some of them also quoted anonymously—who say they observed changes to their Yelp listings after receiving calls from Yelp sales reps.
I'm sorry but that ain't enough. Yelp listings, like Google search results, change regularly. Sometimes negative reviews move up, sometimes they move down. A simple correlation does not mean that anything nefarious is going on. It just means that businesses that get bad reviews generally get angry about those bad reviews. It also doesn't seem totally crazy that one of Yelp's 200 employees might happen to dislike an establishment that also got a sales call.
So I'm not convinced there's anything untoward happening. I've always found Yelp's reviews pretty accurate. But let's see if more people start coming out of the woodwork with real examples of abuse. Until that happens all this story proves is something we've always known: restaurants like reviews, as long as they're good.
Today's news
How to Pick a Name, and the Inc. Way to Pick a College
Posted by Max Chafkin at 11:27 AM
Beware the Canadian pirates. Okay, so you knew that Russia and China are not exactly paradise for patent holders. But Canada as a hotbed of IP theft? That's the contention of the International Intellectual Property Alliance, a consortium of copyright industry trade groups based in the U.S., which released its annual watch list this week of 38 countries that need to crack down on IP infringement. The group singled out China, Russia, and our heretofore innocuous neighbor to the north, Canada. Ars Technica says Taiwan is dropped from the list for the first time in a decade. To justify its list, IIPA includes industry-specific breakdowns for dollar losses to U.S. companies by country. IIPA claims member groups lost $18.4 billion from lax IP enforcement and ineffective law in 2008, $16.4 billion of that was business software makers.
More naming troubles. In December we chronicled James Siminoff's struggle to rename his start-up and acquire a corresponding URL. Turns out, naming and branding is a fairly common problem for new companies. Common enough that Siminoff is dealing with it again as he tries to launch a new company. On his blog, Siminoff talks about his attempts to buy the name Grid.com. It's a funny tale, which includes a demand for $800,000, a court battle, and tons of other good stuff.
Why are recessions so miserable? Because even people who keep their jobs are depressed. Nearly half of all Americans fear they’ll lose their job, a new AP poll finds. That’s up from 28 percent the same time last year. One upside for employers fortunate enough to be hiring: lots and lots of applicants, even for less than desirable jobs.
As if you didn’t have enough to worry about. The Wall Street Journal's small business blog warns of a rising threat to small businesses: employee fraud. How can you protect yourself? The WSJ has some suggestions, like installing a video camera and making sure your employees take vacations.
Loan Guarantees could come quickly for Tesla. The new Energy Secretary, Steven Chu, says that loan guarantees for green technology companies could start as early as April, according to Reuters. That's good news for cleantech startups, and, according to Greensheet, great news for Tesla Motors, the electric car startup that needs a loan guarantee to get its next model into production. Last week, Tesla CEO Elon Musk announced that the company will unveil the new car next month, with production scheduled to begin in 2011. (For more, check out Inc.'s coverage of Musk and Tesla.)
Which College is Best?. Right now, it's Yale--with the University of Missouri in second place. Inc.'s March issue profiles the coolest college startups, and now we're asking readers to pick their favorites. So far, the favorite is a Yale-based company called GXStudios which creates college-themed war games (basically customized versions of Risk) that attract thousands players who compete on teams. Check out all the companies, and then tell us which you like best.
Fallout from state budget cuts. States like California and New Jersey are trying to curb budget deficits, but cutting state payrolls could hit private businesses too. That’s according to a study by the University of Connecticut, which found that $1 billion in cuts to state payrolls would cost Connecticut's economy 7,000 private-sector jobs this year on top of any direct layoffs.
Baseball tries to adapt to bust. Fortune has a piece on how to keep baseball fans loyal despite the downturn. America’s favorite pastime—after bank nationalization, of course—has been hard-hit by the recession as corporate sponsorships disappear and demand drops for premium seats. Teams like the Arizona Diamondbacks are making accommodations to keep their games affordable. They’re prioritizing customer service—by offering $1.50 hot dogs and allowing shared season tickets—to ensure that the recession doesn’t scare penny-pinched fans away from the stadium.
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February 18, 2009
Today's news
Reliving the Meltdown and 25 Tips on Tax Deductions
Posted by Nitasha Tiku at 11:29 AM
Inside the meltdown. Frontline ran a compelling piece on the first few months of the economic crisis last night—from Bear Sterns CEO Allen Schwartz botched CNBC interview that sped up its demise to Dick Fuld’s hubris in refusing to find a buyer for Lehman to free market patriot Paulson announcing a capital injection into America’s largest banks that would make him the most interventionist Secretary of the Treasury in U.S. history. It’s strange to watch the always spot-on Frontline treatment applied to something that feels like it happened yesterday. But laid-out in an hour-long format with journalists who covered the power brokers behind the crisis and investment bank insiders, its chillingly clear how Bernacke and Paulson had no idea what was coming or how quickly the boom years of subprime mortgages and credit default swaps could topple Wall Street.
Getting entrepreneurs started early. Like really early. According to a panel at Davos, teaching grade-school kids basic entrepreneurship is key to the global economy’s recovery. It’s a provocative claim, as no one knows if it’s even possible to teach entrepreneurship, and even advocates admit the business literacy parts are easier to explain to kids than creativity and innovation. But, as Kelly Spors at Independent Street suggests, maybe introducing the possibility early on, while their minds are still malleable, will encourage more people to pursue entrepreneurship: “We need to frame their minds early on—perhaps similar to why it’s best to take piano lessons or learn a foreign language long before adulthood.”
It’s that time of year again… Yes, April 15th is already casting its shadow over the new year. We’re keeping our eyes peeled for helpful tax tips for small business owners. Business Week has 25 deductions you may not have heard of, while the IRS’s page for small businesses is here. For more from Inc., see our law and taxation resource center .
Pepsi design brief leaked; we learn more than we ever wanted to about the making of a logo. What was Pepsi thinking with its ubiquitous new ad campaign? If you really want to know, check out this Fast Company post. The soft drink giant’s 27-page PDF somehow leaked to the public. And it’s an exercise in self-aggrandizement. The presentation compares the Pepsi logo to the golden ratio, the Mona Lisa, the earth and its magnetic fields, and the Parthenon. As FC’s Aaron Perry-Zucker astutely observes, “It also illustrates the extreme disconnect between the marketing world and the real world.”
