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March 31, 2009
Today's news
The Future of the SBA
Posted by Ryan McCarthy at 2:33 PM
With confirmation hearings for set for tomorrow, the folks at American Express OPEN are hosting a free online forum tomorrow about the future of the SBA. Considering the controversy surrounding fraud and SBA contracting, and President Obama's recent efforts to include small companies in the stimulus plan, there's plenty to discuss.
Amex OPEN's panel discussion will be webcast from 1 to 2 p.m. EST tomorrow. The panel, which will be moderated by John Battelle, the founder of Federated Media Publishing. Also, on the panel is Jeffrey Carr, an associate professor of marketing and entreprneurship at New York University's Stern School of Business; Barbara Kasoff, the CEO and co-founder of Women Impacting Public Policy; and Ken Yancey the CEO of SCORE.
Check out the webcast here.
Today's news
Raising Money Amid a Credit Crunch and Google Starts a VC
Posted by Max Chafkin at 1:03 PM
Could Google fund your next venture? Google already controls your website traffic, your email, and, maybe, your soul. Why shouldn't it own a piece of your company? According to the New York Times, Google is creating a venture capital arm, called Google Ventures, which is anticipated to invest up to $100 million over the next year. The search giant hopes to fund high-potential startups in areas like the Internet, clean technology and life sciences, which should be good news amid a tough fundraising climate. (Google's blog has the news as well.)
The SEC cracks down on peer-to-peer lending. Remember Prosper? The site, which Inc. first wrote about in 2006, had built a nice little business doing small person to person loans, spawning a handful of other peer-to-peer lenders. Then, as we reported in January, the SEC got involved. The agency slapped a cease-and-desist order on Prosper, which up until then had enabled 25,000 loans totaling around $150 million. Until Prosper registers with the SEC, it’s prohibited from facilitating any new loans. Today, the Big Money, asks why the SEC is messing with little lending startups--amid a credit crunch no less--instead of going after Ponzi schemes. "Why, in the depths of the Great Recession, would the federal government be stepping on the necks of John Dough and Joe Sixpack who just want to float a little cash to help each other get through the tough times?" the article asks.
Boom times for microlenders. Microlending tends to be associated with developing countries, but with bank loans increasingly hard to come by, it's getting more popular in the U.S. The Wall Street Journal says that small businesses and entrepreneurs are turning to organizations that loan between $500 and $35,000. Microlenders generally charge higher interest rates, but, according to the article, "They are more lenient in screening prospective clients, however, and more willing to tailor repayment periods to the specific needs of a business. And it is that flexibility that is attracting more small-business borrowers these days."
The return of Joe the Plumber? According to the AP, the debate over how many small businesses will be hit by the administration’s proposed tax increases is heating back up, even though no one has made any progress in either direction. Obama says few small businesses would be affected; the NFIB says otherwise. For continuing coverage, check out Robb Mandelbaum's blog.
Looking to make your mark as a video game entrepreneur? Bizbox thinks the future of gaming is on your iPhone. What does that mean for entrepreneurs? The industry is being pushed towards a blockbuster model, which could put the squeeze on small companies. But at the same time, major companies like EA and Sony can’t raise prices too much because of the proliferation of cheap choices for consumer, which are often created by unknown start-ups. The sector is expanding, and it’s a more comfortable place for entrepreneurs than big businesses.
Spam is out of control. Spam now accounts for 94 percent of all e-mail, according to a New York Times blog post. And that could get even worse. The post says there’s reason to believe spammers are constructing more decentralized “spamming botnets” that would make malicious e-mails even harder to crack down on. Check out Inc.’s guide for taming your spam here.
$74 million for virtual goods. Seriously. According to Techcrunch, a Finnish company called Habbo, which operates a virtual world for teens, made $74 million in 2008, mostly through sales of virtual gifts. The article cautions that Habbo is one of the few companies that has made the virtual stuff business model work.
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March 30, 2009
Today's news
Lessons in Generating Revenue and What Angels Want
Posted by Nitasha Tiku at 11:28 AM
Lessons in revenue generating from an unapologetic airline CEO. If you’ve seen the Spirit Airlines ad depicting a 30-something man in bed with his friend’s mother, you know its new slogan: “You think that’s low? Spirit Airlines fares are even lower.” Under CEO Ben Baldanza, reports the NYTimes, the no-frills airline has made keeping costs down and scrounging for revenue its full time business. Customers may fill message boards with complaints, but for one-way flights as low as $9, Spirit isn’t changing its policies: charging customers for everything from water on flights (“Where else will you buy water at 35,000 feet?” says Baldanza) to seat selection to checked baggage—and dispensing with amenities like TV screen or receptionists (instead a sign reads, “This is a self-service reception area, saving 2 cents per customer.”). To top it off, every surface in the 145-seat planes can be leased by advertisers. Yes, folks, even the sick bags. Read Inc.’s Q&A with another low-frills airline exec, ex-Jetblue CEO and Azul airline head David Neeleman
Angel investors now favor smaller deals. According the University of New Hampshire's Center for Venture Research, angel investments in U.S. start-ups totaled $19.2 billion in 2008, a decline of 26.2 percent. But, more than 55,000 start-ups received funding from angel investors last year, which represents only a 2.9 percent drop over 2007. Bottom line: angels are still investing, but deals are smaller and harder to come by. In case you missed it, we compiled a list of some of the nation's best angel groups here.
Did Wagoner deserve to go? News that the Obama administration has pushed out General Motors CEO Rick Wagoner is dominating the news this morning--and sending public markets into a tailspin. The Wall Street Journal details the automaker's woes--it's been unprofitable since 2004 and faces an uncertain future--and suggests that the automaker make end up in Chapter 11 Bankruptcy. That possibility, which looked remote just a few months ago, was called by a number of Inc. readers back in 2006, in an article entitled "How Would You Fix General Motors?" (Malcolm Bricklin, the car entrepreneur who introduced Americans to the Subaru and the Yugo, also recommended ditching dealerships and brands and renegotiating with unions in bankruptcy court.) What do you think about the government's ouster of Wagoner? If you were running GM today what would you do?
Fuel from pond scum. Of the 60 “algae start-ups” in the U.S., Sapphire Energy is one of the most promising, says CNN Money. The company successfully used its algae oil fuel on a Continental Airlines flight in January, as a 2% blend. But the company owner, a molecular biologist whose worked on two start-ups before, says that he’s not really interested in making an additive. He thinks that algae is the new green fuel of the future.
How the tobacco tax increase will affect the small companies. On April 1st, the largest single increase in the federal tobacco tax will take effect: cigarette tax will go from 39 cents to $1.01 per pack and tax on cigars will go from a nickel to 40 cents. NPR’s Morning Edition talked to cigar manufacturers (many of them run by immigrant-run) in Tampa’s Ybor City, noting that two-thirds of cigars sold in the U.S. are made in Florida or imported through the state. Eric Newman, president of the J.C. Newman Cigar factory, says, “This is our life. Shame on Congress, shame on our government for trying to put us out of business. In the days they are offering $25 billion bailouts, we don't want a 25-cent bailout. We just want the government to leave us alone to run our business the same way we've been doing it for 114 years."
A social network based on net worth. While other “elite” social networking sites already exist, the WSJ reports that affluence.org has mastered the art of separating the wealthy from the merely aspirational. They search public records for details like home prices and liens to do their best to verify that applicants have at least $3 million in net worth or at least $300,000 in household income. The site owner says that the site does have a revolving door—nowadays, they’re kicking out 50 or 60 people a day.
What they used to teach you in Stanford Business School. Portfolio’s Felix Salmon posts an email from a Stanford MBA (circa 1972) on the seven principles he learned in b-school. Among the lessons: “Always ask what can go wrong” and “Remember that any damn fool can compute an IRR or DCF. The trick is to find a business that can return 20% after tax, understand its critical indigenous and exogenous variables, and then run it so it meets its return target.” Back in the early 70’s, notes Salmon, b-school grads were still expected to go into business. As MBAs flocked to finance instead, schools adapted their curriculum. Salmon predicts that we might see a swing back to the basics, but wonders if those principles will stick.
Another entry in the electric-car race. Less than a week after Tesla’s releasing plans for the Model S, Malaysia’s national car company, Proton, and a Dutch-based star-tup (ironically named Detroit Electric) have signed an agreement to produce a zero-emissions sedan for the European and US markets, according to an article in Newsweek. The fully-charged car will have a range of 150 miles, a top speed of 120 mph, and it’ll cost between $23,000 and $33,000. Detroit Electric says the cars will hit the market early next year.
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March 27, 2009
Technology
To Twitter or to Tweet?
Posted by Max Chafkin at 1:05 PM
Magazine editors and writers often get caught up in the vagaries of grammar only to discover—after 15 minutes spent bickering over the serial comma or the dangling modifier—most readers don't particularly care. Except when they do.
Last month’s “We Asked, You Twittered,” in which we printed readers' Twitter messages was pretty well liked. But there are, apparently some members of the Twitterverse (sorry) who disagree, demanding that we use the verb "tweeted" instead of "twittered". Ryan Carson twittered (or is it tweeted?) in defense of the tweet and yesterday we got a surprisingly angry letter saying that “twittered” is, well, just about as uncool as you can get—"like Alice on the Brady Bunch waving a peace sign and shouting "Groovy" to Marcia and Greg. Not a lot of street cred."
Why people are so animated about this is beyond me. But I thought it’d be worth offering some reasons why Inc. picked "twittered" instead of "tweeted" (or, "twatted," as Stephen Colbert would have it). Grammatically speaking, "tweet" is an intransitive verb, whereas "twitter" can act as a transitive or intransitive verb. In other words, your 11th grade English teacher would be okay if Shaq "twittered" his whereabouts but not if he "tweeted" them.
Another reason for using “twittered” is that it makes more sense to somebody who isn’t that familiar with the service. Many people have heard of Twitter, Inc. but they don’t necessarily know what a tweet is. If we used “tweeted” our headline might seem cool to early-adopting Twitter fiends, but it would make no sense to the vast majority of us noobs. And nobody says “I googed,” they google.
But maybe Twitter deserves a new word. I emailed co-founder Biz Stone to ask what he thinks:
Ultimately, whatever gets used more will probably win out but my personal thought is that Twittering is the verb that refers to the act of creating a tweet which is the noun. However, you may catch me tweeting one day so don't hold me to that!
So Biz is with us--sort of, and for the time being--but he's open to a new coinage. What do you think? Is it tweeted or twittered? Let us know in the comments (or on Twitter) and you just might end up on the old dead tree mail page.
Today's news
Entrepreneurs Save the World, Box Water, and China Struggles
Posted by Ryan McCarthy at 11:11 AM
The Economist finally discovers the entrepreneurial society. Dr. Jeff Cornwall's blog points to a special report by the folks at The Economist on the role entrepreneurs will play in easing the global recession. There's a ton of great stuff in the piece. (Though, as Cornwall points out, The Economist's newfound love of entrepreneurship is just a tad late). One comforting note: when it comes to entrepreneurship, The Economist says, America still has a clear advantage over emerging countries like India and China. Check out our interview with Amar Bhide, a professor of business at Columbia University -- and a decided optimist on the American economy -- who's prominently featured in The Economist's report.
How much does Tesla’s new electric car really cost? Tesla Motors revealed its second all-electric car yesterday, the Model S sedan. Today’s NY Times Bits blog discusses its sticker price, which according to Elon Musk, Tesla’s chief executive, isn't the whole story. The car costs $57,400, but really only $49,900 after tax credits. It’s still not as affordable as other similar-sized cars, but Tesla says that after you factor in savings on gas, it’s comparable to a $35,000 sedan.
