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Posts Tagged ‘Entrepreneurs’

In a new book entitledcomplacent-class, author Tyler Cowen notes that the entrepreneurship rate in the United States has plummeted to about 7.5% of American companies today that are considered “startups,” down from about 13% in the 1980s (when, coincidentally, our firm started, back in the recession of 1987).

At the same time, the percentage of workers who “switch jobs” every year, a general indicator of workers finding better prospects elsewhere – as opposed to shifts caused by layoffs – has declined by nearly 50% since 2000.  Cowen further points out the overall decline in measured productivity, now at about half the post WWII average since we moved out of the great recession, as well as about a 25% decline since 2000 in U.S. patents that are also filed in Europe and Japan (an indicator of greater scientific rigor, he believes).

More alarmingly, the type of innovation occurring these days tends to be more incremental than fully transformational.  Here, think: Uber, Airbnb or Snap, to name just three recent examples of the new innovation.

One of Cowen’s conclusions appears to be that a “complacent class” — defined as a risk-averse populace that has lost “the capacity to imagine or embrace a world where things do change rapidly for most if not all people” – has “sapped us of the pioneer spirit that made America the world’s most productive economy.”

In his book, Cowen points out the contrast between the changes of the past 50 years and those that occurred in the first half of the 20th century.  His view is that we went from dramatic improvements in health and education, coupled with a vast proliferation in technologies like autos, planes and phones, to the changes in the past 50 years which, by contrast, he finds more modest.  “A lot of our technological world seems to have stood pretty much still.”

Cowen draws an interesting point, noting how what he calls “matching” makes it easier than ever for people to find what they need, or an algorithm thinks they need.  It’s true for shopping for everything for music and movies to clothes and spouses.  A click or a swipe and, often as not, we find what we’d previously had to spend a long time looking for. (He even humorously points to a new dating app from Oscar Mayer for specifically targeting bacon-lovers.  You gotta’ love it.)  His implication appears to be that we are both less creatively inclined perhaps, and more complacent in accepting the status quo as life becomes easier, and the incentive to improvise and create diminishes.

Cowen, an Economics professor at George Mason University predicts the U.S. will see a wave of online crime that will “wall off” the Internet, thus “reinforcing group isolation.”  He sees the world becoming a more dangerous place, where “the higher the benefits of peace, the more gun-shy and war-shy the prosperous and peaceful countries will become.”  He sees this as incentive for smaller, radicalized groups to “seize territory or start wars…”

There are many who would argue against some of his depressing and Doomsday predictions.  While it acknowledges the recent decline in startups, it hasn’t yet allowed time for the necessary re-emergence from the most recent recession, nor for the entrepreneurial spirit many in business today see around us in the up and coming generation of new entrepreneurs.  In other words, the jury’s out.

Whether you agree or disagree with Cowen’s assumptions and conclusions, he’ll make you think.  And isn’t that, at the core of it, what ultimately incentivizes the entrepreneur — thinking of a better way?  Here’s hoping his dire predictions can be undone in some small, ironic way with some soul-searching by tomorrow’s entrepreneurs on the conclusions he draws.

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startupthecityTonight in South Bend, Indiana, a student group that I’ve been proud to be associated with for the past two years will be hosting a grand event that’s been months in the planning – and it’s already a sell-out.

StJoeCEO is a group of over 30 high school seniors (and one junior) from seven area high schools in its second year, with a mission of developing tomorrow’s young entrepreneurs.  For several months now the students have been building support for their big event at the Palais Royale in downtown South Bend.

(Disclosure: I am a board member and the CFO of StJoeCEO, but much more interesting and importantly to me, an occasional in-class volunteer and a mentor to several of these bright and enthusiastic students.)

If you ever despair of the future, given all the divisiveness surrounding us today, just find a group like this to turn your head around.

Tonight’s event, Startup The City is a celebration of the entrepreneurial spirit, and of the tremendous strides that the city of South Bend has made in just the last couple of years.  The event features “Venture Valley” and “Innovation Way” that will showcase local entrepreneurs… “Panel in the Park,” a panel discussion including South Bend Mayor Pete Buttigieg, Chamber CEO (and former area mayor) Jeff Rea, and a host of local business dignitaries… and showcase presentations by area start-ups.

For the students, it’s an opportunity to put into motion what they’ve been learning the past few months about business, innovation, strategic thinking, finance and emotional intelligence, not to mention marketing, sales, pitching, record-keeping and flat-out entrepreneurial thinking.  Program Director Iris Hammel and her co-teacher Bethany Hartley have been tireless in their efforts to set a high bar for these kids – and they appear to be exceeding.