Sign of the times: grocery bills. Privately-held premium grocery chain Wegman’s is growing despite the recession. The Baltimore Sun reports that the company is planning to open a new store in Harford County, Maryland that will employ 600 people. "They don't take expansion lightly," said grocery analyst David Livingston. "They do it methodically.” Meanwhile, the Sun’s business section has added a very useful weekly feature—and a sign of the times—a comparison of prices at three local grocery stores.
Is the Go Daddy's gross-out ad strategy tapped out? Teressa Iezzi, a Go Daddy customer, takes the company’s sexist marketing tactics to task on AdAge.com. Unmoved at first about the manufactured controversy behind its 2005 Superbowl ad, Iezzi now finds herself fed up. “Apathy was beaten down by the feeling of revulsion at being treated with such contempt by a marketer. Yes, the company's brand persona makes me feel unwelcome as a woman. But Go Daddy's advertising has gotten to the point where I'm not even sure it's about the sexism anymore. What I can no longer countenance is the sheer stupidity, the breathtaking inanity (to quote my favorite U.S. district judge) of the marketing communications coming from what is meant to be a major player in this sector of the internet economy. The ads offend me as a human being. In short, I just don't want to be associated with this company on any level.” Here's the company's latest Superbowl offering:
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February 17, 2009
Oracle’s Shopping Spree; Cities that Foster Innovation
Posted by Nitasha Tiku at 11:25 AM
Is Selling to Larry Ellison the New IPO? The Wall Street Journal has a front page story on a rare "shopping spree," in which Larry Ellison's Oracle is aggressively buying small software companies. The Journal says that with fewer big software companies, Oracle has focused on small companies, which have been desperate to sell as investment capital has dried up. One CEO who sold out calls Oracle the "new IPO." Alley Insider isn't buying this story, pointing out that Oracle's acquisitions have actually slowed.
Anatomy of a meme. In The New York Times Magazine Rob Walker takes readers through the story of how an illustration of a whale held aloft by a flock of birds became Twitter’s iconic “Fail Whale”. We would say something about the dangers of using stock photos (Twitter co-founder Biz Stone paid a few bucks for the worldwide rights). But in this case, where the illustrator got some publicity and a few thousand from related merchandise, the Fail Whale ended up mobilizing Twitter users who built a small community (on Twitter) around the image.
New York: down but not out. Phoenix, on the other hand… Where will the next great entrepreneurs and the post-recession opportunities arise? A look at Richard Florida’s cover story for the Atlantic suggests some answers. He predicts the decline of the suburbs and argues talent and ambition will continue accumulating in specific cities. Sun Belt cities powered by growth alone and Rust Belt manufacturing towns will be the hardest hit, while key urban areas like New York, Silicon Valley, and North Carolina’s research triangle will be hotspots for output, jobs, and innovation.
Zuckerberg: 'Trust Us' Facebook founder Mark Zuckerberg responded yesterday to a growing din of online criticism over a change to his company's user terms. In brief: the company deleted a clause that allowed users to regain the legal rights to their messages, photos, and blog postings if they deleted their Facebook accounts. Consumerist warned, "Make sure you never upload anything you don't feel comfortable giving away forever, because it's Facebook's now." Zuckerberg basically says that because user terms are "overly formal and protective" you should basically just ignore them and trust Facebook. Many think he's overreaching. What do you think?
Something’s killing the video game business, and for once it isn’t the recession. Slate examines why video game publishers are reporting record losses despite sales of games increasing. Talking heads blamed the economic crisis. But Slate finds otherwise: “They're spending more than they're bringing in.” While there are still plenty of cheaply-made games, these days big publishers hire hundreds of professional developers per game for projects that take years to complete. Midway, the company behind This is Vegas, spent between $40 million and $50 million on development. Behemoths like Electronic Arts are relying on “the Hollywood” model, where a few blockbuster hits cover other losses. But Slate’s N. Evan Van Zelfden argues that it should borrow from the old Hollywood “studio system” instead where during the Great Depression, a movie could be made in two weeks—and people would pay to see a new one every week. His advice resonates even outside the industry: “Change the scale and scope of the world. Make the story shorter. Use lower-quality graphics. Recycle proven tools and technology.”
Women-owned companies come up short. Independent Street looks at a recent report from the Kauffman Foundation that found that businesses owned by women underperformed those owned by men. The report says, “women-owned firms recorded lower survival numbers, as well as lower numbers for size, growth, earnings and profits.” According to the study women tend to start off with less capital and lower credit scores, which can affect their ability to get loans.
Currency is so overrated. The WSJ says bartering is on the rise in small firms. Cash-strapped businesses that are finding loans increasingly hard to come by are trading goods and services instead of shelling out money. Informal bartering agreements are easier to accommodate between small firms, especially those that know each other well. For example, one sandwich company in Atlanta, GA is catering lunches to satisfy an overdue refrigeration bill.
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February 13, 2009
A Plan for American Tech and How to be an Angel Investor
Posted by Max Chafkin at 11:09 AM
Geek squad for the common good. What should President Obama's tech policy look like? The Yankee group released a paper yesterday with some suggestions, including mandating that new multi-tenant buildings have fiber installed during constructions and using femtocells (a wi-fi alternative that extends coverage indoors) in federal buildings. Meanwhile, Stacey Higginbotham at GigaOm is jazzed about one suggestion in particular: a national Community Service Geek Squad that could “help seniors and other-technology-challenged communities become more connected with society while providing experience to young people at the same time.” Wait, does that mean we can get paid for showing our parents how to text?
The real cause of the IPO drought Don't blame Sarbox for the IPO drought, says Henry Blodget of Silicon Alley Insider. Blame crappy companies. Blodget points out that the seemingly hot IPOs of 2007 have performed abysmally: “But the industry's complaints about how these regulations have killed the golden goose will have more weight when the industry is producing dozens of rapidly growing, high-quality emerging companies every year.”
Persistence Pays. Buried in peHUB’s recap of a
Consumers drastically cut back on food. According to the Commerce Department (sans Judd Gregg), food spending fell by 3.7 percent in the fourth quarter of 2008, the sharpest drop since the government began measuring. That, according to an article in today's Wall Street Journal, is a really bad omen for the economy.
