IPO Pipeline is Full

Red Herring reports that the IPO pipeline is full of growing ventures looking to expand.
“As of December 30, 116 companies had filed plans for IPOs to raise $24.8 billion, according to available records. The number of potential issuers and the dollar-volume figures are more than double what they were a year ago.
“Flip the calendar back to January 1, 2004, when 49 IPOs were looking to raise $8.9 billion. By the time 2004 ended, 238 IPOs had been priced, raising $45.2 billion.”
This is more evidence of the potential for a strong economy in 2005.

Small Business Leading the Way in 2005

Bear Sterns has released a new report offering more evidence that it is entrepreneurs driving most of our current economic expansion. Rather than investing in growth, most large corporations are sitting on their cash. One of the interesting findings of this study is that one of the major drivers of small business growth is “strong growth in final demand.” That is to say, entrepreneurs are giving the market what it wants, and many of these opportunities seem to be in markets that had previously been the domain of larger corporations. We are certainly seeing evidence of that in the music industry here in Nashville.
Thanks to Ben Cunningham for passing this report along.

Minimum Wages Going Up

There is growing pressure to increase minimum wages across the country. Inc.com reported last October about this trend. Now comes word from Law & Entrepreneurship about the impact that higher minimum wages is having on small businesses in that state.
“The Chicago Tribune cites some examples of small business proprietors that will be cutting workforce and hours and raising its prices in order to cope with the increases. Illinois may also be putting its small businesses at a competitive disadvantage as it is the only state in the Midwest that has a higher state minimum wage than the federally mandated minimum wage. Therefore it is making its small businesses located on the state boarder vulnerable to out of state competition which can utilize cheaper labor.”
Why are minimum wage laws bad policy, especially when it comes to poorer workers and small businesses? Richard Burkhauser from Cornell University argues that they no longer are having the intended social impact that was intended when minimum wages were first enacted.
“(O)nly one out of three of the working poor gained from the last federal minimum wage hike in 1996. The others were poor despite having higher rates because they either earned more than the minimum wage, worked part time or had large families. Of the $3.39 billion in additional wages generated by the last minimum wage hike, Burkhauser found that only 17 percent went to the families of the working poor. The other 83 percent primarily went to second or third earners whose families had income that was often well above the poverty line, indicated by the federal government to be $16,450 a year for a family of four.
“Teenagers are the group of workers most affected by the minimum wage, he said. When the minimum wage went from $4.25 to $5.15 in 1996, 44 percent of teenage workers benefited, but only 17 percent of those teenage workers lived in poor families. The majority, 51 percent, lived in families whose income was three or more times above the poverty line.
“‘Minimum-wage increases are extremely ineffective as a mechanism for reducing poverty,’ he said. ‘They were never very target-efficient and are even less so today.'”

Advice for Social Entrepreneurs

StartupJournal has some excellent advice for those interested in starting up a non-profit business based on the experience of several successful social entrepreneurs.
“Rather than lurch from grant to grant, these founders are starting for-profit/nonprofit hybrids and applying business tactics to expand their reach and make better use of available resources. They’re embracing the wave of productivity savings unleashed in the economy in the 1990s — new information technologies, smarter financing strategies, savvy alliances.”
I am finding a growing number of students in our programs interested in channeling their entrepreneurial aspirations into the nonprofit sector. Just as with their for-profit brethren, they benefit from gaining training in start-up and growth management skills.

Luck and Fortune

Inc.com has an amazing story told by a young entrepreneur, Bo Peabody, who started a business during the dot.com craze, sold it for $58 million in stock to Lycos at a point where he still had generated almost no revenue, saw Lycos stock go up tenfold, and then sold it all before the dot.bomb crash. Smart? Maybe a little. Lucky? You bet! Here are Mr. Peabody’s reflections on his own success.
“Luck is a part of life, and everyone, at one point or another, gets lucky. Luck is also a big part of business life and perhaps the biggest part of entrepreneurial life. At the very least, entrepreneurs must believe in luck. Ideally, they can recognize it when they see it. And over time, the best entrepreneurs can actually learn to create luck.
“Luck in business is different from regular old luck, like when you find $20 on the sidewalk. First of all, being lucky in business has an intoxicating underbelly called believing you’re smart. No one actually believes that he should take credit for finding $20 on the sidewalk. But when people get lucky in business, they are often convinced that it is not luck at all that brought them good fortune. They believe instead that their business venture succeeded thanks to their own blinding brilliance.”
It is good to be smart. It is even better to be lucky. But, it is critical to know the difference. I have seen too many entrepreneurs confuse luck with brilliance only to come crashing down to earth when their luck runs out.
Thanks to Peyman Motlagh, one of my former graduate students, for passing this story along.

Entrepreneurs Look Back on Their Forecasts for 2004

The Nashville Business Journal (our local version of the American City Business Journals) ran an interesting look back on how well ten local entrepreneurs actually did in meeting their 2004 forecasts.
There are several interesting lessons on the challenges entrepreneurs face when looking into their crystal balls each year. For many they got to where they had hoped, but not the way they had planned. Business planning is such a fluid process, even for established entrepreneurs. The same creativity that launched the business becomes even more important as you navigate what my friend Peter Vaill describes as the permanent white water that is business today.

Social Entrepreneurs Recognized

Social entrepreneurship, which is the application of entrepreneurial tools and techniques to non-profits, is gaining recognition both in entrepreneurship circles and among non-profits. Fast Company has honored those non-profits they consider the 25 best social entrepreneurs.
Who are these social entrepreneurs? Endeavor Global is one example.
“Consider the work of Endeavor Global, a New York-based nonprofit that seeds economic growth in developing countries by supporting the work of large-scale entrepreneurs. In 2002, 97 companies funded by Endeavor generated $332 million in revenue and created 8,562 jobs in Latin America.”
One of my favorites is the Grameen Foundation USA, which “uses microfinance and innovative technology to fight global poverty and bring opportunities to the world’s poorest people.”
How do they achieve this goal?
“With tiny loans, financial services and technology, we help the poor, mostly women, start self-sustaining businesses to escape poverty. Our global network of microfinance partners has already reached more than 800,000 families in 20 countries.”
This group of non-profits clearly shows that it is the private sector that best addresses even the toughest problems our world faces. Explore these remarkable social entrepreneurs and offer them any help you can.