Collectively, the StJoeCEO team has already raised around $80,000 in event funding, half of which will later go to fund the students’ own start-up businesses, which each will be diligently working on as soon as Startup ends tonight.  In the coming weeks, each will give a ‘Shark Tank’-like presentation to a panel of local business and investment professionals, and will ultimately share in funds that will help them launch their own local businesses.

What a great way to learn about entrepreneurship and the many benefits of their hometown community.  I am excited to attend this evening along with about 300 other folks, and look forward to working with these students the rest of the year.

You can learn more about StJoeCEO here.  They’re currently accepting applications for a few spots in next year’s classes, and are in the process of adding a college level program and an Elkhart area class as well.  I encourage anyone who knows of a bright young high school junior to check them out.

And by the way, local business community… investors are ALWAYS welcome!

 

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Today’s post is slightly off-topic from our usual software, ERP and business categories… but not by much.

If you’re a small business owner, or maybe thinking about being one, then a recent article in Inc. Magazine is instructive in pointing out what motivates men and women to want to start, and run, their own businesses.  A brief synopsis follows.  (You can find the full text of the article beginning on p. 60 of the March, 2012 issue of Inc.)

A couple Harvard Business profs took their stab at listing top motivators and found that they were, in order:

1. Autonomy.  Entrepreneurs number one motivator.  “The only distinction is between the independent and the fiercely independent.”  In general, “motivations for company founders change less over time than do the motivations of other professionals.”  It’s true across the board regardless of age or gender.

2. Power and Influence.  Entrepreneurs care almost as much “about being the boss as about not having a boss.”  True of men across ages, and of women in their 20s and 30s.  After that, women may feel they have already proved themselves and are looking for ways to make the work itself more meaningful.

3. Managing People.  Prevalent among younger entrepreneurs who may conflate managing people with power.  With experience comes the joy of inspiring rather than directing, and interest in pure “management” tends to wane.

4. Financial Gain.  Especially true among men.  Conversely, you may have to surrender some control (to investors, partners, angels, etc.) to earn financial gain.  Women want to be independent and powerful, “but don’t care as much about getting rich.”

5. Variety.  Grows more important as entrepreneurs age, and learn they can sculpt their own roles within their own businesses.

6. Altruism.  Women of every age view their companies as vehicles for making a difference, a factor less prevalent among men almost regardless of age.

7. Intellectual Challenge.  Scored particularly highly among older women entrepreneurs.  The thinking is that by their 40s both they and their male counterparts are often financially comfortable and seeking satisfaction elsewhere.  Also, many women have been forced to put intellectual growth on hold while they struggled to build companies and raise children at the same time.

You can take a modified version of a quiz called CareerLeader, used by hundreds of schools, at www.inc.com/motivation to see where you fit on the entrepreneurial scale.

Use it to rank your motivations, and see perhaps what makes you tick.

 

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Today we take a slightly off-topic detour, before we launch into a new series of ERP posts. (Beginning with our next post, we’ll be taking a hard look at the impact of ERP software in the distribution and wholesaling arena, courtesy of a new report recently published by Aberdeen Research.)

Today’s slightly off-topic post is still of general interest, I think, to our base of manufacturers and distributors, because it’s about some timely and topical topics: namely, the success factors behind U.S.cities that are actually creating jobs today.

The keys lie in two areas near and dear to our hearts: entrepreneurs and education.  In this case, a recent article in the November 29th Wall Street Journal (p. A3) points up some interesting correlations that have led to certain cities (notably, Austin, Texas, among others) growing jobs.

You can read the article yourself if you’re a Journal subscriber, but if not, the gist of it is this: They’ve found that a great way to create jobs for people who didn’t go to college is to attract highly skilled entrepreneurs “and watch the companies they start hire lower-skilled workers.”

Even as manufacturing dwindles as an employment base, it turns out that an effect is happening in the tech and service sectors that is similar to what previously happened in manufacturing: jobs – even highly intellectual ones – tend over time to get broken down into increasingly smaller and more granular tasks.  Just as assembly lines one broke down manufacturing production into discrete tasks manageable by individuals, these high-tech and high-intellect jobs are going the same way.

So, by attracting entrepreneurs, who in turn are hiring the best and the brightest, cities end up creating even more jobs for the lesser-educated — say, those with an associate’s degree.  Towns (like Austin) with faster growing influxes of population tend to grow even faster still, and take great advantage of this phenomenon.