Small business job losses could double. More bad news: the Los Angeles times reports that in the next year there could be another million lost jobs. The estimate comes from Joel Prakken, chairman of Macroeconomic Advisers, the St. Louis firm that creates the monthly ADP National Employment Report. "I think when we finally turn around it will be small business whose employment ramps up first," Prakken said. Still, he predicts "many more months of sharp declines."
Tax burden shifting to local businesses. Over at the New Entrepreneur blog, John Tozzi found something interesting while scanning the SBA’s small business economy report. The data’s from 2007, so it’s a tad out of date, but it suggests as larger companies become more sophisticated about choosing to pay in more favorable tax districts, the burden will shift to smaller local businesses. As Tozzi points out, look for this to become a bigger issue as money gets tight in state and local governments.
So you wanna be an Angel Investor. YCombinator, the startup investment fund, is putting on a free seminar in Mountain View on how to become an angel investor. Speakers include Paul Graham and Ron Conway. You can request an invitation here. (Via TechCrunch.)
Weekend watching. PBS’s Nightly Business Report has been airing a series on the top innovations of the last thirty years. (The past segments are available on PBS's website.) The first featured medical innovation? The Nintendo Wii. Incidentally, a Google News search of “Wii therapy” turns up 80 stories in the last month alone. A typical one from the Milton Daily Standard: “Together ‘Wii’ can."
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February 12, 2009
Today's news
Immigration, Valley Blues, and Easy Managing Tips
Posted by Ryan McCarthy at 12:00 PM
Immigration and innovation. In the New York Times, Thomas Friedman has a thought-provoking column about start-ups and immigration. Friedman argues that limiting immigration (H1-B visas in particular) will only hurt America's entrepreneurial endeavors. He cites some very under-reported statistics: "According to research by Vivek Wadhwa, a senior research associate at the Labor and Worklife Program at Harvard Law School, more than half of Silicon Valley start-ups were founded by immigrants over the last decade. These immigrant-founded tech companies employed 450,000 workers and had sales of $52 billion in 2005, said Wadhwa in an essay published this week on BusinessWeek.com." If this study is correct, limiting H1-B visas seems ridiculous. Here's the original essay by Wadhwa.
15 minutes to managerial success. One quarter of an hour each day. That's all it takes to become a better manager according to an article in the Harvard Business Review (via BusinessPundit). Here's a snippet: "Show up in their workspace. Employees expect you to stay in your seat. Don’t. Once per day, get up and walk over to the desk of someone you haven’t spoken to recently. Take two minutes to ask her what she’s working on. Once she’s done answering, respond “What do you need from me to make that project/transaction successful?” Message to employee: I know who you are, I’ve got high expectations — and I’ve got your back."
This man will shut you down. Silicon Valley is full of specialists who cater to the start-up ecosystem in Northern California--accountants, bankers, lawyers, venture capitalists, and management consultants--but today's Journal introduces us to a new character: the wind down guy. As venture-backed start-ups struggle to raise additional funds or get to profitability, business is booming at Sherwood Partners, which has been shutting down an average of three start-ups a week. The article says that even viable companies--that is, companies with products and revenue, if not profits--are being forced by their investors to shut the doors. One upside: for companies that make it, now may be a great time to snap up a competitor. The average price for a venture backed company has fallen by a staggering 87 percent from a year ago.
Surprisingly, retail sales are up. U.S. retail sales were up 1 percent in January according to according to a Commerce Department report described in this NYT story. The uptick came as a surprise to some analysts. Just yesterday, the AP reported that a 0.8 percent drop was expected by economists surveyed by Thomson Reuters. And earlier this week, the AP reported that that retail sales were expected to be down 1.6 percent, according to an analysis by the International Council of Shopping Centers and Goldman Sachs.
Bebo founders give cash to kids. Last year Michael and Xochi Birch got ridiculously rich when they sold their social networking startup to AOL. Now, the Birches are putting some of that money to good--or at least novel--use, sponsoring a contest called Maker Your Money With a Tenner. The contest gives 20,000 British kids £10 (or about 15 bucks) each, and tells them to do something useful. Prizes go to the children who make the most money or have the most impact on society. (Via Tim Ferriss's Twitter stream.).
Luxury lodging for less. According to ABC News , if you’re planning on traveling (for business or leisure) you should check out discount rates at top hotels before you check in anywhere else. The recession has crippled the luxury hotel industry, as Americans cut back on travel or downgrade to cheaper lodging. Even some Ritz-Carlton hotels have lowered their room rates to fill vacancies. The chain’s hotels in Philadelphia have dropped rates from 10 percent to 15 percent, with some rooms available for under $200.
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February 11, 2009
Today's news
The New Rules of T&E and States with Stimulus Bills
Posted by Nitasha Tiku at 10:57 AM
No such thing as a free lunch, especially these days. The New York Times discusses the changing dynamics of corporate lunches. The recession has forced many employees to reign in their expense accounts as companies cut back on discretionary spending. Thus, a rise in the awkward moments after the check lands on the table–when neither party wants to pay, but someone has to. Some strategies: leaving at an opportune moment to go to the restroom, playing “credit card lottery,” or just skipping the pricey places for some more affordable grub.
Lawsuit cost Facebook $65 million. Last year’s settlement over who created Facebook--which pitted the company’s CEO Mark Zuckerberg against the founder of ConnectU--was worth $65 million, according to a California legal newspaper. The Record discovered the sum on the website of the law firm that had previously represented ConnectU. Although $65 million is a lot of money, ConnectU had unsuccessfully argued it was insufficient, citing Facebook’s $15 billion valuation.
States planning their own small business stimulus. Independent Street, lists of several states preparing their own stimulus packages, many aimed at small business. Arizona will focus on tax incentives, while Florida and Colorado are focusing on loans. See more Inc. coverage of the stimulus and your business.
Is the Kindle sequel business-class? The Kindle controversy has begun. Fast Company was at the Morgan Library for the unveiling, and Chuck Salter posted his first impressions, plus photos and video of the surrounding media storm. Salter’s take is that the Kindle’s controller is “not as intuitive and responsive as I'd like,” and “doesn’t delight” like the iPod’s tracking wheel did. Meanwhile, Yahoo blogger David Coursey has waged an a all-out assault on the Kindle, 2, judging it unfit for business. His reasons: it won’t replace a laptop, the display is still gray and the talking voice? Kind of creepy: “Does it also see me when I’m sleeping and knows if I’m awake?”