Water in a Box, not a Bottle. The green movement has demonized bottled water as wasteful and eco-unfriendly. But Fast Company says that water companies are working on improving their reputation. Some established companies, like Aquafina, are creating bottles made with less plastic. But more intriguing is the start-up Boxed Water is Better, that ships empty recyclable milk-carton-like containers to the water source in an attempt to keep pollution levels low and donates 20% of their profits to charity.
Retrenchment in Portland. The New York Times takes a look at the economic troubles of Portland, Oregon, where even credit-worthy businesses like independent mega-bookstore Powells’ are cutting back. Michael Powell, the store’s owner, recently halted plans for a $5 million expansion. The NYT points to a viscous cycle at work here -- fears of borrowing lead to fears of lending, and vice versa: "Banks now confront accusations of clinging to their money, depriving the economy of growth, while the picture, as Mr. Powell attests, is more complicated. Even banks that are eager to lend find some of their best customers reluctant to extend themselves."
Tough time for Entrepreneurs in China. Think it’s bad here? Well then take a look at this Wall Street Journal article on China, where years of headlong growth have slammed smack into the global slowdown. The last decade has been an unprecedented period of opportunity for Chinese entrepreneurs, who proved uniquely able to keep pace with the country’s rapid development. But now they’re facing their first major downturn, and many are struggling to figure out their next move. Tony Yu hopes a new killer application will create more demand for his firm GenTech, which outfits plants for high-tech work, but he’s also asking his engineers to spend their spare time developing new equipment that could add value to the company if he decides to sell.
Facebook’s cash crunch.. For every million users Facebook signs up, My Web Page says, Facebook needs $1 million in servers to store its user's photos, videos, and other facets of their online identities. But revenue may not be catching up. So despite raising more than $500 million from Microsoft and Hong Kong billionaire Li Ka-Sing, Facebook CFO (and YouTube veteran) Gideon Yu is once again looking for capital. It's no surprise, then, that Valleywag says that Facebook valued at well below the $15 billion that Microsoft estimated when it bought a stake in 2007.
You’re never too important to haul boxes -- at least for a week. Amazon’s Jeff Bezos is spending a week working in a Kentucky distribution center, Silicon Alley Insider reports. Bezos apparently wants to know what it’s like to be a rank-and-file employee, and his press team says there will be no photo or interview opportunities.
Lance Armstrong may own the tour. Lance Armstrong broke his collarbone earlier this week, and, although it remains to be seen how the injury will affect his return to the Tour de France this summer, the Wall Street Journal brings news of a feat that may be even more impressive than conquering Alpe D'Huez: Buying the Tour. Armstrong has exhibited an entrepreneurial streak for some time. He was a part owner in his team, he negotiated novel sponsorship deals, sold millions of Livestrong bracelets, and he recently announced plans to open a bike shop in Austin. The Journal chronicles how Armstrong attempted to orchestrate a $1.5 million buyout of the Tour in 2006 and 2007, but says that the credit crunch derailed the deal. Nonetheless, Armstrong still appears to be interested.
Michael Scott to start a paper company! Last night, The Office, NBC's send-up of all things corporate, went entrepreneurial. Michael Scott, clearly having secretly read Inc.'s "Starting Up in a Down Economy," announced he is starting his own paper company. (Note: This is fictional, but funny. Check out the episode here. And then read our Q&A with Office creator Greg Daniels. What else are you doing on a Friday afternoon?)
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March 26, 2009
Today's news
A New Electric Ride and Raising Money Now
Posted by Max Chafkin at 11:07 AM
Tesla unveils new car. Elon Musk's electric car startup will show off it's latest model--a $50,000 sedan that the company hopes will take electric cars mainstream. Though many large automakers have announced plans to build electric cars, the Model S, if released on schedule in 2011, would be first mass produced electric vehicle, according to an article in the San Jose Mercury News. (Via Business Insider.) Tesla's first car, a lightning fast two seater, was delayed initially but has been largely a success since it went into production last year. The company has delivered 250 cars, which sell for $109,000 each, and the roaster has earned high marks from car reviewers. For more on Tesla, check out Inc.'s profile of Elon Musk.
SBA lending plummets. Bizbox is livid this morning about the marked drop-off in SBA loans and is questioning whether the Obama administration can do anything to stop it. Despite billions of government dollars designed to get credit flowing again, major banks just aren’t making the loans. Bank of America, whose CEO infamously referred to its SBA portfolio as a “damn disaster,” lent $136.1 million in 2008; in the first quarter of 2009, the company only doled out $3.3 million. Bizbox concludes we’re going to have to rely on community and regional banks to restart lending.
More Y Combinator copycats. The banks may be dry but there's a boom in small scale angel investing. In 2007 Paul Graham's influential seed-stage venture fund Y Combinator had a breakthrough idea: starting a great tech company didn't require millions in venture capital. Instead, what today's entrepreneurs needed was several thousand dollars in seed funding, some attentive mentoring, and time to build. Now, TechCrunch reports that the model has popped up in places like, Boston, Colorado, Philadelphia, and, now, Atlanta. We first wrote about Y Combinator's model here .
The latest recession-buster: military contracts. Despite longstanding concerns about the number of government contracts set aside for small companies, military contracts are helping some small companies stay afloat during the recession. The NYT examines a few small businesses that have broken into the $55 billion world of military contracting. Service firms are getting into the act too: "Beth Harshfield, the owner of Exhibit Arts, an advertising and marketing company in Wichita, Kan., said she started bidding on military contracts six years ago because “I got tired of the local economy kicking the legs out from under us.” Now 80 percent of her business is with the military. Her company creates trade-show booths for Army recruiters and acts as a staffing agency for military bases."
The workplace as a chat-room. A Wall Street Journal piece looks at how growing up with the internet affects the workplace expectations of what they call “Generation F” or the Facebook Generation. (Meanwhile: Can we please get a moratorium on generational coinages?) The writer predicts that when the job market improves, these youngins will be seeking out a job environment that values peer-review, information-sharing, and chosen instead of assigned tasks. For more on the new generation--whatever it's called--check out Donna Fenn's excellent essay on young entrepreneurs.
Mossberg's favorite iPhone Apps. The Wall Street Journal's star tech reviewer lists his favorite applications for the Apple iPhone. Most are well known--he likes Facebook, Google Mobile, and Amazon's Kindle app--but there are a couple of interesting suggestions. One is Quordy a $3 application that allows you to quickly synch your office documents with your phone, which could make it possible to leave the laptop behind.
Moms slighted in hiring. Today’s Economix blog discusses what it calls “the anti-mommy bias,” or, more technically, the concept of Family Responsibilities Discrimination. In one study cited in the post, when fictional résumés and cover letters were sent to employers, childless women got 2.1 times as many callbacks as mothers. Fathers, the researches found, were not penalized.
Want to start a business in an unfamiliar industry? Do your research, of course, but consider an internship before taking the leap. You’ll learn how the business works from the inside out, from the supply chain to HR policies. That insider knowledge will be essential in getting your business off the ground--and these days, you’ll need all the help you can get.
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March 25, 2009
Today's news
SBA Fraud; Facebook Surrenders; Obama, Obama, Obama
Posted by Nitasha Tiku at 11:27 AM
GAO alleges major fraud in SBA program. The Government Accountability Office says hundreds and possibly even thousands of businesses in the Historically Underutilized Businesses program don’t meet the requirements, reports USA Today. Nineteen businesses that were inappropriately awarded $30 million in contracts were caught red-handed. The House Small Business Committee’s chairwoman, Rep. Nydia Velázquez, D-N.Y., will recommend that the SBA shut down the program until they can sort through the wrongly-classified businesses.
Zuckerberg surrenders to users’ redesign revolt. Valleywag has the scoop from inside Facebook headquarters: the company’s staff has been consumed with “fire drills” trying to figure out how to deal with the maelstrom of negative feedback from its latest redesign and has finally capitulated—well, sort of. Zuckerberg’s motivation behind the redesign was to make the social network operate more in “real-time”—like Twitter, which he tried to buy for $500 million and failed. Yesterday, Zuckerberg delegated the apology to his product director, Chris Cox. Read the full text here. They will be fixing some of the problems caused by the redesign, but not going back to the previous iteration.
Why small companies will win in this economy. At HarvardBusiness.org, management consultant Peter Bregman relays the story of Passlogix, a small company that's been killing its larger competitors of late. In fact, in a down economy Passlogix has secured multi-year, million-dollar prepaid contracts. According to Bregman, in an era filled with the failure of large corporations, small companies are actually more reliable business partners. Bregman writes: "The gap of confidence between small companies and big ones is growing…We simply don't trust companies anymore. We trust people. And in big companies, it's hard to even find a person to trust as we scream "operator" into our telephones only to get transferred to another menu whose options have changed. That gives small companies a huge advantage."
Have a question for President Obama? Want to give him your two cents about cutting the payroll tax or how to get capital flowing to entrepreneurs? Now’s your chance. Yestrerday, Whitehouse.gov opened for questions for a “community-moderated online town hall” to be hosted on Thursday. Previous online events were moderated by the White House Press Secretary, but this one will feature Obama himself, says AllThingsD. Participants are encouraged to send in a video of themselves asking the question and can vote on submissions from others. The most popular questions will be answered—or at least addressed. So far, this question (from “swish” from Ellwood City, Pennsylvania) is the most popular in the small business section: “what specifically can the federal govt do to lower the cost of providing quality health coverage for small business owners?" Is that the most pressing concern for small businesses?
Cash for tweets. Twitter may be popular, but it's got no plan to make money, right? Not exactly. The Wall Street Journal surveys the ways marketers are using the service to sell ads. These include a startup that will pay to serve ads within a your personal Twitter stream, websites that cull tweets on a particular topic and sell traditional display ads, and a site that charges companies to display their messages. Yesterday, Twitter itself announced what could be the beginning of a revenue strategy, a deal with Microsoft. Meanwhile, the Journal quotes co-founder Biz Stone saying that Twitter plans to offer paid accounts. "The accounts would offer users more features in exchange for a fee," according to the article. For more on Twitter, check out the feature we did last year and, of course, follow Inc.
Obama’s small business plan: it’s a start, but only a start. Bizbox looks at some of the reactions to Obama’s plan to help small business, and some of them aren’t too enthusiastic. They plan to use TARP funds to buy securities on SBA loans, eliminate fees, and raising the amount of loans the government will guarantee. That’s all well and good, but many are concerned this won’t boost the number of loans and it won’t solve the root of the small business problem—consumers just aren’t spending. Bizbox concludes that it’s a good beginning, but largely a symbolic one, and it’s going to take more than gestures to save these companies. For more on the administration’s efforts to get credit flowing for small businesses, see Inc.’s coverage.
Xobni gets another $3 million. Xobni, the social email platform we covered in our 30 under 30 issue, last October has gotten another $3 million, this time from BlackBerry Partners Fund, boosting its Series B total to $10 million. Seeing no signs of the recession, Om Malick calls it part of the “funding torrent” in Silicon Valley.
