John Tyler: The Outlook for Entrepreneurism in America
Watch this interesting interview with John Tyler, General Counsel and Chief Ethics Officer for the Kauffman Foundation. The Kauffman Foundation is one of the largest and most effective centers supporting entrepreneurism in America. Mr. Tyler addresses how we can enhance the entrepreneurial ecosystem in the United States in order to grow and develop our economy and create jobs. How many new startups would we need per year to have an impact on our economy? And why does Mr. Tyler believe we need more start up companies to fail faster? What can we do to make entrepreneurship easier for everybody?
Is America losing its edge compared to the growing entrepreneurial ecosystems of India and China?
What Kauffman Foundation programs are available to assist entrepreneurs in the United States? What is Kauffman Foundation doing to assist minority and women entrepreneurs to grow their businesses and provide better access to capital?
Are business schools teaching entrepreneurship the way they ought to?
Watch now and let me know what you think!
Interview with John Tyler
This month I took a trip to India for 3 weeks to study the microfinance industry. MFIs in India are in a position where they are unable to collect savings due to government regulation, so they rely on private equity as a way to raise the capital to fund loans. Currently, the microfinance industry is going through a small crisis in India due to threats of increased government regulation, but many MFIs are still looking for funding to grow their business. Some MFIs are even expanding their business by offering larger loans to clients that have completed several successful loan cycles and are now ready for more capital or to new clients that have SME-sized businesses. The SME segment of the market in India is relatively un-serviced by commercial banks. MFIs offer loans to micro-entrepreneurs and banks offer loans to large businesses, but many small and medium sized enterprises are left without access to substantial funding. These businesses are often referred to as the “missing middle” by industry experts. Many MFIs are expanding their models to service these “missing middle” clients and have become very successful in this segment.
I spoke with several players in the microfinance industry in India, and the main focus for most organizations is raising capital in a way that will grow the business without sacrificing the social mission. There have been a few big players in the industry that have taken private equity capital and have had to raise interest rates and change the organization’s mission in order to answer to investors. Many MFIs are looking for an alternative investment, such as patient capital, in order to grow the business while maintaining the social impact. Some MFIs have turned to angel investors from the US as an alternative to private equity. The angel investor community is not strong in India, but there are several angel investors from the west who have chosen to invest in India. Angel investors offer MFIs a smaller amount of capital than a traditional PE firm, but demand a more reasonable return (20-25%), and a more hands-off approach to managing the business.
Overall, there are many opportunities for angel investment in India. In the MFI industry alone, there are many exciting opportunities to invest in organizations that have a strong and developing client base, grow at 50% or more each year, are expanding to give loans to SMEs, and have highly educated and experienced leadership. Angel investors that want to make a difference in a developing country by investing in organizations that create jobs and livelihoods while also earning an adequate return on investment should look into the MFI investment opportunities in the growing markets of India.
As valuations soar, tech field starts feeling bubbly
By Laurie Segall, staff reporterDecember 20, 2010: 11:25 AM ET
NEW YORK (CNNMoney.com) -- On any given day at Grey Dog, a small restaurant in downtown New York, you'll find clusters of engineers and entrepreneurs crowded around tiny wooden tables discussing their startups' latest creations.
The high ratio of techies to tables isn't surprising. DogPatch Labs -- an office space that houses more than 10 companies backed by venture capital firm Polaris Ventures -- is right around the corner. One street south, a variety of startups rent desks at TechSpace. A number of Union Square Ventures-backed companies work in the area. And TechStars, a mentoring-and-seed-cash program that just selected finalists for its first crop of New York startups, is right around the corner.
Within a few densely packed urban blocks, dozens of tech startups are cranking out code. And investors want in. Early.
Which has tech veterans a bit nervous.
The murmuring started months ago, with early-stage investors moaning about soaring valuations and venture funds shifting their cash toward Internet upstarts. Then a widely circulated dispatch from New York venture capital doyen Fred Wilson yanked the conversation out into the open.
"I think the competition for 'hot' deals is making people crazy and I am seeing many more unnatural acts from investors happening," he wrote last month in an ominous blog post titled "storm clouds."
Things have intensified since then. Google (GOOG, Fortune 500) tried -- and failed -- to snap up daily-deals darling Groupon for a rumored $6 billion. Twitter sucked in $200 million more from investors, giving the company a valuation of nearly $4 billion. Kleiner Perkins is raising more than $1 billion for new venture capital funds -- and lured Wall Street's star Internet analyst, Mary Meeker, to Silicon Valley to spot investments for them.
Wilson avoided using the term "bubble," but others aren't shying away. Angel investor and Wine Library TV host Gary Vaynerchuck thinks a "huge bubble" is inflating.