Entrepreneurial boot camp. Business Week has some advice for veterans-turned-entrepreneurs. There are plenty of resources for vets who want to start up their own ventures. Groups such as the Northeast Veterans Business Resource Center offer counseling, access to venture capitalists, as well as assistance in scoring government contracts.
Twitter to start charging companies? In an interview with a British trade magazine, Twitter co-founder Biz Stone says after noticing that more companies are using Twitter and more individuals are following them, the company has contemplated charging for the service. Making business customers pay is an obvious strategy for the almost 3-year-old company to start generating revenue. But Stone clarified his statement for Techcrunch, “What we’re thinking about is adding value in places where we are already seeing traction, not imposing fees on existing services.” Dell reportedly made $1 million in sales via Twitter during the holidays and started giving discounts exclusively to its followers.
The grand old days of Web 1.0. In more Twitter-gazing news, Will Leitch at New York magazine takes a sharp look at the company’s Silicon Alley business model compared to other west coast dotcomers in the heyday of the first internet gold rush, including this flashback to his own days in Silicon Valley: “Mostly, I remember the meetings. We’d have about four meetings a day, in which a group of overpaid twentysomethings would ramble on for an hour about “content integration” and “vertical scalability,” just long enough to make it look like we were doing something. The nine months I worked at a dot-com back then were epic slack, all done in the name of The Future. We were changing the world. We believed. In something, anyway. The rest of the world didn’t matter.”
First the banks, now the geeks. More fans than ever turned out for this year’s New York Comic Con, but they weren’t shelling out cash like they usually do, says Reuters. "I'll be happy if I do 60 percent as much as last year," reported Albert Stoltz, whose booth sold comic books. But the downturn didn’t completely zap business. Chris Stuppi, who sells replica weaponry, wasn’t worried, because ardent fans save up so they can shop at the Con. Replica weaponry: not an impulse purchase.
Salon sends up BBC’s new show on the economy with a cartoon satire. Last month, BBC debuted, "The Oracle,” a TV show co-produced by the Huffington Post, with the goal of predicting the path of the world economy. The show is hosted by Max Keiser, a columnist for HuffPo and Intrade. “If Max had been on our screens a year ago the current global financial crisis . . . might not even have happened,” boasted BBC News head Paul Gibbs. Check out Salon’s clever animated satire, where the meltdown is compared to “a nude figure in a shocking lewd way.”
February 10, 2009
Technology
How to Win Government Contracts and Help with Layoffs
Posted by Max Chafkin at 11:38 AM
How to get your bailout. Okay, so it's not the blank check you may have been hoping for, but the government is expected to spend vast sums of money on technology, education, and infrastructure--contracts which you may want to compete for. The Wall Street Journal’s small business blog has some advice for how businesses can gear up to get a piece of the stimulus package. And there's a searchable database for federal contracts.
Yahoo to buy Tumblr? Peter Kafka at AllThingsD gets off his sick bed to squash rumors via Valleywag that Yahoo was in talks to buy “revenue free” microblogging service Tumblr for “low to mid-eight figures.” Founder David Karp called the rumors “categorically false” and quipped that Valleywag “got it backwards”. But Tumblr coder Marco Arment takes sarcasm one step further: “I hope they let me work on some of the many exciting projects at Yahoo! Who needs a high rank at a small company in New York? I want to move to California and get stuck in traffic every day on the way to my midlevel engineering job where I sit in a cubicle all day and can’t make any product decisions while working on something nobody will ever see to manage regional ad clickthrough stats tracking.”
The Obama Stimulus Package. Last night Obama made his case for quick passage of a stimulus package. The Wall Street Journal has coverage here. "Obama set benchmarks for his economic recovery plan, saying its success should be judged by whether it creates or saves four million jobs, stabilizes the housing market and gets credit markets operating again," the article notes. Meanwhile, NewTeeVee sees a shift in consumers' viewing habits when it comes to live events.
The Mark Cuban Stimulus Package. The entrepreneur, ballroom dancer, and noted basketball critic blogged yesterday (thank you, Alley Insider) with a competing plan to help the economy recover. He suggests an "open source funding environment," inviting entrepreneurs to send him their business plans and offering to invest money in the ones he thinks are promising. He's only looking for companies that can generate revenue quickly and can be profitable within 90 days.
Is your bank in trouble? One in eight banks in the U.S. could fail in the next five years, according to a frightening report from RBC Capital Markets cited by Reuters. Commercial loan delinquencies may push over 1,000 already struggling U.S. banks towards insolvency, says RBC. (For some perspective, over 1,300 banks collapsed during the S&L crisis of the late 1980s). Besides mortgage losses, industrial and commercial real estate loans are weighing heavily on banks.
When the person you fired has a friend. Workforce Management's community forum is hashing out a thorny problem: How do you retain a key employee if you've been forced to let go someone the key employee really likes. A user recommends this approach: "Have an honest conversation that acknowledges that you understand that she is angry, but that there were good reasons why you came to this decision and that you hope she understands that it would be inappropriate for you to disclose any details about why her friend was terminated because it would be unprofessional and would violate trust and that she would expect the same courtesy if she were in that situation."
Online classes worth taking. The Oregonian's personal finance blog flags a cool service, Academic Earth, which collects online courses from top colleges. You can audit a 26-lecture series from famed Yale economist Robert Shiller. There's also a class called “Five Critical Skills That Entrepreneurs Need,” by Jerry Kaplan and a lecture on entrepreneurial ingenuity from Yale’s Barry Nalebuff.
Savings plans, instead of raises. Despite the downturn, some small companies are adding 401(k)s for their workers, but bypassing company matches and delaying raises, according to the Journal. It's a low cost way to retain workers in turbulent times. And it's a way to make sure your employees are planning for the future.