A different kind of Credit Crunch. While financial pundits have bemoaned the lack of lending by banks, the NYT’s David Leonhardt says that, for some industries, the current problem isn't lack of credit – it's too much outstanding debt. Leonhardt looks at the three main players in the car rental industry, Avis, Enterprise, and Hertz, companies that took on so much debt in good times, they can't get low-interest loans now that the economy has soured. Leonhardt writes of this now-common problem, "Many [small businesses] are struggling to get financing but are afraid to be identified publicly as a spurned borrower. Instead, they are quietly cobbling together loans any way they can and hoping the squeeze eases soon." (For more of Enterprise, which owns the largest private fleet of cars in the world, check our cover story here.)
Small Business needs the Postman. Senator Olympia Snowe of Maine has sent a letter to Postmaster General John Potter pushing him to think about how reducing the mail delivery schedule could negatively impact small business, according to the Washington Post’s small business blog. He wrote that the proposed reduction from six delivery days to five could really hurt small companies. "America's small businesses depend on reliable and consistent service from the USPS, and they could suffer significant setbacks by a shortened mail delivery week, such as lost sales, order backlogs, and job cuts," said Snowe.
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March 24, 2009
Today's news
Broken Web Ads, Medical Records, and How Investors Think
Posted by Ryan McCarthy at 11:30 AM
Is web advertising broken? Wharton professor Eric Clemons has a thought-provoking piece today on TechCrunch that suggests the web hasn't yet settled on an advertising model that works. Clemons argues that web ads have three serious very serious forces working against them -- consumers increasingly don't trust advertising, consumers don't want to see ads on the web, and, with all of the information available on the web, consumers get no reliable product information from web ads. If you're a web advertiser, or considering becoming one, it's well worth a read.
Your medical history is now a booming market. How would you like $20 billion injected into your industry? Thanks to the Obama administration's promise to modernize medical records, that's the prospect facing start-ups in the electronic medical records space, reports the WSJ. One company, the Westborough, Massachusetts-based eClinicalWorks, a two-time Inc. 500 honoree, plans to hire 500 people in the next few years. eClinical's co-founder couldn't be more bullish: "As of Dec. 31, we had put together a game plan saying, 'This economy looks like it's really getting bad. Why don't we be a little bit prudent?'" eClinical's Girish Kumar Navani told the WSJ. "It changed in four weeks to, 'You will hire for growth; forget hiring for need.'"
How angel investors think. Paul Graham hosted a free conference for aspiring angel investors earlier this month and posted his talk in the form of an essay. It's pretty technical--and it's aimed at investors --but it's worth a read if you're interested in raising cash from angels. Some of the tips: use a standard term sheet (Y Combinator publishes one for free) so you're not spending hundreds of dollars an hour in legal fees to negotiate, use a lawyer with start-up experience, and don't get hung up on valuations since they don't mean much when the company is tiny. "Don't get hung up on mechanics or deal terms," he says. "What you should spend your time thinking about is whether the company is good."
The pains of payroll. Ever wonder why so many owners of small companies are ambivalent about the U.S. government? According, to this piece in The Big Money, it's all about the assorted agonies of paying the payroll tax. Jonathan Webber, the founder of the New West, a media company in the Rocky Mountain region, writes about the sheer difficulties of actually filling payroll taxes for his small company: "What we'd like more than anything is a less cumbersome process and an IRS field rep who was actually empowered to work with us rather than simply scold (and punish) us for missing a payment or paperwork deadline. We were recently told that we had missed a quarterly payroll tax report dating back to 2006—which, in fact, we had not, but the burden of proof was definitely on us."
Calling all young entrepreneurs. New York City Mayor Michael Bloomberg is holding a contest challenging budding entrepreneurs to come up with the next big idea. City Hall is inviting B-school students from around the world to submit business plans, and the winners will receive $20,000 and a trip to the city to meet with VCs, professors, and entrepreneurs. The contest, called NYC Next Idea 2009, is the latest in a series of initiatives to bolster small business in the city.
A sweet spot in the downturn. Call it a comfort food or a cheap indulgence, but candy stores are seeing increased sales during the downturn. The NYT reports that sales are significantly up at many shops, large and small. To quote the owner of the Sweetdish candy store in San Fransisco, “All is well in candy land.”
27 graphics explaining the financial crisis. Flowing Data, a data visualization blog, gathers the “tasty visuals” magazines have put together in the past few months to depict the financial crisis. Check out the number of subprime homeowners to prime homeowners rise from 2005 to 2009, the effects of deregulation, congressional voting on the bailout plan, and golden parachutes—all in eye-friendly infographic form. (via naked capitalism)
WebTV founder eyes video games. The Wall Street Journal has news on a new company founded by Steve Perlman, the entrepreneur who started WebTV. Called OnLive, it allows people to play sophisticated video games over the internet--without a video game consul or a pricey PC. It's like cloud computing, except fun. The article also notes that Perlman's technology incubator, which created the new service, also provided the technology for Brad Pitt's reverse aging in the Curious Case of Benjamin Button. (Via Business Insider.)
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March 23, 2009
Today's news
Getting a Fair Shake from VCs and Google Circa 2000
Posted by Max Chafkin at 11:49 AM
Term sheet red flags. When credit is scarce, investors are apt to get greedy, saddling startups with all sorts of onerous terms like liquidation preferences. (Those require that investors get paid back first--often at a rate of several times their initial investment). TechCrunch has the skinny on another such red flag, the exploding term sheet. Exploding term sheets are essentially offers to invest with a sell-by date. "[T]he goal is to put additional pressure on the company to accept the terms and quickly, without much further negotiation. In particular, they don’t want to see a deal 'shopped,' which is when you take their term sheet and go to other buyers/investors looking for a better deal (which is exactly what you should be doing as soon as you get a term sheet from anyone)," writes Michael Arrington. He recommends simply ignoring the expiration date and calling the bluff. For more advice on negotiating with investors, check out the blog VentureHacks.
Small businesses hurting. The stock market may be soaring today, but the recession continues to present new challenges, says the New York Times which has been tracking five small companies since October. Reporters noted a more hopeful tone in recent interviews. Worksman Cycles in Queens has shifted its product line away from supplying to automakers and large corporations. Instead the trimmed down staff is making food vending carts (which laid-off workers can purchase for only $3,000) and delivery bicycles. A butcher from the Bronx has managed to persuade Con Ed to accept lower monthly payments and his landlord not to raise the rent. And a bus tour operator hired an online marketing director, but cut back on ads that didn’t yield sales and canceled plans to attend two trade shows. Says the head of Worksman Cycles: “If anyone was asking me what numbers we’re expecting, it would not be a reasonable forecast. I can’t really know at this point. I know we’re going to be down. If we’re not down, it would be a miracle. It’s just a matter of are we going to be down 10 percent or 30 percent.”
Department of hindsight. It's easy to make fun of revenue-challenged companies like Twitter and Facebook--until they're multi-billion dollar monoliths. That's the gist of a clever post on Business Insider, which dug up an old BusinessWeek article on Google from 2000. At the time, Google claimed to be booking just $80 million in revenues from selling search advertising. The establishment was very skeptical. BusinessWeek cast doubt on Google's long term revenue prospects and suggested it wouldn't be able to compete with (now) long-forgotten Northen Light and AltaVista. The lesson, says Nicholas Carlson, is that you shouldn't count a company out just because it hasn't figured out a revenue model yet.
Palm’s Pre A threat to the iPhone? Om Malick cites data from Compete showing that hundreds of thousands of people are eagerly awaiting the Palm Pre. At CES, 400,000 people checked out the Pre-related pages on Sprint and Palm’s websites and around 100,000 are still visiting. Malick remains dubious about whether the smart phone can keep Palm from being put out to pasture.
Are immigrant-owned businesses surviving better than most? Independent Street takes a look at a story from the Richmond-Times Dispatch that claims that the values immigrants learned about “being thrifty, avoiding excessive debt, and relying on family support from native countries” are helping them ride out the recession. In some Asian cultures, notes the article, the savings rate is as high as 15 to 20 percent compared to single-digit savings in the U.S. Nico De Leon, the owner of a engineering firm who moved to the U.S. from the Dominican Republic, says, “You are used to bootstrapping. You are used to the idea that you are going to have lean years, possibly quite a few.”
A new age of entrepreneurship? Pointing to a recent New York Times story about the unemployed leveraging their passions into business plans, Bizbox predicts a coming golden age of entrepreneurship. Like the laid-off biotech employee turned jelly-fish-lava-lamp maker (it makes sense when you see the pictures), more people are seizing on the recession as an opportunity.
Or at least a new age of the infomercial. Laugh all you want, but the Snuggie is having a bona–fide cultural moment. And now might be the time to consider your own infomercial--that is, if you’re looking to move the right kind of product. Why? CNN Money breaks it down. Airtime is currently dirt cheap, thanks to big marketers slashing their budgets. And infomercials have often been an effective strategy for entrepreneurs. For proof, see Inc.’s How I Did It with sales legend Ron Popeil.
The world’s cheapest car. Tata Motors, India's largest automaker, debuts what they call the “world’s cheapest car” which will cost about $2000 this week. A Time Magazine reporter who test drove the “Nano” earlier this month reported that while the car is easy to operate and comes with ample legroom, turning on the air conditioner noticeably sapped power from the tiny two-cylinder engine.
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March 20, 2009
Today's news
Undo Button for Email and the Wisdom of Norm Brodsky
Posted by Nitasha Tiku at 10:51 AM
An undo button for email. You heard right. Those geniuses at Google have just released a feauture that allows you to take back an email after you've clicked send. (Techcrunch has the news.) You have to click undo within the first few seconds or so, but it's a vast improvement over the awkward apology email.
Twitter can make you money. Brazil’s best-known TV host, Marcelo Tas, has leveraged his 18,000 followers on Twitter into a gig to help pitch a Spanish Telecom company’s new fiber-optic Internet and TV service in Brazil. As part of the deal, reports the Wall Street Journal, Tas has to mention the service in his tweets. Twitter’s popularity has surged in the past year, with 7 million unique visitors in February, compared to 500,000 in March, 2008. And big name companies like Disney have already brokered deals with widely followed Twitterati. Where sites like Facebook have had a hard time attracting significant ad dollars because advertisers are reluctant to put ads on pages whose content they don’t control and remain wary of “banner blindness,” Twitter’s “rapid-fire, real-time and mostly public messages” could change that, says the article. So far, about 3,300 Twitter users have signed up with Twittad, a firm that connects users with marketers who want to place ads. But don’t expect an answer to online advertising, one expert cautions, “Not everyone is on it yet."
Norm Brodsky, Jack Stack drop wisdom at GrowCo. Inc.'s inaugural GrowCo conference continues today in Orlando. To follow the festivities use the #growco tag on Twitter, where Inc. editors and attendees are broadcasting what they've learned, 140 characters at a time.
Rhode Island strip club to host a job fair. The Foxy Lady strip club in Providence, Rhode Island is taking advantage of the state’s floundering economy by hosting a job fair to fill around 30 positions, from strippers to DJs to barteners, reports BusinessWeek. Rhode Island’s economy is among the country’s worst, with an unemployment rate of 10.3 percent in January. But the Foxy Lady is somewhat insulated. "It's taken a hit," says manager Bob Travisono, "It's not as bad as restaurants and stuff like that. In times like this, they seem to drink their sorrows away."
Camera maker cashes out. Pure Digital's Flip video camera has gotten lots of love from technology reviewers over the past year or so for creating perhaps the first camcorder that doesn't make it's users feel like dorks. The company has sold some 2 million of the easy-to-use cameras since they were released in 2007. Today, the Wall Street Journal reports that Cisco is buying Pure Digital for $590 million. Fred Wilson uses the deal as an opportunity to address the question of what constitutes a good return for venture capitalists. The answer: it depends on when the investors put in their money. (He concludes that this deal was in fact a good return.) His blog post is pretty technical but its worth reading for any entrepreneur who hopes to understand how VCs think.
