A new study released by the University of New Hampshire reports that total angel funded deals are up 15% in the first half of 2006 when compared to the same period from 2005 even though the economy seems to be slowing down a bit. This is because the slowdown is thought to be short-lived. Angel investors look three to five years out, and in this time frame they see a strong economy returning.
Here are a few details from the study:
– Although there are more deals being made this year, they are making smaller investments. This could be a slight hedging of their investments using diversification due to the current soft conditions.
– If you are not in healthcare services/medical devices/equipment (27% of investments), software (18%), biotech (10%), retail (10%), media (10%), or IT services (10%), you are facing tough odds on finding angel investors. Those six sectors soaked up about 75% of all investment dollars so far in 2006. Although this is a much broader list than has been seen in the past, which is also a good sign for the future.
– Angels are not as early into the dance as they used to be with only 40% of their money going to seed or start-up financing. This percentage used to be much higher. What we don’t know is if this is a true shift to later stage funding or simply more money being invested and some of it going into later stage deals. Anecdotal evidence suggests that they have shifted at least somewhat out of seed investing.
(via National Dialogue on Entrepreneurship)
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New Data on Small Business
The most recent data from the SBA shows that small business is still driving the economy, employing 50.6% of the entire US workforce. The SBA also has a web page that allows you to really dig into the small business statistics from varying sources, looking at industry sectors, number of firms by size (revenues and employment), birth and death rates of small business, and so forth. It also has data by state and metro areas. If you are into data, this is a fascinating site.
Intellectual Property Waisting Away?
Universities are giant R&D departments dreaming up the “next big thing.” The problem is, they are not very good at making the transition from ideas to market applications.
Many academics have no experience in the business world. They do not understand the difference between an interesting new idea and a real market opportunity. But, don’t try to tell them that. Rather than truly partnering with the private sector to mine the wealth of new product applications, they set up rules and stipulations that keep many good opportunities locked away in their labs, and push many applications that are not ready or not truly viable into the market. They do this through their technology transfer policies and tight control by administrative and faculty committees.
Alfred Mann, inventor of the first insulin pump, wants to give hundreds of millions of dollars to universities with one simple condition. He wanted to the right to pick which ideas get funding based on the experience that he and his staff has had in launching new medical devices, rather than allow a committee of faculty and administrators to decide which should get funding with the money he donates to the university. So far, he has found no takers.
From Forbes.com:
Mann is puzzled by the rejections. As he sees it, universities should welcome his guidance since they typically do a bad job in commercializing their professors’ inventions. Professors, he says, don’t know how to turn their ideas into products. University patent offices have trouble finding industrial partners. He cites statistics showing that billion in government and industry sponsored university research each year leads to only billion in commercial licensing revenue, a paltry 2.7% return.
But universities say Mann wants too much control for too little money. Experts in technology transfer tend to agree. Robert Lowe, a professor of entrepreneurship at Carnegie Mellon University, who studies the topic, says that universities don’t want a single entity to have first-look rights to option its inventions because it can interfere with academic freedom and amount to a giveaway.
If technology transfer is to be part of the engine that drives our emerging entrepreneurial economy, universities need to stop being arrogant and understand that those with market experience can help the common good by accelerating new products coming out of their ivory towers.
(Thanks to Jim Stefansic for passing this along).
An Uphill Battle
The results from a new study on cheating among MBA students conducted by the Center for Academic Integrity at Duke University is quite disheartening. From Bloomberg.com:
The study found 56 percent of MBA students acknowledged cheating….The study offered two main explanations for the cheating: the pressure-cooker atmosphere of business school leaves many students willing to compete by any means available, and corporate scandals have distorted the standards of many business students.
So what these students are telling us is that the “ends justify the means” and “I might as well get started cheating now, because that is what I will need to do in corporate America.”
Another study found that more than 70% of undergraduate business students admit to cheating.
Corporate America has helped to corrupt our culture with all of its scandals. My only hope is that the entrepreneurial generation will create a new breed of American business leaders that seeks to do well in business without sacrificing their integrity. That is why we need to infuse not just legalistic ethics, but morality and values into business education.
The Ugly Beast
I wrote a post earlier this summer about the risks of inflation in our economy and how unprepared today’s entrepreneurs are to meet the challenges that a period of high inflation can create for small business owners. Here is a summary of my recommendations:
So what can a small business do these days to try and weather this storm?
– Keep overhead low.
– Build cash reserves to buffer short term price increases that precede higher prices on your part.
– Watch your margins carefully. Worry about growing profits, not sales.
– Don’t lock into long-term contracts that have narrow margins with large customers.
– When inflation heats up even a little, be aggressive with frequent small price increases rather than waiting and trying to catch up at some point with one big jump.
– Pay down variable interest loans ASAP. As long as there is inflation, interest rates will keep going up.
A recent survey from the NFIB raises additional concerns that inflation may be heating up.
They found that about one third of small business owners plan to raise prices, mostly from small businesses in manufacturing and construction. But, these are real goods that consumers will feel in their pocketbooks. Although energy prices have eased, wage pressure is still strong due to shortages of trained, qualified, experienced workers.