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February 9, 2009
Today's news
Goodbye to Fake Steve Jobs and the Value of a Plan
Posted by Ryan McCarthy at 10:41 AM
Hang up my Pajamas, says Fake Steve Jobs. Dan Lyons, the blogger who impersonated Steve Jobs with much hilarious success for two years, breaks down the economics of his blog and advises readers to give up their dreams of pajama-clad riches. During his busiest month he made just $1,040, and he gained 20 pounds over two years. Writes Lyons, "I also came away with a sneaking suspicion that while blogs can do many wonderful things, generating huge amounts of money isn't one of them." Valleywag suggests that Lyons isn't being entirely honest. After all, he did score a book deal and a new job at Newsweek, as a result of his blog. Meanwhile, Inc. isn't convinced by either explanation. We just think Lyons may have picked the wrong industry. Check out our list of companies you can start in your pajamas.
Unsurprising news of the day. The WSJ reports on a recent study from the The Small Business Administration’s Office of Advocacy on the merits of having a formal business plan. From the sample of budding entrepreneurs they followed, those who formulated actual business plans prior to launching their companies had an easier time getting the early stages of their businesses rolling. Certainly not a revelation, but good advice nonetheless.
Bezos doing his best Jobs imitation. Amazon founder Jeff Bezos is launching the new version of his digital book reader, the Kindle, right now. The first version of the device was criticized by some reviews, but went on to sell out this holiday season and developed a loyal following. For all the details, check out the live blogs:16 shades of gray! Stephen King is in the house!
The money is out there, just not where you think. Of course, Silicon Valley, Boston, and New York City are the traditional hotbeds of venture capital activity. But, the Washington Post has some heartening news from in Virginia. McClean-based Amplifier Ventures has started a mini-incubator called The Business Accelerator Program. Amplifier will select six start-ups, which will each receive $50,000, along with some valuable advice from investors and proven entrepreneurs. Nice to see that Y Combinator's model, which we first covered here, is catching on.
Eat your vegetables. Read your reports. That’s advice from Zane Safrit, small business owner and blogger. Regular reports, in this analogy, are your company's vitamins. Safrit’s also got a list of the reports that have helped him along the way. For more on how numbers are your friend, see Norm Brodsky’s latest Street Smarts column.
What's your H20 footprint? In November, we told the story of 11 entrepreneurs who are betting that water will soon become a trillion-dollar industry. At Fast Company, Anya Kamenetz mulls over a report from GreenBiz.com, and points out that that it's not just water scarcity that is driving large companies like Coca-cola, GE, IBM, and Frito-Lay to consider H20. Instead, large corportations are looking to closely monitor their water usage and ultimately become "water neutral."
A future for micropayments? Entrepreneurs have long tried to make the micropayment business model work. In Time magazine, Walter Issacson rather optimistically hopes that micropayments could help save the ailing newspaper industry. Issacson's long list of failures in the space include forgettable ventures like Flooz, Beenz, CyberCash, Bitpass, Peppercoin, and DigiCash. Meanwhile, Salon's Tech Insider reports on Noca, a new micropayment service that skips credit cards altogether. They’re testing out their idea now through two Facebook apps, OneClickPayand HelpYourWorld.
Corporate crooks still abound. A recent Business Week article indicates that corporate theft is on the rise. (The average cost to combat corporate malfeasance is seven percent of annual revenue, according to the article). In tough economic times, employees may feel more compelled to engage in activities like charging you for non-work related travel or meals.
February 6, 2009
Today's news
How to Monetize Your Twitter Feed; Recession Psychology
Posted by Nitasha Tiku at 11:26 AM
Someone monetized their Twitter feed. Finally. Brooklyn Museum launched a new members only program called 1stfans. For $20 a year, you get a “socially networked museum membership” that connects you with other 1stfans through a protected Twitter and access to a private Facebook, and Flickr groups. Brooklyn-based digital agency Big Spaceship notes that while it may be more difficult for brands, as opposed to cultural institutions, to get people used to the idea of paying for exclusive content, Zappos and Dell have already benefited from their presence on Twitter. But while museums may get people to pay for a protected Twitter, “Those folks are going to expect a Twitter feed worthy of that fee.” One Think reader suggests Q&A sessions with artists via Twitter and integrating their Twitter stream into an exhibit.
Brace yourself for January’s job losses. The US economy shed 598,000 jobs last month, according to the New York Times. It’s the biggest drop since the start of the recession and worse than forecasters were predicting. The downturn has cost 3.6 million jobs so far. Mark Zandi, the chief economist for Moody’s Economy.com, concluded, “Businesses are panicked and fighting for survival and slashing their payrolls,” sending the economy into a downward spiral that only aggressive action by policy makers can solve. For more on the proposed stimulus package, see Inc.’s guide to the Obama administration.
Ladies First. The Times also reports that women may surpass men as the majority in the workforce. While 82 percent of job loss has struck men, the proportion of women working has only minimally changed since the recession began. It helps that many women are employed in health care and education, which have been somewhat shielded from deep cuts that have befallen other sectors this year. Still, women earn 80 cents for each dollar that men make and often times they’re employed in part-time positions often without benefits, according to the article.
Shady website showcases recessionary desperation. Slate’s Big Money delves into a publicity stunt from Bailoutbooth.com. Tuesday morning a man calling himself “Bailout Bill” set up a booth in Times Square and started giving away serious cash—up to $1,000. The only string attached: you had to confess to Bailout Bill why you needed the money. Hundreds of people lined up, even more flocked to the site. As it turns out, the whole thing was a marketing stunt for a new video classified ad venture from a company with no Google trail. But Slate took the opportunity to display the thousands of pleading messages from the site asking for cash as a word cloud to give readers “a neat glimpse into a recession’s psychology.”
Plenty of problems for paid dating sites. Free sites like PlentyofFish and OKCupid are challenging subscription sites like Match.com and eHarmony, according to a report by Business Week. These days, no one wants to shell out as much as $60 for a membership, but they do still want to date. So free sites are rapidly gaining market share. For more on PlentyofFish’s founder Markus Frind, see Max Chafkin’s recent article and more on Inc.com.
Charlie Rose interviews Nvidia CEO, Jen-Hsun Huang. Nvidia is the world’s largest producer of graphic chips. Rose talks to Huang about how visual computing is revolutionizing things like smartphones to medical scanning equipment. Rose also recently sat down with Shep Fairey, a “a buzz guru” long before Obama decided to run for president. Read Rob Walker’s interview with Fairey on marketing that straddles the world of street art and commerce.