Auto suppliers get a bailout. The administration has created a $5 billion fund to support auto suppliers specifically. They’ve been hit hard by the credit crunch—without assistances, as many as 500 could go belly-up within 60 days. The majority are small businesses already operating under tight margins, but if they go under, it won’t be pretty for bigger car manufacturers, even the relatively healthy ones like Toyota. Plus, the nation’s roughly 1,500 auto parts manufacturers employee half a million workers.
When Wal-Mart moves in. The saying goes, “If you can’t beat ‘em join ‘em” but when it comes to small businesses competing with Wal-Mart, one Dartmouth professor is advising the opposite. His study, discussed at Independent Street, examined the impact on small businesses when a Wal-Mart moves in. It’s not a pretty picture. Instead of competing directly with the big-box giant with bargain prices, he suggests diversifying and offering products--like high-end goods--to appeal to a different group of customers. Take a look at this feature from the Inc. archives about what happens to one New England community when Wal-Mart comes to town—including advice from Ken Stone, one of the first researchers to study the long-term impact of Wal-Mart’s presence on small businesses.
What’s Portuguese for “JetBlue”? JetBlue founder David Neeleman--who was dismissed by the airline’s board in 2007--is taking to the skies once more with a Brazilian upstart called Azul. In the Fortune Small Business article, Neeleman says that he plans to triple the Brazilian air travel market, to 150 million flights a year, by using tricks he picked up while at JetBlue. Brazil’s up-and-coming affluent citizens still take lots of long-distance bus journeys as opposed to domestic flights which can cost up to 50% more per mile than in the U.S. Check out Jason Del Rey’s Q&A with Neeleman from our June issue.
Thinking of starting your own business? Now is, oddly enough, a good time: low real estate and labor costs, plus the motivation to buck the trends and succeed. But it’s not going to be easy. Here’s a primer from US News on getting started. Financial adviser Ylisa Sanford Seymour says stay away from discretionary service businesses like spas and salons, make sure your family is on board, and try to use traditional sources of funding, rather than loans from friends.
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March 19, 2009
Today's news
How to: Monetize the Internet, File Taxes, Give Bonuses
Posted by Nitasha Tiku at 10:46 AM
Monetizing the internet. Any entrepreneur worth their bootstraps will tell you: revenue can’t depend on web advertising alone. Acknowledging the glut of ad inventory on the web, Time Inc. announced yesterday that over the next six to eight months, it’s going to start experimenting with charging readers for content on sites like SI.com, Time.com, CNNMoney.com, and EW.com. Time Inc. EVP John Squires told the Silicon Alley Insider, “Certain content area of our sites will try some pay tests, just to see what will drive consumers to get out their wallets or subscribe to one of our magazines." Peter Kafka points out that the New York Times has been publicly toying with the idea for some time. And sites like ESPN.com have long used a “freemium” strategy (some free content, some paid premium content). Sites that have failed to monetize beyond some web ads or plans for a premium services (ahem, Twitter, Facebook, Tumblr), might want to take note. But what about consumers? What would you be willing to pay for?
A tax cut that could make a difference. Could we be reaching a tipping point against the payroll tax? BizBox points out just how wrong-headed that could be during a recession: It’s both regressive, because it’s phased out as your income approaches six figures, and literally a tax on work. And it contributes to the massive headache that tax-related paperwork causes small businesses. Liberal Hendrik Hertzberg and the right-leaning NFIB both want either a temporary or permanent break from it. At a time when everyone is focusing on immediate job creation, it’s a compelling idea.
Tax tips from former auditors. Business Week has some advice from a former IRS auditor. As a small business owner, you’re more likely to get audited than an employee, so be sure to dot your I’s and cross your T’s. Don’t forget payroll taxes, be sure you’re properly classifying independent contractors, and have a paper trail to back up cash payments.
Credit rate hikes killing small businesses. More dispatches from the credit crunch: Skyrocketing credit card interest rates are forcing small businesses to shut their doors, Bloomberg reports. Many owners are abandoning cards as they become too expensive, even as bank loans are drying up. According to a recent survey, 3 out of 4 businesses with fewer than 500 employees are getting hit with tougher credit-card terms—and half of them depend on plastic for financing. For more funding alternatives, take a look at Inc.’s guide to angel investors nationwide.
How to do bonuses right. Blogger and VC Fred Wilson weighs in on the the bonuses at AIG (he's canceling his policy, for one thing) and offers his own guidelines for how to give out bonuses. He recommends compensating employees mostly with equity and making all bonuses subject to board approval. For cash bonuses, which may be necessary in private companies, he outlines his favorite formula: a long term approach based on EBITDA. Writes Wilson, "There is no question that the word 'bonus' will now be political poison. And that is unfortunate. Because I believe that bonuses, when properly constructed, can be an excellent way to compensate executives."
Is time running out for Tim Geithner? Business Insider and Gawker have started the countdown on Tim Geithner’s tenure as head of treasury, with the New York Times jumping on the Geithner-questioning bandwagon this morning. After the AIG bonus debacle and Obama’s asserting his “complete confidence” in the secretary yesterday, it’s only a matter of time, they say. Any guesses on who might replace him?
Citysearch fights a dip in readership by going hyperlocal. In 1996, Citysearch was one of the first online companies to create an online version of the Yellow Pages. But with competition like Yelp, its February viewership saw a 21 percent drop year over year where Yelp’s monthly visitors more than doubled. “We got a little bit stale. Our consumers were telling us to get modern,” CEO Jay Herratti told the New York Times’ Bits Blog. To that end, it’s becoming more local, and more social—going from 150 city guides to 75,000 neighborhood guides (sushi in the East Village vs. sushi in Manhattan), which it hopes will eclipse Yelp (currently only in 24 cities). Since November, Facebook members have been able to see their friends favorite restaurants and bars show up at the top of their Citysearch listings and publish Citysearch reviews via Facebook Connect. Borrowing a page from Yelp, user reviews now get equal prominence with editorial ones. In the past 4 months, daily registrations have tripled. Herratti’s approach to the competition? “You watch and then you get better.”
EntrepreneurSpace? The SBA just announced a new website meant to act as an online community for small business. Ohmygov.com likes the idea but panned it as “little more than a clunky forum more reminiscent of Web 1.0 than Web 2.0.” Still, there is some potential here: “Eavesdropping on one conversation between aspiring government contractors demonstrated the power of information sharing, even in such a basic platform, as one firm learned the rules of becoming a veteran-owned small business from the other.”
Trimming severance packages. The outlook for individuals laid off from small firms is bleak—not only do they enter a brutal job market but according to the WSJ, employers are scaling back severance packages too. One of four firms polled in December said that they planned to change severance policies, some by reducing cash payments others by trimming benefits.
Recommendations for the new administration. Despite some stimulus for small business, challenges remain, writes Palo Alto Software founder Tim Berry at the Huffington Post. Berry cruised the web and gathered some recommendations for the Obama administration: redouble funding for SBDC’s and SCORE, offer bigger tax credits for private business investments, and fix the health care problem. Sound advice, but we fear it will end up filed under “easier said than done.”
Best states for business. According to Chief Executive magazine, they are Texas, North Carolina, Florida, Georgia, and Tennessee, in that order. The Lone Star State was a particular standout--seeing its gross state product grow by 4.2 percent, compared to 1.9 for the nation. The worst states? Massachusetts, New Jersey, Michigan, New York, and California. The rankings are based on a survey of more than 500 CEOs who considered business climate, regulation, and quality of life, among other criteria.
You can’t have that doggy in the window. A $300 robotic triceratops toy, named Kota, released last year by Hasbro Inc., is facing extinction, according to the the WSJ. Not surprisingly, parents are spoiling kids less and less with pricey playthings these days. They’re buying them less expensive items, especially big gifts like bikes and scooters. Some parents interviewed think it’s a shame, but others see the downturn as opportunity to teach their toddlers lessons in fiscal responsibility.
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March 18, 2009
Today's news
The Bonus Conundrum and Saving Money on Calls
Posted by Max Chafkin at 11:16 AM
Bad bonus? For a second day in a row, the business press is focusing on the $165 million in bonuses AIG paid to employees who helped bring the company down. The Wall Street Journal looks at who these people are and how much they made, discovering that 11 of the 73 people who got more than $1 million in "retention" bonuses have already left. The numbers are staggering--and as the New York Times points out, ownership (that's you and me now) isn't happy--but the fireworks raise another question: How should companies retain employees during bad times. Inc.'s Kasey Wehrum tackled this question in the November issue and discovered some good ideas: give less cash and more equity, structure bonuses to reward employees for intangibles like hard work, and, if bonuses are being cut, alert employees well in advance.
Obama's internet whiz (and Facebook cofounder) moves on. FastCompany's Ellen McGirt has the scoop on a move by Chris Hughes, a Facebook founder who most recently worked with president Obama on his digital campaign, to a venture capital firm called General Catalyst. The Cambridge VC has backed Kayak and Birghtcove. When you're done catching up on the latest, check out McGirt's excellent cover story on Hughes in this month's FastCompany.
Another band goes entrepreneurial. The Counting Crows have fired their record company and struck out on their own, Techcrunch reports, joining bands like Radiohead and Nine Inch Nails which have decided to self-publish their music. Front-man Adam Duritz explains it thusly: "The internet opens a world of limitless possibility, where the only boundaries are the boundaries of your own imagination." Techcrunch thinks this will lead to "an explosion of music related innovation." One such innovation: the name your own price album, which Radiohead tried last year and which Inc. magazine tried to copy. Curiously, what worked for an internationally renowned rock band didn't so much work for us.
Calling for nothing. The impending release of Google Voice is just the latest in a series of developments that can offer small businesses basically free phone services, Gigaom reports. The article recommends using Skype or Google voice and avoiding paying for any metered phone service: “If you’re paying anything more than a penny or two a minute for calls, except for certain international routes, you’re getting ripped off.” Once the phone system is retooled, check out this Inc. story on free services for the rest of the office.
Sun shines on SXSW. Despite all the hand-wringing outside of Austin, within South by Southwest, tech entrepreneurs hope to be part of the solution to the recession, the LA Times reports. A workshop titled "What do I do with myself, now that the economy has collapsed?" featured a panel of dot-com survivors who lived through a bust and regrouped. "Broke is the new chic," said Bryan Mason of San Francisco, who led a panel that urged people to quit their jobs and start new ventures.
Microbreweries, a recession-friendly startup. Despite the downturn, the WSJ says that demand for microbreweries is on the rise. New openings of microbreweries last year marked the highest number since 1999. The costs of starting-up are still steep though when you factor in property, brewing equipment, and other assets needed to get going. One Florida-based entrepreneur says he has leaned on the helping hands of volunteers to get his brewery up and running. Luckily, he can reward them with free beer.
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March 17, 2009
Today's news
Patent Problems, Airline Upgrades, and Bank Start-ups
Posted by Ryan McCarthy at 11:06 AM
Patents are increasingly pending. If you’ve filed a patent application recently, don’t count on a speedy turnaround. The U.S. Patent and Trademark Office, which is funded by fees from patent applications, is hurting from the downturn. According to Reuters, some industry specialists predict that applications could drop as much as 10% this year. The Office has halted hiring which, the article says, only makes the clearing of an already hefty backlog of applications more daunting.