Unfortunately, one of the only hopes for an easing of inflation is a recession. Some of us remember this old dance. The economy gets strong, but then it overheats causing inflation. Inflation dampens the economy, leading to a recession. Then the cycle repeats. The Fed is trying to keep control so we do not get into this old business cycle again. But, this time their interest rate policy may not be enough. Let’s hope the ugly beast of inflation can get controlled before it takes us into and economic tailspin. Stay tuned….
Extreme Entrepreneur Tour
What follows are a series of posts that summarize the inaugural stop of the Extreme Entrepreneurship Tour here at Belmont today. To follow the day’s events in order, read today’s posts from the first to the last (from the bottom up). Thanks to the EET crew for putting on an excellent program!
I am off to Florida to celebrate my Dad’s 85th birthday. Three Cheers for my favorite octogenarian (and still active) entrepreneur!!!
On Top at 23, and Still Climbing
Ephren Taylor was the final speaker of the Extreme Entrepreneur Tour. At 23, he has already achieved amazing success:
Success in business — His real estate company holds over $150 million in real estate, specializing in affordable housing for urban communities. He also has a highly successful entertainment company. He is one of the youngest CEOs of a publicly owned corporation, haven taken his business public after coming out of “retirement.”
Success in life — Ephren is active in charitable work and a frequent motivational speaker inspiring young people to strive for their own success in life. He is married and has two young children.
Ephren’s story is one of drive, ingenuity, and persistence. His is also a story of maturity and integrity beyond his years.
Entrepreneurial Careers
During the first session of today’s Extreme Entrepreneur Tour stop here at Belmont, Doug Fath shared how he came to choose an entrepreneurial career path in his life. Doug began his entrepreneurial career in 2001 at the age of 19. While in school he started an online sports apparel business. He sold that business in 2004 as he graduated college, and moved his entrepreneurial career into real estate by founding Faithful Investments, LLC. His business specializes in urban revitalization. Their mission:
Faithful Investments is committed to making a difference by building meaningful relationships and creating win-win situations with all of its business partners and customers.
To carry out this mission, Faithful Investments creates pleasurable living experiences for its tenants, innovative solutions for homeowners and money making opportunities for its investors.
He began his talk by citing a study which reported that 70% of young people are dissatisfied with their career choices early in their lives. Many of these young people end up in such unhappy circumstances by choosing careers based on what other people expect them to do. He offered words of encouragement and inspiration for young people to find happiness and satisfaction in their careers, by forging their own path by pursuing their own dreams and passions in their lives through entrepreneurship.
Belmont Welcomes the Extreme Entrepreneur Tour
Belmont University will serve as host to the inaugural stop of the Extreme Entrepreneur Tour this afternoon from 3:00-8:00 p.m. as part of our Moench Entrepreneurship Lecture Series. We are delighted to be the first host for this exciting event. The Extreme Entrepreneur Tour brings top young entrepreneurs to college campuses to spread the entrepreneurial mindset at a grassroots level. Included in today’s program is Ephren Taylor whose business, Amoro Corporation, is headquartered here in Franklin, TN. I wrote a post a while back about his return from retirement to the business world at the ripe old age of 23.
It should be a great event. Any of you who are local are encouraged to attend. It is free and open to the public.
10 Steps for Growth…And the New Challenges it will Create
StartupNation recommends ten steps to help grow beyond the start-up mode:
1. Measure and Analyze Current Status
2. Get Efficient through Technology
3. Enhance Your Customer Experience
4. Cozy Up with Vendors
5. Maximize Your Niche, Expand to a New One
6. Develop New Channels
7. Acquire Growth Capital
8. Create a Culture
9. Ramp Up Awareness and Demand
10. Improve Sales Techniques
For each step they offer short articles and other resources to help apply these steps to a business.
Remember, however, that starting the growth process is only the first part of the process of moving your business ahead. Growth will create a new set of challenges:
1. Beware of the Growth Myth. Focus on growing profits, not sales! Too many entrepreneurs assume that profits always follow sales. This is not always the case. And even when profits do begin to follow sales, cash flow can lag even farther behind.
2. Vision Drift. Don’t lose your way. Stay focused on your core business. It may need to adapt and change, but these must be deliberate and planned choices.
3. Cultural drift. Managing the culture of your business is your job! If you don’t manage it, your culture will take on a life of its own, which is almost never a good thing.
4. Resource crises. Securing the fuel to support growth can be a constant strain…cash, staff, space, equipment, etc., etc.
5. Systems crises. The mundane and the complex all need development. From accounts payable to planning, all systems must be updated, enhanced, and made ready for growth.
6. Muddled structure. Make sure your structure makes sense for your strategy and your culture. We make small decisions on how to organize our employees that may make sense as we make them, but they may create an overall structure that can choke future growth and profits.
7. Disjointed strategies. Your business and your strategy need to be in harmony. All aspects of your business must be consistent and geared toward meeting customer needs and expectations.
Once the business begins to grow, both the entrepreneur and his business need to begin a transformation. If not properly managed, the entrepreneur can grow himself right out of business.
(Here is a link to a summary of all of the posts I have made about the challenges of growth).