Will “Buy American” backfire for small business? The
The tricycle of the future? Inc.’s sister mag Fast Company takes a look at the Aptera 2e, a tear-drop shaped electric three-wheeler that can go 90 miles per hour and has a range of 100 miles. The startup says that production will start in October at a price between $25,000 and $40,000. It looks cool, but, Fast Company warns, it may impractical: "But the Aptera 2e is really something of an oddity. It's too small to be a family car because it only seats two people. And with a range that limits it to short commutes rather than long-distance runs--100 miles between recharges--it won't get you very far."
Even Crispin is cutting. AdAge’s 2008 agency of the year, Crispin Porter & Bogusky, just announced that its cutting 6 percent of its 900-person staff, a total of 60 employees. The shop grew 15 percent last year to $140 million and handles advertising for the likes of Coca-cola, Microsoft, and Burger King. Ad Age calls it a “barometer for the economy’s impact on the agency business.” We named Chuck Porter one of our 26 most fascinating entrepreneurs for his tendency to verge on recklessness.
Not so fast with the doom-and-gloom about declining small business loans. Entrepreneur magazine says forget big banks, try your regional bank. One SBA lender’s CEO Chris Hurn even predicts, “We're entering an era when specialized institutions and community banks are the go-to source for small business.” He and other CEOs profiled are betting on entrepreneurs to lead the country out of the recession, and they plan to benefit by attracting their business now. For more, see Inc.’s article on tapping community banks.
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February 5, 2009
Today's news
The Key to Good SEO, and Some Good News (Maybe)
Posted by Max Chafkin at 11:11 AM
How to fix your Google results. Wall Street Journal reporter Julia Angwin writes about her efforts to take control of her Google results. Angwin is about to publish a MySpace tell-all and wanted to spruce up her image. "One of the paradoxes of the digital age is that the boundless freedoms of the Internet also constrain our identity," she writes. "Before the ubiquity of search engines you could go on a date or a job interview and construct a narrative about your life that fit the situation. No one in your book group had to know that you were a punk-rocker in high school. But it's much harder to package yourself in the Google era." Angwin recommends linking all the pages you control--your Twitter feed, your Facebook page, your blog--to one another as a quick fix.
Bill Gates's mosquito stunt. At the Technology, Entertainment, Design conference yesterday, Microsoft founder Bill Gates let out a batch of mosquitos onstage to try to make a point about the dangers of malaria. The stunt freaked out and amused TED attendees. Ebay founder Pierre Omidyar twittered his dismay, while conference organizer Chris Anderson came back with this crack: "Gates releases more bugs to the world." (Read more about the Gates talk and the conference on Ethan Zuckerman's blog.)
Could the bottom be near? Ratings agency Moody’s is predicting that the housing market will probably bottom out in the fourth quarter of 2008, Reuters reports. “More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability,” the report said. But Time magazine begs to differ: “Only an idiot would think it will last.” Time points to continuing unemployment and credit tightness and says the pain will continue.
Small business gets a hand up. That small business bailout you've been waiting for? It has arrived--at least in Lakeport, California. The Lake County News reports that the town's City Council changed guidelines to allow loans of $15,000-$75,000 for local small businesses. “We need to keep our interest rates low,” said Councilman Bob Rumfelt, and incur risks “without being criminal.” Meanwhile in in Lisbon, Ohio, a small business loan program was extended. So far, since 2002, the program provided 21 loans totaling $205,585, which have created a total of 25 jobs, according to administrator Martina Grimm. Are local officials in your community doing anything to help?
Woz gets back in the game. Apple co-founder Steve Wozniak is joining a new startup, says the New York Times, which reports that the tech industry veteran could "ignore the call of the motherboard no longer." Wozniak will bring his engineering chops to Fusion-io, a storage startup based in Salt Lake City that is backed by Dell. His previous company, Wheels of Zeus, shut down in 2006.
All in the Family. The New York Times reports on why family businesses might weather the economic storm better than most other companies. According to the article, family businesses may be able to reduce pay of workers more easily and owners feel extra pressure to keep the doors open no matter what because they don’t want to be the generation that fails. Last April, Inc. looked at some companies that had weathered not just the Great Depression, but the Panic of 1873. Check it out here.
Sacrificing Profits for Customers. In today’s Journal, there’s an article about small firms that have resorted to giving away free stuff to lure otherwise hesitant customers. Experts say it’s a risky strategy because if give-aways don’t encourage more spending, the companies will just end up even more financially strained.
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February 4, 2009
Today's news
Mario Batali on Customer Service; the Next Bubble to Pop
Posted by Nitasha Tiku at 10:27 AM
The “hug the customer” approach to fine dining in a recession. If you’ve ever tried to get reservations at a new Mario Batali restaurant—forget David Chang—you’re well-versed with the ole “we have something before 5:30 or after 10” rigmarole. But Frank Bruni reports there’s an altered mood taking over the New York restaurant scene these days: “extreme solicitousness tinged with outright desperation.” With predictions that fine dining revenues could fall 12 to 15 percent in 2009, top tier restaurants are trying things they never would have six, or even three months ago, including special deals, little perks, relaxing demands, and an extra attention on what was once better left to the Applebees of the world: accessibility. Says Bruni: “They’ve seldom wanted you so bad, so they’ve rarely treated you so good.” Learn how Danny Meyer got finicky chefs known for thief smoked lobster or beef carpaccio to get on board with cutting costs.
Restaurant tries pay-what-you-want promo. In more tales of epicurean entrepreneurship, a London Restaurant--taking a page from Inc. magazine—okay, and the rock band Radiohead—is letting diners pay whatever they want for their meal. Reuters calls it "an unorthodox bid to beat the credit crunch." Customers will have to pay for their drink bill but can pay as little as a penny for dishes like foie gras and steamed butterfish. Will it work? Inc. tried this strategy last spring in an attempt to attract new subscribers. As a business move, it was pretty much a failure. But, as a magazine article, it was brilliant.