Upgrades abound Facing a shortage of customers willing to pony up for premium seats, airlines are making it easier to upgrade tickets, reports the WSJ. Some tantalizing deals: "Last week, UAL Corp.'s United Airlines offered a $236 round-trip first-class fare between Boston and Miami; British Airways PLC and other carriers are offering a $1,800 (before taxes and fees) round-trip business-class fare between New York and London with a 14-day advance purchase requirement. That's 84% below the standard $11,172 fare."
Not-so-"shovel-ready." The Obama administration sold the stimulus package with the idea it would immediately create jobs rebuilding the nation’s crumbling infrastructure. But, as the Wall Street Journal reports, the process of spending the money has hit some roadblocks. “Shovel-ready” apparently means four months in most states, even for critical projects like replacing bridges that are literally falling apart, because the bidding process takes time. In fact, Joe Biden’s model project will have to wait until June.
File under "Be Greedy When Others Are Fearful." A Banking Boom?American banks lost $26.2 billion last quarter. But although established banks are hurting, it's a great time to start a new bank, according to the Wall Street Journal. It's not as crazy as it sounds. Big banks are suffering from bad balance sheets and serious branding problems. That's created an opportunity for start-up community banks. The Journal writes of one small bank in Springfield, Massachusetts that has been advertising "no baggage and no bad credits" and a "bail in" program. Lest you think that opportunities are limited to banking, remember that a recession is a great time to start a company. Say it to yourself five times if you have to.
An Easy Rider that's easier on the environment. Everyone's waiting for the electric car. But, the LA TImes suggests powerful electric motorbikes could be a hot new market California, not surprisingly, is home to several start-ups aiming to dominate this market.
Bad News for the Bad News Bears. The latest victims of the downturn? Little Leaguers. ABC News says that parents pinched for money are cutting back on Little League memberships. Some leagues are hurting too because small businesses that paid for sponsorships in the past have called it quits. Where's Chico's Bail Bonds when you need them?
Beware the "regulatory boa constrictor."Across the country, entrepreneurs are clamoring to be heard amidst a spate of state and federal economic recovery plans. But in California, a new state law would require legislators to consider the impact of laws on small companies, and force lawmakers to engage the entrepreneurial community while drafting legislation according to the LA Times. "Small businesses from Chico to Indio are telling me the regulatory boa constrictor is strangling them out of business," said John Kabateck, California director of the NFIB.
Where to watch for the recovery. Are we there yet? Probably not, but tech consultant Gene Marks has a few signs to watch for over at Business Week. He says to keep an eye on Expedia’s site traffic and the Baltic Dry Index.
March 16, 2009
Today's news
How to Find Good People and Getting a Loan Gets Easier
Posted by Max Chafkin at 10:58 AM
How to find talent in unlikely places. What do people who make money by recruiting talented people do when the economy tanks? They keep recruiting, of course. The New York Times talked to a all manner of talent scouts--venture capitalists, head-hunters, and record executives--for a survey on recruiting published yesterday. The lessons are not all that surprising--the article recommends looking in unusual places and casting a wide net, for instance--but some of the methods used are. We learn that the VC Ram Shiram, an angel investor in Google, looks inside Stanford computer labs and prefers to invest in entrepreneurs who are starting their first or second company. Meanwhile, Sequoia's Michael Moritz uses a founder's salary as a proxy to gauge commitment: "Bare-bones pay is generally a good sign; it means the founder wants every possible dollar to go toward the success of the company, even if it means personal sacrifices."
Lessons from a failing industry. Clay Shirky's new essay, which compares the current upheaval over digital technologies to the creation of the printing press in the fifteenth century, is ostensibly about newspapers and the media business, but it contains an implicit warning against self-inflicted blindness that could apply to any industry. Shirky has some interesting stuff to say about the future--he thinks that entrepreneurs like Craig Newmark will likely create the institutions that replace newspapers--but the best part of the essay is the beginning, when he describes how newspaper companies failed to consider the possibility that their industry was undergoing a revolution: "When reality is labeled unthinkable, it creates a kind of sickness in an industry," he writes. "Leadership becomes faith-based, while employees who have the temerity to suggest that what seems to be happening is in fact happening are herded into Innovation Departments, where they can be ignored en masse." A sound warning.
The mobile web is huge. On his blog, VC Fred Wilson passes along some remarkable numbers from ComScore, which indicate that the mobile web is one third to one half the size of the Internet. Some 63 million people access the mobile web each moth in the U.S., if you're scoring at home. If these numbers are even close to correct, marketers can't afford to ignore the mobile world. For more on the marketing possibilities in the mobile web, see our story here.
Geeks converge in Texas at SXSW. For entrepreneurs hoping to launch a technology startup, this weekend's South by Southwest conference, which is as much about partying as it is about panels, has become a key marketing opportunity. The New York Times explains the unique challenge of selling your startup to the cool kids of tech: "But wooing the technorati is a tricky business. Start-up companies are aware that in-your-face marketing is a good way to scare off the kinds of people who go to South by Southwest." Meanwhile, Kevin Rose, the founder of Digg and the subject of a November cover story, launched a new service that makes connecting with tech insiders (not to mention Shaq, Britney Spears, and Lance Armstrong) a lot easier. It's called WeFollow and it's a user-generated list of top Twitter users. (Yes, that's Rose at the top of the tech list with 293,147 followers.)
The best place to start a company. It's not Silicon Valley, according to a GigaOM report from SXSW: “The model of tech getting used to VCs throwing crazy amounts of money at them is just crazy,” says Mike Maples, Sr., an angel investor who formerly worked at Microsoft. Other panelists decried the VC funding model as shallow and limiting for entrepreneurs. Check out an on-location video at the end of the entry.
Obama’s new plan to increase lending to small businesses. Today Obama and Geithner will announce the administration’s plan to make lending to small businesses more attractive. The plan revolves around two SBA programs: 7(a), which allows small businesses to procure government-backed loans up to $2 million through the SBA, and 504, which guarantees up to $4 million worth of economic development projects for small businesses, reports CNN . Here's the nitty gritty: Loan guarantees for 7(a) now cover 90 percent of loans below $150,000. The administration will also temporarily waive upfront fees for 7(a) loans that banks charge borrowers, which can be as high as 3.75 percent. And, starting today, fees for both lenders and borrowers on any new 504 application will be eliminated. The White House is hoping that decreasing the cost of borrowing will make it easier for small businesses to get the credit they need to make new investments. As Inc.’s Robb Mandelbaum noted a few weeks back, the SBA also withdrew earlier plans to limit goodwill financing to 50 percent of a loan after experts and business owners protested. Instead, through August 31st, the agency will review each loan where goodwill financing exceeds the new rules.
Buyer’s market for businesses? A recent survey shows that 80 percent of business dealmakers think it’s a buyer’s market, the Chicago Tribune reports. "We had a record 2008, and so far our buyer inquiries are up 200 percent over the same period last year," said Domenic Rinaldi, managing partner of Sunbelt Business Brokers in Chicago. "There's so little security in corporate America. Owning a business is a way to gain control of their destiny." As the Tribune points out, loans are low for those who qualify, the job market is incredible for employers, and many businesses will be more profitable after the recession. On the other hand, business brokers, like real estate agents, always say it's a buyers market, so these survey results aren't that surprising.
When fighting off competition, remember the four R’s. That’s regulation, reputation, regeneration, and real estate, and they’re all strategies for guarding your market share against upstarts. Over at Business Week, Steve McKee recommends these barriers, which you can erect to deter as many potential competitors as possible. They might not all work for your business, but these days, you need to be especially vigilant about protecting your bottom line.
Small business owners are optimistic. A recent survey says that most small businesses were profitable last year and have high hopes for the future. The survey results, available at FOX Business, reveal that 69% of small businesses were profitable in 2008, and 70% said that they expect their businesses to still be in operation in five years as opposed to being closed, sold or transferred.
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March 13, 2009
Today's news
Wealth Declines, Default Entrepreneurs, and Zuckerberg Visits Oprah
Posted by Ryan McCarthy at 10:15 AM
Your customer is now 18 percent poorer. The average American family saw an 18 percent decline in their personal wealth, reports the Wall Street Journal. That's a total decline of $11 trillion. If you think this is a reason to cut prices, tread carefully. Check out our guide to recession pricing from this month's issue here.
Founder of Cape Cod Chips dies. Like many entrepreneurs, Stephen Bernard's career followed a circuitous path. After getting a degree in economics, he hitchhiked cross-country, fought forest fires in Alaska, sailed to the Turks and Caicos Island, and fished for tuna out of New Bedford, according to an AP obituarytoday. Bernard would go on to found Cape Cod Potato Chips, which brought kettle-cooked chips back into vogue and attracted hundreds of thousands of visitors a year to its plant in Hyannis, Massachusetts. For more on Bernard's life see our coverage.
Entrepreneurial, by default. Today from the New York Times: Out of work and out of options, more people are looking for work as freelancers, aided by websites that allow them to advertise their work and bid on contracts. Traffic for places like Elance, oDesk, and Guru where up last year and looks likely to increase again. The sites deduct a commission, freelances connect with their clients, and businesses are able to fill gaps created by layoffs and hiring freezes.
Lumber as Object Lesson. At the Future of Web Apps conference in Miami last week, 37Signals Founder Jason Fried picked an unusual topic in a talk delivered to software developers: byproducts of manufacturing processes. Beginning by pointing out that web companies still hadn't figured out how to make a lot of money from many new technologies, he described how the lumber industry discovered it could make money selling sawdust. Then he urged software businesses to consider selling (or finding ways to make money from) their intellectual byproducts. Fried's company 37Signals has created ancillary revenue streams by selling books. He summarizes in this blog post: "Think hard about what you do. Look closely at everything you do. There are probably by-product opportunities everywhere. Hell, even your office space could be a by-product. You rent it to work, but what about after hours?"
BBB cracks down. Across the country, the Better Business Bureau is increasing its efforts to combat increasingly rampant frauds that target businesses and consumers. In Milwaukee they’re targeting mailings from debt consolidators reports ABC’s WISN, while in Arizona the Daily Star reports on free classes for business owners dealing with the rocky economy. Chicago’s eNews Park Forest reports on another BBB initiative: warning small businesses to be wary of scams involving bogus awards.
Facebook founder talks to Oprah’s. Tech bloggers are speculating about what Mark Zuckerberg’s appearance on Oprah later today. Sure to be on the agenda says Valleywag is Oprah’s new ad-friendly Facebook page. AllThingsD hears that an as yet unnamed celebrity Facebook addict might call in to talk up the service. The NYT's Brad Stone says Zuckerberg logged in some serious hours with his PR advisors earlier this week to prepare.
Uncle Sam wants you (to work for him). Independent Street has a roundup of resources with great tips on how to get government contracts. The federal procurement process is complicated, and you’ll have to navigate a patchwork of rules differing from agency to department to administration. But thanks to the stimulus package, there are plenty of opportunities.
March 12, 2009
Today's news
“Search Funds” and Google Voice’s One Phone for Life
Posted by Nitasha Tiku at 11:25 AM
Google muscles in on voice. “One phone number, for all your phones, for life.” That’s the promise from Google Voice, the company’s game-changing new service. Among other features, it enables calls to ring on multiple phones, live screening of calls, transcription of voicemail and online archiving of text messages. As TechCrunch notes, “Google is finally bringing us the voice service that was promised back in 2006.” That was when Google bought GrandCentral, a startup that they used as the base for Google Voice. The new service threatens the telecomm ecosystem—including tech startups. The New York Times reports that the service will hurt big players like Skype, by undercutting their VOIP calling rates. Smaller startups like Spinvox and PhoneTag, which offer voice mail transcription for a fee are in dire peril. The big drawback for consumers, TechCrunch points out, is getting a new number—and telling everyone you know. After that, the world of telephony is Google’s for the taking.