"I'm seeing a lot of companies get $5 million to $15 million valuations now on their first seed rounds that have no anything," he says. "At least they're a little bit more practical than 2000, when people got crazy."
Hot deals "are incredibly competitive, which pushes up valuations," says TechStars director David Tisch.
Two worries. First: Bubbles artificially prop up weaker ventures and disrupt market Darwinism.
"I do worry about companies that shouldn't get funded, getting funded," says Chris Dixon, an active Silicon Valley angel investor whose portfolio includes Skype and Foursquare.
"When you have great talented people all starting their own company, the companies that are trying to hire are getting hurt because they're not able to hire," Tisch says of the brewing talent war. Exhibit A: Google's recent decision to hike its workers' pay by 10% across the board.
Second problem: This kind of thing usually ends in tears. Bubbles burst, and the last time that happened it blew a crater in the U.S. economy and froze tech investing for years.
Which is why those who think things are getting frothy wouldn't mind hearing some pops.
Lawrence Lenihan, managing director of New York-based FirstMark Capital, thinks there will be a few high-profile flameouts.
"My prediction of what will happen is that there could be a meltdown in the New York tech scene," he says. "But it's like a forest fire: It's good, it clears out the dead wood."
Tisch thinks a bust "would help everybody on some level. A realignment of the early stage stuff would be a benefit to quality companies."
But here's the silver lining: Some of the dot-com debacle's lessons stuck.
Most of the billions being plowed into the tech scene's hottest startups right now are coming from venture capitalists and rich angels -- not retail investors sucked along by an IPO tsunami. And those VCs say they're planning carefully for the market's ups and downs.
"We are not pulling back. We are sticking with our investment strategy,"Fred Wilson says.
He thinks his last venture capital firm, Flatiron Partners, made two mistakes during the go-go '90s: It raised too much and spent it too fast. This time around, he's keeping a close eye on maintaining a slow and steady pace, adding six to eight companies a year to Union Square Ventures' portfolio.
Lenihan has a similar approach. His firm, which makes the majority of its investments in New York companies, will keep deploying its cash even if the market fizzles.
"This is not Silicon Alley," he says of the modern New York tech field. "This is not something where it's going to disappear off the map."
The tech industry itself has also changed. Thanks to open-source software and fast-improving tech tools, it's vastly cheaper to launch a Web startup now than it was 10 years ago. And for every Twitter -- a great idea in search of a business model -- there's a Groupon or Zynga: companies that mint money and are already solidly profitable.
As Dixon put it: "The tech sector is probably the brightest sector of the U.S. economy. It's real. It profits."
So in downtown in New York, techies will keep checking in at Grey Dog, where Tisch stopped in for breaks while culling through the stack of applications for TechStars NYC. The finalists -- who got the good news last week -- include ventures targeting fields ranging from data migration to social e-commerce to fashion.
Maybe one of them will be the next Google.
Arizona has the potential for global presence
by Kathleen Ingley - Dec. 4, 2010 05:34 PM
The Arizona Republic
A giant Canadian private-equity fund makes investments around the planet. Why not in Arizona?
The answer's simple: Nobody asks.
The Caisse de Depót in Montreal gets a constant stream of businesspeople pitching opportunities in places like New York and Chicago. But Arizonans aren't making those international sales calls.
Maybe it's a relic of the Old West, a lingering ornery notion of self-sufficiency. (Forget the fact that developing the West required massive infusions of capital and government money.)
But staying as disconnected as a cowboy on the open range makes no sense for modern Arizona.
"There is a lot of money looking for places to go in this world," according to R. Glenn Williamson, founder and CEO of the Canada Arizona Business Council. "There's no reason why Arizona shouldn't be on that map."
Foreign investment is just one place where we're missing out on the global economy. We should expand exports, attract companies and become a magnet for talented international workers and entrepreneurs.
Step 1 is to get rid of an inferiority complex.
"We sell ourselves very short," Williamson said last Wednesday in a breakout session at Global Arizona 100. The conference, co-sponsored by Science Foundation Arizona and the Morrison Institute for Public Policy at Arizona State University, is aimed at developing strategies and partnerships to make the state more internationally competitive.
The 200 attendees developed a set of recommendations to bolster international trade, which they'll share with the state's political and business leaders.
In Williamson's view, Arizona right now has "an adequate product to sell globally," with a good supply of small and medium-size businesses that are attractive for investment. This is one of the few places in the world with the capability to build aircraft "from tip to tail."
A true global strategy is a mix of action and mind-set. My checklist would include:
A state focal point
The fledgling Arizona Commerce Authority, a public-private partnership, needs a section to promote foreign trade. And the resources to support it.
A wide-angle lens
Arizona must encourage a global perspective at all levels of leadership.
This means putting up a strong fight against xenophobia. The issue of illegal immigration can't continue to obscure Mexico's importance as our No. 1 export market and the economic potential for various partnerships.