Is private equity the next bubble to burst? A transatlantic coalition of unions (Britain’s Unite and Services Employees International in the U.S.) warns the Guardian that the PE industry poses a “looming disaster.” $500 billion in PE debt needs to be renegotiated by 2010. Alchemy Partners’ Jon Moulton predicts that up to 30 percent of mid-market buyouts could end in default. Nearly 10 million people in the US and the UK now work in firms under PE ownership, after the surge of deals between 2005 and 2008. The coalition is calling for more transparency and full disclosure from PE firms of “loan repayments, debt-to-equity ratios, the identity of lending banks and the structure of covenants.”
Health care reforms healthy for small business? The health care reform battle begins now. A new study by the National Federation for Independent Business (NFIB) says that an employer healthcare mandate would devastate small business. "In the current environment, an employer mandate could wipe out 1.6 million jobs in just five years and reduce the GDP by around $200 billion," said NFIB Senior Research Fellow William "Denny" Dennis. As the Portland Business Journal reported in December 2008, the NFIB led the fight against Clinton health care reforms in 1993 and 1994. Here’s a sample of a similar study the NFIB released in 1994. So far, the Obama plan has tread gently on the subject of small business employer coverage though, claiming that “very small businesses and start-ups will be exempt from employer contribution, and larger companies will get tax rebates and reduced costs by joining the National Health Insurance Exchange."
Grocers find feast and famine in slump. While grocery stores get a countercyclical boost from cash-strapped consumers eating at home more, not all grocers benefit equally. For example, there’s Bing's Market in Rio Linda, California, where sales are down 25 percent. As the Sacramento Bee reports, some independent grocers with specialized products have seen a bit of a dropoff. Meanwhile, across the heartland in Danville, Virginia, WSET reports that bargain grocers are seeing a big boost in sales.
Try and try again . . . and you still might not succeed. Over at Slate’s Bizbox , there’s discussion of new research from the Harvard Business School. A recently published working paper: “Performance Persistence in Entrepreneurship” found that entrepreneurs who have been successful in the past will have more success in future projects than those who have previously failed or those just starting out. Not exactly earth-shattering, but the findings do highlight the tough odds of succeeding right off the bat. The study found that successful entrepreneurs found success again 34% of the time, while first-timers are successful only 22% of the time.
Thanks for the bailout money, lemme just put that in the vault. Despite the hefty bailout, most of the biggest banks that received federal funds in past months do not appear to be lending more, according to the analysis in last week’s WSJ. They found that lending in the 4th quarter (post-bailout) actually decreased at 10 out of 13 banks.
Forget Silicon Valley. That's the advice of entrepreneur and tech guru Tim O'Reilly who writes about the unexpected roots of innovation in a Forbes.com column. "It turns out that many of the great waves of creative destruction that have reinvented Silicon Valley didn't start there," O'Reilly argues. "More important, they didn't even start with the profit motive." O'Reilly points our that many big innovations of the last few decades--the Web, open source software, and the personal computer--were led by tinkerers, not finance types.
Meet the new jobless. In their series “The New Jobless,” Fortune discusses why this is the “equal opportunity recession” – in other words, one that is not confined to certain industries or job levels. The project follows various unemployed Americans in their struggles to land another job.
Small business loans in terrible shape. From the Wall Street Journal comes bad news, especially if you’re looking for a loan: losses on small business loans are rising fast. This signals a number of problems on the horizon: more unemployment (given the number of jobs small businesses create), decreased local tax revenue, and more home equity and personal credit card defaults (which owners often use as a back-up line of credit). Last fall, Bank of America CEO Ken Lewis called small business loans “a damn disaster.” If you need capital, take a look at our guide to angel investing.
Oil falls, gas rises, oil rises, gas _____? Bloomberg reports that crude oil is up in New York following a positive report on the U.S. economy in the fourth quarter of 2008. Earlier in the week, oil was down and gas was up, partly due to the threat of a refiners strike, according to the Denver Post. Now, the strike has been averted, but oil is up, and a major refiner plans to delay a new refinery. The New Haven Register says gas prices could continue to rise—as most Americans fear they will.
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February 3, 2009
Today's news
Shrinking Angels Funds and a Memorable Coffee Bust
Posted by Ryan McCarthy at 10:56 AM
If only Norm Brodsky got to him in time. On Slate today, there's a great cautionary tale about the failure of an all-too-charming coffee shop in Manhattan's Lower East Side. Like many entrepreneurs, Michael Idov fell in love with the notion of running his own business. Not surprisingly, he was soon reminded of the unfortunate realities of start-up life -- trivialities like profit margins and sales volume, for instance. Describing an impeccably pedigreed pastry chef he hired, Idov writes: "Hercule, as I'll call him, embodied every French stereotype in existence: He was jovial, enthusiastic, rude, snooty, manic-depressive, brilliant, and utterly unreliable. His croissants were buttery, flaky, not too big, and $1.25 wholesale. We sold them for $2 and threw away roughly 50 percent—in other words, we were making a negative quarter on each croissant."
Mint reports on the economy. Aaron Patzer, the youthful founder of Mint, has access to some pretty amazing data. Patzer's built a website that does the gargantuan task of providing a single place to track all of your bank accounts, credit cards, and investments. Mint's automatically tracks info from thousands of banks and over 900,000 users. As a result, Patzer's got a uniquely intimate view of our economy. At TechCrunch, Patzer outlines what this data means for entrepreneurs: "Is [the data] Great Depression bad? That’s a qualitative question I can’t answer. But what the data, the hard facts, mean for you – if you run a consumer business – is that your customers are spending $400 less each month than they were a year ago, have burned through half of their savings, and on average have taken on an additional $5k in debt." For more about Patzer, check out our coverage in last year's young entrepreneur feature.
Angel funding is drying up. According to the New York Times, many angel investors are waiting out the recession. There's a lot of scary anecdotes in the piece, including word of fewer angel investments, smaller deals, and shrinking valuations. "Many professional angels — those who invest as a full-time job, rather than as a side project — are still financing start-ups, if at a slower pace," the Times writes. "They say the best opportunities come during downturns, as companies’ valuations fall significantly. The median valuation of start-ups seeking angel financing fell 25 percent, to $3 million, from the third to the fourth quarter of 2008, according to Angelsoft, a Web service for angel investors and entrepreneurs." For more, see our complete guide to angel investing, and our look at some of the top angel groups.