Want to run a business, but not start one? The New York Times has a piece today on search funds, a growing trend in financing. A couple of aspiring entrepreneurs, typically bright young b-school grads, want to start a company, but they have no practical experience. So they go to investors, who agree to fund their search for and possible acquisition of a promising, profitable business. Ideally, they grow the business and everyone makes money. It’s sort of like venture capital, but investors fund start-up entrepreneurs, rather than businesses.
How much equity is enough? On his blog, VC Bijan Sabet has some brief advice for entrepreneurs looking to reward advisors or investors with equity. "Unlike employees, advisors may not be helpful as time goes on. They may become distracted with other things on their plate. With employees, options typically vest over multiple years. It’s hard to use that type of vesting schedule with advisor but I would at least think about it in those terms. "
How to save money on travel costs. The Wall Street Journal has a curious front page story on how Goldman Sachs has been radically cutting expenses by forcing its employees to stay at in (gasp!) rooms at the Embassy Suites which cost $250 a night (compared to $495 a night at their customary sleeping quarters, the Ritz). The article goes through the horrors that Goldman bankers are subjected to: poly-cotton blend sheets (with scandalously low thread counts), undignified wake-up calls that sound like a rooster, and a river view of New Jersey. Assuming that you've already forced your employees to make these big sacrifices, you may want to check out Hannah Clark Steinman's blog, which has the latest deals on everything from travel to technology.
More trouble from the mortgage meltdown. Small builders are facing stiff competition from foreclosures, the Wall Street Journal reports. Houses they built are back on the market at fire-sale prices, undercutting their attempts to sell new homes, and many buyers are limiting their searches to just foreclosures. While larger companies are cutting expenses and restructuring debt to stay alive, a lot of smaller contractors are going under.
For virtual startups, VC funds aplenty? Om Malick says startups making virtual goods, online games, or virtual worlds aren’t seeing a downturn. His evidence: in the last month alone, three companies have won the VC lottery megamillions, including Greystripe, a games-related advertising network, an online social gaming company called SuperSecret, and Offerpal, a startup that links virtual currency to real-world marketing deals. Together, they saw $30.5 million last month. Malick says investor interest mirrors the growing popularity of social games and virtual worlds, but he also starts the post with “if there is an economic crisis”, so we remain skeptical.
Jobless rates in January rose sharply across the country. In the counterpart to yesterday’s story about local economies planning their own stimulus, the WSJ looks at January unemployment numbers. The picture is grim. Nearly half of states saw unemployment rates rise a full percentage point, “a remarkable jump.” The worst cases were in manufacturing heavy states in the Midwest, and in states that suffered the most from the housing bust. Export-heavy states, which were buoyed until recently be overseas demand, saw numbers jump as the recession spread around the globe. Unemployment in South Carolina, home to international companies and other exporters, skyrocketed 4.7 percentage points in the past year. Compare recent data by state and year in the Journal’s unemployment chart.
Is the recession slowing? Probably not, but retailers saw a possible glimmer of hope in February, with sales declining only 0.1 percent, compared to the 0.5 percent drop that economists anticipated. Analysts cite the affect of declining gasoline prices on disposable income. But fluctuating numbers like the 1.8 percent gain back in January make experts wary of extrapolating from any of this data. “We’re a little cautious that this won’t last,” said Rosalind Wells, chief economist for the National Retail Federation tells the New York Times.
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March 11, 2009
Today's news
Inside the Credit Crisis and Life after Google
Posted by Max Chafkin at 11:36 AM
How bad is the credit market? Really bad. New York Times columnist Joe Nocera heard again from one of his readers, a man referred to only as Anonymous Banker, who describes a rather grizzly credit scenario for a hypothetical $10 million company. The details are a bit wonky, but the big picture is frightening: for small and medium-sized companies loans aren't just becoming harder to get, credit lines are being withdrawn and banks are requiring that some outstanding loans be paid in full. This is happening, it turns out, to solid businesses that have never missed a payment. Not pretty.
Dodgeball founder tries again. What do you do when you create a cool product, sell it to a giant company, and then watch it struggle as your new bosses ignore what you made. That was the experience of Dodgeball founder Dennis Crowley, whose now-defunct mobile social networking startup allowed bar hoppers to broadcast their whereabouts to friends. The service predated Twitter but never caught on--and Crowley blamed Google, which acquired the company in 2005. His new venture, which he unveiled last night, offers a similar promise and has a similar name: Foursquare. Alley Insider has the details.
The trouble with online advertising. Noah Brier, head of planning and strategy from the Barbarian Group isn’t afraid to say it: “Online display advertising sucks.” The main problem, as he writes in AdAge, is that display ads need to be aware of where consumers live and what they're reading. “At least it should know what site it's on and what people are there for. I mean, we spend a lot of time thinking about our consumer, right? . . . However, we give little or no thought to what they're actually doing once they get there. What content are they looking at? What's the difference between home-page visitors and lower-level visitors?” The reason those questions aren’t considered, says Brier, is that the math gets done early on—everybody picks 3 sites that fit that IAB guidelines. But without knowing where the display is sitting, the focus of the creative is out of context, forgoing the web’s biggest advantage: its ability to cheaply reach smaller groups with targeted messages. To fix the problem, Brier recommends more versions of ads and custom ones for larger sites. Making an ad look like it belongs on the page is another way to avoid “banner blindness.” (via AllThingsD)
Local governments try their own stimulus packages. The Wall Street Journal has a front page story that chronicles the efforts of local governments to help businesses and workers. The story focuses on a town in Texas that, despite a predominately conservative city council, is creating a miniature version of the old WPA. Meanwhile other towns are making their own efforts to jump start growth. Lancaster, California, for instance, is offering $30 gift cards to anyone who spends $300 at local businesses and paying vehicle registration fees for anyone who buys a car locally. And New York City is spending $15 to try to turn laid off investment bankers into startup investors.
Chinese manufacturing struggles, gets cheaper Chinese exports dropped a whopping 17.5 percent in January, Bloomberg reports. Some 20,000 small and medium-sized companies in China's Guandong province have closed since October. As this New York Times piece suggests, Chinese manufacturing has become a lot less expensive: "Producer prices were 4.5 percent lower last month than a year earlier, after having shown annual increases of as much as 10 percent as recently as last summer."
You think your company has it tough? In the Middle East, Global Hosted Operating System, a tech startup, faces a challenge as big as the global financial slump. Their employees are separated by the West Bank barrier separating Israel and Gaza. CNN reports that the company's Israeli CEO can’t visit his headquarters in the West Bank. The company's flagship product is a virtual desktop for web-based applications. “I thought, 'Maybe I can combine my business interest with my ambition to do something for peace and to help create jobs for Palestinians,'" said founder Zvi Schreiber.
One smart cookie. How to boost sales during a recession? Eight year old Wild Freeborn had a rather sensible answer: YouTube. Within two weeks, she had more than 700 online orders in her North Carolina neighborhood. But the Girl Scouts of the USA, receiving complaints from other parents who suggested that Freeborn's business practices were anti-competitive, ordered the scout to take down her video and go back to old fashioned cold calling. Newsweek reports on the story (with Freeborn's video, "Buy cookies! And they're yummy!") here.
Advice for tough times. When your business’s growth stalls, don’t guilt-trip yourself. That’s what Business Week columnist Steve McKee urges in this excerpt from his new book, When Growth Stalls. Instead of focusing on who caused problems—especially those caused by external circumstances—concentrate on what you can do to solve them. For more tips on how to tune-up your company during trying times, check out Inc.'s feature from our January/February issue, with tips from the founders of Whole Foods, Intuit, and Cisco.
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Global Business
Have American Entrepreneurs Lost Hope?
Posted by Jason Del Rey at 11:03 AM
Earlier this week, the Times published a post on its Bits blog focusing on a recent interview with Jack Ma, founder of the giant B2B site Alibaba.com, and CEO of its parent company, Alibaba Group. Ma, who we featured last year in a How I Did It, told the Times that he believes the global recession will last three to five years and "If you don't accept that, you are in trouble."
Ma also shared his not-so-upbeat view on the current state of entrepreneurship in the United States. "You don't see the hope here," he said. "This time they are waiting for the government."
Ma's statement didn't sit well with at least one reader: Mitch Free, CEO of MFG.com, an Atlanta-based competitor of Alibaba.com, which former Inc. staff writer (and current Times writer) Stephanie Clifford profiled in our May 2008 issue. "While there is concern – and we should all be concerned – the spirit and confidence of grassroots manufacturing and entrepreneurship here is far from broken," Free wrote in the blog's comments section. "I...hope that (Ma) takes the time to visit some of the U.S. manufacturers and businesses that are fighting these business conditions to develop and grow. I think that doing so may give him a more accurate perspective of the American spirit."
Free might be on to something here. Over the past year, my colleagues and I have spoken with dozens, if not hundreds, of entrepreneurs who are battling through the recession with ingenuity, innovation, and hard work. That's a pretty good sample, but still just that. So is there any truth to Ma's assertion?
March 10, 2009
Today's news
New Retirement Accounts, Credit Cards, and Lay Off Blogs
Posted by Ryan McCarthy at 10:08 AM
Regulatory changes coming for retirement accounts. Bizbox and the Wall Street Journal take a look at Obama’s new budget, which may force business owners to set up retirement programs for their workers. For employers that don't have retirement plans for their employees, the new rule would for them to establish direct-deposit IRAs. It's sure to be a serious headache for entrepreneurs. As you may expect, the National Federation of Independent Business and the National Association of Small Business are opposed to the change. There are concerns that small businesses could get sued for mishandling individual retirement savings or would have to adopt newer, more complex (read: expensive) payroll systems.
Blogging layoffs. Laid off workers are increasingly turning to blogs to chronicle their experiences, according to an article in today's Journal. "For many, it's therapeutic and a way to connect with others in the same situation," writes Alina Dizik. "But...some bloggers have angered former employers with their candid writing." The upshot? Companies contemplating layoffs should be aware that those decisions could quickly become public information, whether they issue or a press release or not.
Credit cards the next credit crunch? So says Meredith Whitney—a former Oppenheimer analyst, wife of a pro wrestling star, and now head of her own advisory group—in a chilling op-ed in today’s WSJ. Whitney had the attention of financial community after being one of the first to call the crisis on Wall Street. Whitney thinks we’ll see that $2 trillion in credit retracted by card providers in 2009, at least a 57 percent reduction. Some causes: an overreliance on FICO scores, lax underwriting standards, and credit limits set based on an an applicant's zip code.
A VC summer camp. TechCrunch reports that the VC firm Highland Capital is running a summer program for student entrepreneurs. Highland is offering stipends from $7,500 to $15,000 to graduate or undergraduate students who are involved in a start-up that hopes to operate in one of its areas of expertise. Student entrepreneurs who are accepted into the Summer@Highland program will receive a sponsor from the firm and attention from Highland's VCs, but won't have to give up any equity.