The article points out that forty years ago, the disparity (in the percent of workers with at least a bachelor’s degree) between the 10 most and 10 least educated metropolitan areas in the U.S. (among the top 100) was about 13%.  Now, it’s more than double that.  In a sense, the smart (cities) are getting smarter.  Metro areas with the highest percentage of workers with at least a bachelor’s degree have generally fared better in the downturn, too.  The article cites cities including Boston,Washington DC area, Madison, Raleigh-Durham, andPortland, ME as its top five. 

And of course, these so called “brain hubs” go beyond generating new mid-skills jobs: they’re also generating higher incomes.  There’s a whole new crop of new middle-skill, middle-income specialties that are growing the employment base, spreading the wealth, and creating new job opportunities in these cities.

But it all starts by nurturing entrepreneurs.  Cities that create the right environments (a whole other topic…) are sowing the seeds for their own long term success… in growth, in income and in quality of life.  And one feeds upon the other.

 

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Yes, a little off-topic, but then again, a growing economy is in everyone’s interest, and very much a business topic, after all.  So, permit this small diversion towards a Wall Street Journal article that caught my eye as it articulated a few of the ideas that the Kauffman Foundation has termed the Startup Act.

These are ideas that cost government virtually nothing but which they say promise to encourage the entrepreneurial spirits that have pretty much always been the cure to our economic woes.  Their ideas include:

  • Letting in immigrant entrepreneurs who hire American workers.
  • Reducing the cost of capital through capital gains tax relief for early stage investments.
  • Reducing barriers to IPOs by allowing shareholders to opt out of Sarbanes-Oxley.
  • Charging higher fees for patent applicants who want quick decisions to remove the backlog of applications at the Patent Office.
  • Giving licensing freedom to academic entrepreneurs at universities to accelerate the commercialization of their ideas.
  • Having the government provide data to permit rankings of startup friendliness of states and localities.
  • Regular sunsets for regulations and a consistent policy of putting new ones in place only if their benefits exceed their costs.

Are there any that you would add to the list?  Feel free to comment…

 

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Sorry – I just had to write that headline.  But in a more serious vein, it’s also true. 

In its July issue, Inc. Magazine builds its case for a “revitalized America” with a 16-point plan to create thousands of new companies and millions of new jobs.  You can go here for the full article online if you’re not a subscriber

Inc.’s stated goal is nothing less than a “rebooting of the entrepreneurial ideal.”  They note how America has long been a “haven for entrepreneurs” and that this is the time to “rethink exactly what that means.”

As my own vote of support, herewith a brief summary of some of what I consider their best and most compelling arguments.

Step 1: Take entrepreneurship out of the business schools.  Inc. makes the case for promoting entrepreneurial education in the arts and humanities.  MIT and Univ. of Miami — whose alumni start hundreds of businesses every year — provide case studies.

Step 2: Tap the best and brightest wherever they may be.  Anyone who’s owned a company and employed non-Americans knows (like me) the frustration of getting and keeping good foreign workers, and the travails of the H1-B visa.  Inc. lays out ideas for giving these visa holders green cards when they create companies that create American jobs.  (Separately, note that widespread bipartisan support is building in both the House and Senate for just such changes in law.)

Step 3: Our education system should foster entrepreneurship among the young.  Teaching middle-school students about starting a business turns out to be one of the best investments we can make.

Step 7: Give angel investors a tax break.  The article notes how Minnesota, Wisconsin and Ohio offer tax credits to angel investors for backing early-stage ventures.

Step 8: Cut the incorporation red tape.  Would you believe the U.S. ranks only eighth in ease of incorporation worldwide?  (New Zealand is number one.)  Eighth isn’t bad, but Hawaii has an on-line step-by-step approach that could be a model for other states.

Step 14: Fund big science.  Funding for scientific research as a percent of GDP has dropped since 2003.  It’s under 1%.  Meanwhile, our global competitors are seizing the opportunity.

Step 16: Bank the unbankable with microfinancing.  Recently, banks have beefed up loan requirements and cut small business lending.  We should be doing the opposite.  Microfinance lenders (lenders of very small amounts) are more important than ever in filling the gap.  If it can work in Africa (and it has, significantly), why not here?  Cities and states should embrace these kinds of programs.  Businesses are indeed bankable, “if you know what to look for.”

These are only some highlights, briefly touched, from the entire article.  Pick up a copy of Inc. in print, or check it out online.  It’s a good read, and it may even motivate you to write a politician or act in your own (and others’) behalf.

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