When the crowd gets tired. The last few years have the witnessed the rise of countless companies that rely on input from their customers. Jeffrey Kalmikoff, one of the entrepreneurs behind Threadless (read about it here) has been thinking about what would happen if those customers got tired of participating. He says that while individual members in a community may quit, the community as a whole is likely to be more resilient. And, ultimately, a community-based business is still going to be judged based on the quality of the products it produces, not the size of its community.
Five steps to a successful tech transfer. In a white paper released today, the University of Southern California’s Stevens Institute for Innovation takes a critical look at university-VC relations and offers tips to improve the spin-out process. “Unfortunately, university technology transfer professionals and venture capitalists have often struggled with cultural disconnects, hampering efforts to make maximum impact for university research," said Krisztina "Z" Holly, executive director of the Institute. The paper’s advice: focus on the inventors behind the intellectual property, be ready to make a deal, and excise “academese” from your business plan.
Doubledown media to cut its losses. It was probably inevitable, but Doubledown Media, the formerly high-flying magazine start-up that catered to Wall Street traders, private jet buyers, cigar smokers, and professional athletes, is kaput, according to Folio. The company blamed the economy, but Doubledown was undoubtedly hurt by a raft of litigation over the past two years, including a legal battle with the founder of Private Air magazine and with former New York Mets star (and founder of The Players Club magazine) Lenny Dykstra.
Lessons from the last burst bubble. As the saying (sort of) goes, those who don't learn from recessions are doomed to repeat them. Thankfully, the New York Times has compiled lessons from previous downturns. A few: keep marketing, hire great talent now if you can afford it, and give back to the community—besides being the right thing to do, the good will creates loyal customers.
Microfinance for entrepreneurs? Though they’re usually associated with far-flung places like Bangladesh, there are several microfinance institutions in the U.S. that offer money for entrepreneurs. While U.S. programs are often smaller, they can be a godsend for those who can’t get capital from big banks. But, as this article from American Banker points out, giants like Citi, are eyeing microfinance as a way to acquire new customers and reap big profits. The result: a struggle for “the soul of microfinance,” over whether their priority is to alleviate poverty or make money.
February 2, 2009
How to Save Money, and Avoiding Survivor's Guilt
Posted by Max Chafkin at 11:25 AM
After the layoff. A Time Magazine article reports on the dangers of “survivor’s guilt” to companies that have recently laid off staff. This happens when workers who have retained their jobs feel distressed either from guilt, anxiety, or exhaustion from new responsibilities they may need to take on. Frequently, employers are “oblivious” to these feelings. If not addressed, the negative sentiments can pervade the workplace and begin to affect productivity and commitment.
Facebook founders settle their dispute. A long-running dispute stemming from the early days at Facebook appears to be settled, Valleywag reports. "There's an excellent reason for Zuckerberg to make nice with [co-founder] Saverin, though: Ben Mezrich, author of Bringing Down the House, is writing an account of the founding of Facebook which relies heavily on Saverin as a source. Aaron Sorkin, the West Wing creator, is already planning to adapt the book, which doesn't have a publication date yet, into a movie." The tech blog frets that the settlement (if there is one) could put the book and movie in jeopardy.
Boom times for cobblers. You know things are bad when you see a story on the shoe repair industry on the front page of the Wall Street Journal. As consumers look to save money, they’re patronizing the beleaguered industry at rates not seen for decades. And a few other industries—including auto repair shops, resume writers, and employment lawyers—are happily riding the recession wave. Is anyone else seeing a spike in their business?
The market for intellectual property heats up. In other bad-news-is-good-news news, Ocean Tomo, an intellectual property sales firm, is seeing a countercyclical rise in business, the Chicago Tribune reports. "Most companies would be surprised at how much of the value of their company is in intellectual property," said Kara Cenar, an intellectual property lawyer. Ocean Tomo estimates that patents, trademarks, copyrights and goodwill could make up 75 percent of the market cap for the S&P 500. So who’s buying? According to the Tribune, “entrepreneurial firms see opportunity in the cast-off intellectual property because it can provide a shortcut to success.”
How to save money, part I. Re-negotiate your rent. The New York Times reports that landlords are being more flexible with late payments. In expensive markets they’re often willing to renegotiate rents to ensure they have tenants instead of vacancies.
How to save money, part II. Move! The Journal predicts a wave of state incentives to attract small businesses. New Jersey is planning on doling out $3,000 for every new hire, Minnesota is creating tax-free zones, and Colorado is proposing to cut income taxes for anybody who creates at least 20 jobs. But these incentives face opposition since they typically come at the expense of state layoffs and cuts to popular programs. New York, for instance, is cutting back on business incentive programs to help meet its budget shortfall.
Trade war brewing?The Washington Post warns of the possibility of a trade war. Reminding readers of the destructive protectionism that prolonged the Great Depression, the Post then flashes forward to Davos this year: "We will resolutely fight protectionism," Japanese Prime Minister Taro Aso is quoted as saying. But, the Post writes, “even as leaders call for nations to do the right thing on the international stage, actually doing it at home is proving far tougher.” The U.S. faces the issue immediately, on the question of how much to restrict stimulus spending to “Buy American.” Reuters reports that Canada is pushing for inclusion.
Capitalism finds an unlikely friend. Vladimir Putin, the Russian Prime Minister, delivered a surprising key-note speech at Davos last week. Putin, who has previously shown a tendency to throw entrepreneurs in jail, warned against the dangers of state “interference” in the private sector and talked about entrepreneurship as way one way to rehabilitate the Russian economy. “Development of competition, creation of a sustainable credit system based on internal resources and realization of transport and other infrastructural projects are among our priorities,” Putin told the crowd at Davos. Read the full text of his speech here. There was also a healthy measure of blame for the U.S. for the global crisis. Still, one blogger for Motley Fool, a forum for investors, says Putin “apparently understands free market capitalism, the role of the entrepreneur, the dangers of deficit spending, and the limitation of State power more than our own government, be it Obama or Bush or McCain or Pelosi.”
Little stimulus aid for small businesses. The Atlanta Journal Constitution reports there’s little help for small business in the stimulus package. The plan does allocate more money to the SBA and allows the agency to make direct loans, establish a secondary market lending authority that would allow loans to “systematically important” lenders, and guarantee pools of SBA loans sold to investors. To the Small Business and Entrepreneurship Council, this sounds like Fannie Mae and Freddie Mac. And we know how they turned out.
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