Back to basics. People do crazy things during boom times--like convince themselves that stuff that once cost money should be free. That's the contention of David Heinemeier of 37Signals. "It seems that the web has been so thoroughly infected by the memes of 'the future is free', 'we’ll all live from ads', 'VC money will get us there', and 'acquisition is nirvana' that it has almost lost its faith in the simpler ways," he writes. Heinemeier says that start-ups hoping to succeed in this economy must go back to basics, which means bootstrapping and collecting actual revenues from the beginning. "I think the days of the traditional San Francisco start-up approach are numbered. It’ll be flushed down the drain along with CDO’s and zero-down mortgages."
Twitter as direct mail. Maggiano's, a Dallas-based chain of Italian restaurants, is running a Twitter promotion that has garnered it over 1,000 followers reports Silicon Alley Insider. In exchange for messaging their friends about Maggiano's on Twitter, participants can earn a chance to win a $100 gift certificate. Of course, we're all accustomed to trivial updates on Twitter -- but will promotions like this be seen as spam or a creative marketing ploy?
More on student consultants As we discussed here, student consulting can be an underutilized source of advice for small companies. The L.A. Times has more in this piece. "It's amazing how many small-business owners kind of think the same way when they've been in business for a while and hit a wall: Where do I go from here? How do I get bigger?" Suzanne DeRossett, owner of Empire Building Services, said to the L.A. Times. DeRossett paid $1,250 to Cal State Fullerton for advice as her staff grew from 50 to 70 employees. The story reports that some programs cost a small fee, others are free, and the help offered can range from agribusiness to nanotechnology.
Small business confidence falls again. The NFIB’s small business optimism index dropped again in February, reports Reuters. Owners continue to cut jobs and compensation, and from the looks of it, matters won’t improve this quarter.
March 9, 2009
Today's news
Lessons from a Target Vendor; An Investor Search Engine
Posted by Nitasha Tiku at 11:10 AM
Betting on green, even in this economy. Rob Walker has a nice piece in the NYTimes Magazine for anyone selling to national retailers. He looks at how Recycline, a company that recycles #5 plastic into sleek affordable products like toothbrushes (we profiled them in our first Green 50), is coping with the recession—particularly when its biggest distributors (Target and Whole Foods) are struggling. Recycline says it's seen sales, selection, and distribution for its Preserve line of household products grow slightly thanks to a lower price point ($2 for a toothbrush), plummeting demand for source materials like plastic, and attention-grabbing displays like a Whole Foods scheme called Gimme 5: where stations set up to collect #5 polypropylene plastic, which is then converted into Recycline products, display prominent Preserve advertising near the front of the store. It’s the differentiating factor retailers looking for, says CEO Eric Hudson. Whole Foods is notorious for demanding that its vendors promote products with in-store displays and samples, often at their own expense. Have you heard of any other stand-out initiatives?
An investor search engine. That's what Angelsoft is calling their new platform, which also allows startups to broadcast their business plans to over 400 angel investing groups and scores of VC funds. In an industry that's long been impenetrable to entrepreneurs not in Silicon Valley or New York, Angelsoft's new site could go a long way towards opening up the funding process. Angelsoft, which previously built websites that connected entrepreneurs to angel investors, was co-founded by David Rose, the Chairman of New York Angels.
Rule number one: Have your act together. Angelsoft may help you find ‘em, but VCs are getting pickier than ever, according to Business Week. Begin every board meeting by calculating how much cash you have and how many days that gives you. That’s the type of advice VCs were handing out at this year’s DEMO conference, where many new startups make their debut. The good news is they were handing out bigger chunks of money to promising ideas. But it’s getting harder to get any funding at all, as acquisitions and IPOs drop. So if you want a piece of that VC money, you’ll need a solid business plan, an obvious demand for your product, and a little bit of luck.
Egads, something “as important as Google”? It’s a tall order, but search engine expert Nova Spivack says Wolfram Alpha, an online “computational knowledge engine” from Illinois-based Wolfram Research can help web users answer questions with factual answers like “When was GOOG worth more than $300?” or “What is the 307th digit of Pi?” Says Spivack, “Where Google is a system for FINDING things that we as a civilization collectively publish, Wolfram Alpha is for ANSWERING questions about what we as a civilization collectively know. It’s the next step in the distribution of knowledge and intelligence around the world — a new leap in the intelligence of our collective 'Global Brain.' And like any big next-step, Wolfram Alpha works in a new way — it computes answers instead of just looking them up.” Alpha’s not live yet, but according to the Wolfram Research blog, it will have one simple input field (sounds familiar enough) with access to “trillions of pieces of curated data and millions of lines of algorithms.” Of course, we've heard big promises from Google Killers before. (via AllThingsD)
SBA Retracts Goodwill Rule. Despite concerns that the stimulus plan doesn't do enough to help small businesses, Inc.'s Robb Mandelbaum reports that the Obama administration has repealed an unpopular change to the "goodwill" portion of the SBA's lending process. (We discussed the SBA's new rule here.) Nice to hear that the Obama administration is listening.
Small businesses hiring more contractors. Hiring is up at small businesses, but so is tapping contractors to save money, says The Washington Post. For every 100 employees hired, 3.82 are independent contractors. Contractors don’t receive benefits and employers aren’t required to withhold their payroll taxes. Compared to regular salaried employees, they’re less costly to employ and less difficult to terminate.
Outlasting Blockbuster. Indie movie rental places are hanging in there, even as Blockbuster is hiring lawyers to consider “restructuring” options —for example, bankruptcy. But they’re still facing the same challenges as the corporate goliath who nearly did them in. Mail-order DVDs and streaming online video aren’t going away any time soon, so indie video proprietors are turning to creative marketing solutions. Mike Clark has turned his business, Movie Madness, into a combination rental store and movie memorabilia museum.
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March 6, 2009
Today's news
A Pill for Wannabe Entrepreneurs; LinkedIn Stimulus 2.0
Posted by Nitasha Tiku at 12:09 PM
A Prescribed Success. Fortune Small Business interviews Barbara Sahakian, a Cambridge University scientist who believes in the future of an “entrepreneur drug” that will artificially recreate the brain chemistry of successful small business owners. Sahakian says that the drug could potentially increase a person’s willingness to take risks in decision-making and his or her cognitive flexibility. A few decades ago, entrepreneur used to be a dirty word. We'll take a willingness to dope up to mimic the daring of your average small business owner as a compliment.
The iPhone App Store gets some competition. Renegade stores selling unauthorized apps for the iPhone are springing up online, reports the Wall Street Journal. The article names three such online stores in the works, Cydia Store, where users would have to download special software that alters their iPhones first, Rock Your Phone, for those that don’t want to modify their iPhone first, and a third start-up that specializes in adult games. This competition takes aim at Apple’s iPhone App Store, which estimates show will bring in $800 million this year. Developers have to forgo a 30 percent commission from sellers who want to sell through the store. In the past, Apple had said it wants to strike a balance between closed devices like the iPod and open ones like the PC. Two apps that Apple’s currently blocked is a free program called Cycorder that turns the iPhone into a camcorder and $29 software called PdaNET that lets you use your iPhone as a laptop modem.
LinkedIn Founder's Stimulus 2.0. At TechCrunch, Reid Hoffman the founder of LinkedIn, wrote a guest post about how to use start-ups to kickstart the economy. Hoffman has some intriguing suggestions including, lifting the cap on H1-B visas, and using government funds to match VC investments. TechCrunch also has a video of Hoffman's appearance on Charlie Rose.
Bleak February job report. According to the Bureau of Labor Statistics, the unemployment rate rose from 7.6% to 8.1% in February. The report says that total nonfarm payroll employment dropped by 651,000 in February and, since December 2007, about 4.4 million jobs have been lost, with more than half of losses occurring in the last four months. CNN says the 4.4 million jobs lost are equal to the total number of jobs in each of the following states--Georgia, Michigan and North Carolina--at the end of 2007.
Entrepreneurs turning their closets into consignment stores. The Wall Street Journal profiles several women who’ve turned their homes into boutiques. When times were good, they splurged on designer duds. But now that the economy’s taken a hit and they need cash, many fashionistas are selling their unwanted clothes out of their own closets, cutting out the consignment-shop middlemen. Proof that a little entrepreneurial acumen goes a long way.
A recession start up story. Being laid-off is an opportunity for self-employment, but entrepreneurship is even tougher in hard times that lead to layoffs. A Marketwatch video profiles a company that was born after its founder was fired in the 2002 downturn. “I think if you knew all the challenges, you probably wouldn’t do it,” said Fred Ackerman, president of Black Sheep Adventures, a travel company. Still, he did several things right: consulted with the SBA over his business plan, he works from home, and he keeps fixed costs low by renting equipment like bicycles his clients ride. That way, he says, “certain destinations can flourish and others can contract, it’s not a problem.”
An Enterprise Twitter. SocialText, a Silicon Valley company that is actually growing during this recession, according to this piece in Silicon Beat, has launched a Twitter-ish messaging service for businesses.
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March 5, 2009
Today's news
Green Investing, Email Tips, and Tapping Credit Unions
Posted by Ryan McCarthy at 10:31 AM
Introducing the U.S. Department of Green Investing. As CNET points out, because of the stimulus bill, the government has suddenly become the country’s largest green tech VC. But even veteran VCs can't agree on the future giants of the green tech industry. Concerns about the government's investment philosophy have a lot of people worried, according to Business Insider’s Green Sheet.
How to empty that inbox. Forget declaring "email bankruptcy," as VC Fred Wilson put it. Farhad Manjoo, writing for the New York Times, has some helpful tips on how to sift through your unanswered messages. "It wasn’t easy for me to curb my time in my in-box," writes Manjoo. "E-mail was like a drug, and I needed a constant fix. That’s a good sign you need help."
Twitter's ascent continues. Fast Company tracks Twitter’s explosion as a cultural force over the past three months. The candy company Skittles has replaced its site with a Twitter feed, and airport administrators want to use the service to announce flight delays. For more on Twitter, check out Max Chafkin’s article from last March.
Credit Unions are lending more. According to the WSJ , more small businesses are turning to credit unions for loans they can't get from banks. Most credit unions have dodged the subprime mess, and are in a much better position to lend now. The total dollar amount of business loans from credit unions last year was up 18% from 2007. Interestingly, a federal law limits the amount of business loans credit unions can make at 12.25% of assets.
The Radiohead Business Model. Two years ago, Radiohead tried a bold new selling scheme, offering fans the ability to set their own price for their new album, In Rainbows. We were so enamored of the model -- and, privately, of Radiohead's music -- that we tried it ourselves. Now, from the Guardian, comes word that the first major book publisher is adopting the model for a new book by historian Ben Wilson.
The best and worst of customer service. Independent Street has a list of the small businesses with the best and worst customer service ratings. Among the top ten best are some very niche industries: piano tuning, mailbox repair, and animal and house sitting. (We'd actually like to know how you can give a detailed review of a house sitter). Among the worst: home-warranty companies, cable-TV service, and bridal shops. The rankings are courtesy of Angie’s List, a customer-service rating company.
Are employment tests racially biased? Slate discusses the value of employment tests and whether or not they can be racially biased. The author, Ray Fishman, points out that employment tests can lead to lawsuits under the Equal Employment Opportunities Act. But the effect of employment tests on minorities is contentious. (Hiring decisions, Fishman points out, are made by people with their own unique biases). For the Inc. take, check out the guide to finding and hiring good people, which includes tips on behavioral interviewing.
From the Depressing News Dept. The WSJ has an interactive chart tracking layoffs. Unfortunately, the chart's pretty colors don't add much cheer.
