Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.
Author: Jeff Cornwall
Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.
Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.
The notion that VCs back the riskiest of ventures that are creating entirely new industries is not true. VCs are cherry pickers.
A post at Tim Berry’s blog Up and Running, which reviews an interview with investor Naval Ravikant, highlights the conservative nature of VCs:
“I look for two things that are paramount above all:
Great team. It’s obvious. It’s a tautology. Everybody says it. You have to be working with some of the best people in the industry you’re in.
Huge market. Niche markets just don’t work because the first idea never works. You always have to change the idea, so you need room to maneuver in a big market.
Berry rightly took exception with the comment about niche markets:
Ravikant has more authority on this than I do, but his reference to niche markets bothers me a bit. I like niche markets in a world that is constantly splintering and dividing itself into finer and finer pieces. Some of the biggest markets there are started as niches: Facebook, for example, focused first on a few university campuses. Yahoo was a niche-the Internet-when it started. Starbucks was once a niche (gourmet coffee, affordable luxury) in the Northwest.
I also like innovative niches. But generally VCs do not. The truth is that VCs generally want proven people in proven markets — and really big markets, at that. This is neither good nor bad. It is just how VCs go about their business.
I just hate to see when entrepreneurs who do not meet these criteria waste time and energy chasing money that is probably out of their reach.
Small businesses are turning to angel investors, suppliers and personal credit cards as the financial crisis spreads to Main Street and access to commercial bank loans becomes more restricted.
After being rejected last month at two commercial banks, Education 4 Kids Inc. owner J.M. Ivler is back to financing his 5-year-old online retailer with personal credit cards. “I can’t get the banks to give me a loan,” complains Mr. Ivler, whose Las Vegas company is profitable and produced $350,000 in sales last year.
I have been warning about tightening credit for the past several months. More than ever entrepreneurs will have to rely on their bootstrapping prowess to keep moving forward.
William C. Dunkelberg, chief economist for the National Federation of Independent Business, issued the following statement on September job numbers based on NFIB’s monthly economic survey that will be released on Tuesday, October 14:
“Seasonally adjusted, small business owners reported basically no new job creation over the past few months. The September NFIB survey showed an average loss of -0.34 workers per firm, a decline in private sector employment. Eight percent of the owners increased employment by an average of 3.4 workers per firm, but 18 percent reduced employment at average of 3.1 workers per firm. Not a great performance, unfortunately.
“Forty-nine percent of the owners hired or tried to hire, and 78 percent of those trying to hire reported few or no qualified applicants for the job openings they were trying to fill. Seasonally adjusted 18 percent reported unfilled job openings, a 3 point gain (but still below the thirty-four year average of 22), suggesting that the unemployment rate won’t change much, if at all. Nine percent of the owners reported that the availability of qualified labor was their top business problem, well below last September’s reading of 17 percent.
“Over the next three months, 12 percent plan to create new jobs, and 10 percent plan workforce reductions yielding a seasonally adjusted net 7 percent of owners planning to create new jobs, down two points from August, historically weak but not a real recession number. The September survey shows that small business owners are still muddling along in this economy.”
These findings indicate a gloomier picture than the ADP survey issued earlier this week.
Although not completely immune from our financial mess, VCs are flush with cash and still doing deals. FastCompany has an analysis of the current state of the VC backed part of the economy, which seems to be somewhat insulated from the economic storm:
It may seem sanguine to use the word “haven,” since no corner of the economy is impervious to larger trends. But because venture capitalists work on long fundraising timetables and deal in liquid money, faltering banks and crises of credit don’t effect VC funds as acutely as they do other institutions. That means startups can continue be free to innovate and grow, with money in the bank.
Anecdotal evidence seems to indicate that angel money is still flowing, as well, although many angels seem to be getting more cautious and putting more of their investments into cash.
Two surveys released this week paint a very interesting economic picture.
Entrepreneurs are still creating new jobs. ADP’s Small Business Report for September shows that small businesses (fewer than 50 workers) created 28,000 new jobs last month while corporate America is hemorrhaging jobs, losing more than 170,000 over the past six months.