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March 4, 2009
Today's news
Recording Employees’ Calls and Google’s Holy Grail
Posted by Nitasha Tiku at 11:23 AM
This call may be recorded. ZDNet Australia reports that RIM, the maker of the BlackBerry, records ALL employee phone calls. Wow. In the piece RIM's CIO says that the company does this to keep a lid of pre-release products and other IP assets (Via TechMeme).
How did Vizio sneak into the world of Super Bowl advertising? The New York Time's Gadgetwise blog has the goods on how the maker of flat panel and LCD TVs got ad space for considerably less than the reported $3 million cost for a 30-second spot. And, here's news that Vizio is now the second-biggest seller of flat-panel TVs in the U.S. For more on Vizio's founder William Wang, check out our stories here and here.
Big fish rejected by small pond. After rounds of layoffs, there are more and more big business alumni on the job market, and many are turning to smaller employers in search of opportunities. But the Wall Street Journal, reports many small businesses regularly turn these applicants away, assuming they won't fit with the culture. A biotech startup told one 18-year vet of a pharmaceutical giant they were afraid he "just wouldn't be able to move as fast." All the same, it's a good time to hire self-starters with transferable skills.
Does the new Mac lineup connect with small business? Not according to David Coursey at PC World. Coursey blogs today that although the Mac OS X Leopard Server is Mac OS X Leopard Server “does pretty much everything you would want a server for a small business to do.” But the affordable Leopard Server requires two network cards on the machine running it, which rules out the new Mac Mini. Coursey offers a couple suggestions for Apple, and a lament: “a little more focus on business customers would be most welcome, not to mention profitable for Apple.”
Online video delivery gets a flashy facelift. ZillionTV, a new start-up, aims to offer a twist on web TV—DVD-quality video delivered to your TV over the internet, with three payment options—renting, buying or watching commercials. As the L.A. Times Tech blog reports, the quality is impressive—as long as you have 1.5 Mbps of bandwidth. Another impressive feature of ZillionTV—founder Mitch Berman has raised money from multiple VC’s, Visa, five movie studios and a chip-maker. Now that Berman and ZillionTV have persuaded the investors, they only have to contend with Netflix’s streaming video, Amazon’s VOD moves, and AppleTV, oh yeah and those pesky MSOs like Comcast who are making their own movies into online video. GigaOm’s Chris Albrecht thinks he’s heard this one before, but with the entire industry in a state of flux, now would be the time.
Google’s Holy Grail. Slate’s Michael Agger talks to a Google developer who says having your friends on Facebook, sharing items on Google Reader, blogging on Tumblr, and bookmarking on Delicious, with a separate login at the New York Times is a barbaric approach to technology. Google’s Holy Grail? “Any app, any site, any friend.” The idea being that any web activity, say checking stocks, would be better if the site recognized other people (say investors) that you cared about. Agger points out that consumers will ultimately benefit from the competition between Facebook and Google as we move toward the end goal of “a command center for our online self.” Says Agger: “This may seem like an arcane, technical struggle, but I believe that a year from now, you are actually going to care who owns your social network.”
Reverse brain drain. Duke University professor and two-time tech CEO Vivek Wadhwa, whose research has been getting a lot of play as evidence to make the case for H-1B visas to Congress, releases the fourth part of his study on America’s New Immigrant Entrepreneurs. In his column, Wahwa says young immigrants (the average ages are 30 and 33) are returning to India and China in droves to fuel innovation and economic growth in their native countries, which could impact the U.S.’s long-term economic health.
Iman’s advice for building a brand. Business Week profiles supermodel Iman, whose successful line of cosmetics for women of color started with her own difficulty finding foundation—even the photographer who first shot her for Vogue didn’t have a formula for black skin. She talks about the challenges of building and maintaining a brand over the years: “Yes, we were a huge success at the beginning, but I learned it is staying in business that is the difficult part.”
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March 3, 2009
Yelp Users Speak, Pawnshops, and Accidental Entrepreneurs
Posted by Ryan McCarthy at 9:48 AM
More Yelp users speak out. Can a few negative online reviews kill a small business? Just ask some angry business owners that claim they've been the victim of seemingly malicious reviews on Yelp. The New York Times reports today about a group of small companies that are livid at the San Francisco-based website, which compiles reviews on restaurants, retailers, and small businesses in various cities. For more on this dust-up, see Max Chafkin's defense of Yelp here.
Countercyclical business of the day: Pawnshops. The pawnshop industry is heating up. Case in point: Seattle-based Yuppie Pawn, a company that dubs itself a “kinder, gentler pawnshop,” according to owner Brian Lurie. The Seattle Post-Intelligencer reports that Yuppie Pawn doesn’t like to buy soon-to-be obsolete electronics, isn’t taking construction saws -- which there is a glut of -- but still welcomes Rolex watches, boats, and artwork. In New York City, where there’s certainly nothing gentle about a pawnshop, business is also brisk, according to the Daily News. “We’ve seen a steady flow of clientele, especially with banks and credit cards slashing people’s credit limits,” says Kenneth Conn of Gem Pawnbrokers, which has 15 locations in New York City.
Bezos on PBS. Charlie Rose conducted a lengthy interview with the founder and CEO of Amazon. The Big Picture has the full interview.
New administration, new employment regulations. Workforce.com details changes to employment regulations contained in Obama administration's latest budget. Companies that don’t offer retirement plans will now be required to enroll staffers in a direct-deposit IRA, similar to a direct-deposit payroll system. The budget also calls for legislative changes to reduce employer tax evasion and curb unemployment benefits fraud. Although it was removed from the Stimulus bill, the budget calls for companies to put new hires through a system called E-Verify, which checks info from I-9 forms against Social Security and Homeland Security databases. The budget, however, doesn’t include specifics on one big ticket item: healthcare reform.
Are you an accidental entrepreneur? The souring economy has created a new crop of small business owners, many of whom have turned to entrepreneurship after losing their jobs. On his blog, The Entrepreneurial Mind, Jeff Cornwall of Belmont University discusses points to some evidence of this in the Nashville Business Journal. "As the overall economy worsened, new business starts in Williamson County continued to grow throughout 2008. In December, for instance, the number of new business licenses was more than four times higher than the licenses pulled in December 2007," reports the Nashville Business Journal. It's probably a safe bet that this trend is happening across the country.
Retaining skilled foreign workers. More immigrants are getting their college degree in the U.S. and taking their newly acquired skills back to their home countries, concludes a two-year study by the Kauffman foundation. This exodus of valuable workers is alarming, considering that studies have found that about one-quarter of high-tech and engineering start-ups were founded by immigrants.
Optimism up for entrepreneurs?s? A new survey finds that 63 percent of small business executives expect their business prospects to get better this year, up from 37 percent in November. Still, in a survey conducted by the American City Business Journals, 47 percent of respondents said they were very concerned about the long-term survival of their companies, up from 41 percent in November. Also, the average guess on how long the recession will last? 2.4 years.
Read your Skype voicemails. Spinvox, one of the biggest players in voicemails-to-text, announced today that it will now offer the same transcription service for Skype voicemails. At 25 cents plus the cost of the text, it’s far from cheap, notes GigaOm, but it's one less reason to have a landline.
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March 2, 2009
How to Switch Careers and End of Web 2.0
Posted by Nitasha Tiku at 11:43 AM
What comes after Web 2.0? Over at Wired, Bruce Sterling posts the full text of his speech, The Brief But Glorious Life of Web 2.0, from this year’s Webstock, which has been making its way around the blogosphere. It’s a must-read, but don’t take our word for it. Take BoingBoing's: “it has a whole crapload of incredibly insightful stuff in it.” Or Om Malick's, who describes the winding dialectic as making “the entire Web 2.0 ecosystem look into a trick mirror — with amusing results.” Sterling begins by taking the the maxims of Web 2.0 (like “web as a platform;” “collective intelligence;” “tagging not taxonomy”) and even Javascript itself to task, in the process sizing up some essential truths of what worked, what didn’t, and what needs to change. “The Web has always had an awkward relationship with business. Web 2.0 was a business model. The Transition Web is a culture model. If it's gonna work, it's got to replace things that we used to pay for with things that we just plain use.”
How to buy a domain name – Vol. II. On Tim Ferriss’ blog, PhoneTag founder James Siminoff offers up 10 great tips on thow to acquire a domain name. For more on Siminoff's rebranding saga, check out our story here.
Leveraging a unique skill to switch careers. When police officer Brook Schaub decided to enter the public sector, he realized he had a valuable skill with crossover potential: computer forensics, which he now uses to help accounting and business-service clients. If you’re contemplating jumping into another field, advises the WSJ, the first step is to figure out what your special skill is worth and how you have put it to work in previous jobs. Using something called the Challenges-Actions-Results formula, you should list challenges you’ve faced, actions you’ve taken, and the corresponding results. To find potential employers in need of your talents, the Journal recommends starting with Google to research related keywords and then networking with groups and individuals with a direct relation to that particular skill. Then revamp your resume using the functional resume format, which will highlight the skill rather than the fact that you’re changing careers.
Consumers spending increases slightly, savings rate also up. In January, consumers spending was up a paltry .6 percent, reports the AP. (As the AP points out, this increase follows perhaps the worst holiday retail season in four decades). The government also reported that personal savings rate hit a 14-year high.
How to size up applicants at a job fair. Crowded job fairs, with hundreds of applicants jockeying for a handful of positions are par for the course of the recession, reports NPR’s Morning Edition. At a fair in Greensboro, North Carolina, Jonathan Cole, who was searching for insurance sales candidates, said the key is to quickly assess job seekers who stop by. “It's really all about the first 30 seconds at the table. We just stare at them and wait for them to talk first. And if they're bold enough to take the conversation over, then they probably have a good chance of making it in sales. And if they're not, then they may not be suited for us."
Study shows black-owned startups have less access to capital. A new study surveyed 5,000 businesses founded in 2004 and finds that black-owned businesses rely much more on owner equity than do white-owned businesses—56 percent compared to only 34 percent in white-owned businesses. The study also found that that white businesses have an average of $80,000 of initial capital, compared with $30,000 for black-owned start-ups. The study, Patterns of Financing: A Comparison between White- and African-American Young Firms, is part of a series by the Kauffman Foundation, and will be followed up with more results in Spring 2009.
Slow and steady. Entrepreneurs like Delilah Snell are using their passion and caution to survive the recession. The L.A. Times reports on the Road Less Traveled, a Santa Ana eco-boutique, which sells $47-a-gallon soy-based wall paints, biodegradable cutlery and native California seeds. Snell is shelving expansion plans after a flat year, but hopes to invest more in her business to fuel growth. A big part of Snell’s business is a store calendar full of passion projects, including workshops on topics such as green interiors, vegan baking and beekeeping. Snell plans to increase those to keep her customers involved. A consultant the Times talked with advises Snell to broaden her audience, apply for awards, and create one of her own, a “Green Hero” award for local businesses, groups or people.
Pick a fight with your co-workers day. Forbes says now is as good a time as any to stir up some healthy conflict in your company. Entrepreneurship coach Steven Berglas writes about why disagreement and conflict are necessary for evolving businesses. “Embracing that friction is essential to spurring creativity and boosting morale,” he writes. While it may create some uncomfortable moments, it can prevent latent discontent from building up over time. Consensus, as it turns out, can be a dangerous thing.
Rollin’ On. The Washington Post’s local business blog zooms in on how the downturn is affecting one local bike shop. The owner says he is still making money by keeping things simple. To cut down on payroll, he works alone one day a week and does repair work himself instead of hiring mechanics.
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