However, a new survey of 500 US small business owners conducted by Harris Interactive for ING DIRECT found that entrepreneurs are very worried about their current situation and about the future. Specifically the survey found that:
• 63 percent say are either very- or extremely-concerned about the future of the economy
• 57 percent see developing new business as their number-one challenge through the remainder of the year and “access to cash” ranked number-two at 18 percent
• 56 percent are now saving less money for personal and 53 percent are saving less for retirement savings compared to a year ago
• 40 percent see the current financial state of their business as worse than a year ago
Setting the price for a new product or service can be an agonizing process for new entrepreneurs. If they set them too high they risk turning off new customers. If they set it too low, they risk leaving money on the table and locking their businesses into low prices.
Newbie entrepreneurs often miss the mark on pricing, says Laura E. Willett, a small business advisor and finance professor at Bentley College in Waltham, Mass. Entrepreneurs either blindly place a price tag on their product or service without taking a proper reading of the market or, perhaps more commonly, they underprice their offerings on purpose – effectively apologizing to the market for being new and inexperienced.
Ransom interviewed Belmont alum Cameron Powell for her story:
When Cameron Powell launched River Rock Media Group, a Nashville, Tenn., photography and media production company in 2005, he charged just $75 an hour for his photography service. Considering that similarly equipped photographers can earn between $1,500 and $2,500 for a full day’s work, he’s certain he underpriced himself.
“It got me gigs and it gave me experience working with people. But it didn’t help me gain a whole lot of footing with the market I wanted,” says Powell who now earns the going rate. Instead, he adds, “I was attracting people who didn’t have any money.”
If you have to offer low prices to enter a market, make it clear that they are introductory discounted prices. Don’t start with a low price and hope that you can increase it down the line.
The march toward socialism was slowed down yesterday with the courageous vote in the House.
Things will get worse before it finally gets better. But, if we let the market work, our economy will come back stronger than ever. And entrepreneurs will be at the heart of this economic resurgence.
We have now peeked behind the curtain and seen the truth about the Wizard of Oz that is our federal government.
Always remember — the same politicians now working hardest to pass a bailout are the very ones who created the mess by meddling with the housing market as part of their grand plan of social engineering.
For now remember that cash is king, debt is your enemy, and patience is a virtue. Stay on track.
If you haven’t seen the video “The Call of the Entrepreneur,” I strongly suggest you tune to Fox Business Channel this weekend.
It will air from 5:00 to 6:00 p.m. EDT on Saturday 9/27/08 and from 12:00 to 1:00 a.m. EDT on Sunday 9/28/08. I have my TIVO set up to record this one! We hosted one of the premier showings last year here at Belmont — it was truly inspiring.
You can find your local channel for Fox Business at their channel finder. If you do not have access to this channel you can click here to learn how to set up your own viewing.
As you watch, think about how Wall Street and Washington are trying to strike a deal that will erode the free enterprise system in America.
Congratulations to Belmont’s Andy Tabar for making this year’s list! Here is a profile they ran of Andy and here is an “in his own words” interview with him. Andy is a two time winner of Belmont’s student entrepreneur of the year.
The perspective we are hearing from our social entrepreneurship students is that they want to tackle one social problem at a time. They are not interested in massive solutions to problems, as they believe that all this does is create big, inefficient bureaucracies.
MakeZen’s Weblog offers an interesting take on this perspective. The post challenges how we have conceptualized our past approaches to solving social problems in this world. It clearly echoes what we are hearing from our social entrepreneurship students:
It struck me soon after how peculiar it was the way the question was formulated: would I like to join them to FIGHT against women violence? Why do we use the word “fight” that implies violence to get rid of violence? FIGHT against poverty, injustice, war etc. is something that we normally hear in the news, in the mission statements of some NGOs, and indeed in the life mission of some social entrepreneurs as well. It surely carries a negative energy and it will strengthen the other opposing energy. I believe it more and more that true and LASTING changes can never take place from a negative state of consciousness because ignorance will grow stronger when it is being attacked!
So don’t fight against war, poverty and injustice- rather- work for peace, for fairness and let peace flow through all your actions in order to create true changes! It’s possible, even in the most despair situation!