The urgent job of teaching children whose first language isn't English should not stop us from recognizing the competitive advantage of nourishing their linguistic skills. (Foreign-language skills in general need more respect and emphasis.)
Nearby states and metro areas aren't always competitors. They can be partners in a megaregion that includes Utah, Southern California and New Mexico. That can create demand and economies of scale that could, for instance, build overseas business for Sky Harbor International Airport.
Within Arizona's borders, cities need to have a team strategy for global economic development, presenting a common message and avoiding destructive rivalry.
Smart immigration rules
Arizona's delegation should push for an immigration policy that supports economic development. Goodyear made creative use of incentives to land the first U.S. plant for China-based Suntech, the world's largest manufacturer of solar panels. But when the company wanted to bring a plant manager from China, it couldn't get a work visa.
Promising foreign students get engineering and science degrees at Arizona universities and then take their skills and training home because potential employers don't want to tangle with the complex visa process.
As the state looks at big cuts in K-12 and university funding, no one should ignore the economic impact. Former Intel Chairman Craig Barrett said in a breakout group: "Let's not shortchange education in Arizona, because no one's going to invest long-term without good education."
Even with the Internet, face-to-face contacts are important. Overseas travel has to shed its image as a junket. And we have to realize that multiple trips are often necessary.
Any major Arizona official who hasn't been out of the country should be sent on the next available trade mission, to get a firsthand view of the opportunities and the level of competition. The legislators who think rock-bottom costs are the deciding factor for corporate locations should check out the plants that Phoenix-based First Solar is building in Germany and France.
Building on local links
Arizona has a lot more international connections than most people realize, from the Russian Children's Center to the Indonesian American Association, and we should profit from them in as many ways as possible. The Greater Phoenix Global Guide, a just-completed ASU guide that catalogs a wide variety of groups and businesses, is a valuable new tool (check it out at skysong.asu.edu)
Endurance and persistence
Succeeding in the global economy requires doing the homework, cultivating the contacts and making the cross-connections. North Carolina knows how to do it, with an approach that includes heavy participation in trade missions and meticulous follow-up, said Margaret Mullen, chief operating officer of Science Foundation Arizona. "They constantly keep their name in front of the business community around the world."
This isn't a sprint, it's a marathon. And Arizona has the potential to be at the front of the pack.
In today’s fluctuating economy, the notions of entrepreneurship, entrepreneurial leadership and entrepreneurial decision-making is receiving increased attention by citizens, academics, managers and politicians on a global basis. The current global financial crisis has put added pressure on creating new ideas and bringing these to the market resulting in financial fruition, economic development and employment. Being an entrepreneur and creating value by establishing a new organization in both the profit and non-profit sectors in business as well as the arts impacts both economic and social conditions. This creation process takes more time and effort than one can imagine and is by no means easy, with a high failure rate reaching over 70 percent in certain countries.
Since entrepreneurs are found in all professions—education, medicine, research, law, architecture, arts, engineering, social work and distribution—the definition of entrepreneurship in my book Entrepreneurship, 8th edition (McGraw-Hill/Irwin, 2010) is relevant: “Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort, assuming the accompanying financial, psychic, and social risks, and receiving the resulting rewards of monetary and personal satisfaction and independence.”
Global entrepreneurial leaders create visionary scenarios that assemble and mobilize participants who become committed by the vision to discovery and creation of sustainable value. They have a wide variety of attributes including being a visionary, having a passion for their idea, being a risk-taker, having perseverance, building a team, recognizing opportunities and needs, solving problems, and giving back. Let us look at a few examples.
Leonardo Da Vinci
In addition to his many other titles, Leonardo Da Vinci should be labeled as one of the great global entrepreneurial leaders of all time. It is in fact the breadth and depth of his work, his wide-ranging skills and his lasting impact on both the arts and society that reflect the strength of his entrepreneurial vision. Leonardo created many new and different pieces of art, devices, and ways of thinking that were ahead of their time.
Edward Teach (Blackbeard the Pirate)
From 1716-1718, Blackbeard the Pirate ruled the seas and was also an entrepreneurial leader who flourished in his trade. The pirates who joined Blackbeard’s command often came from the lowest classes of society or were former members of the British Navy, who found the conditions and treatment they received better than life on farms or plantations. All booty taken by the pirates would be divided evenly among the crew, one part each, save the captain’s two.
Peter the Great
Peter I (Peter the Great) ruled Russia from 1682 until his death in 1725, bringing about major modernization to his country. His global entrepreneurial vision and leadership gave Russia a new position of power as the country was transformed into a western empire; educators, military personnel and businessmen were invited to Russia; the army was modernized; a strong navy was developed; and arts and education flourished.
John Rockefeller was an extraordinary American entrepreneur and philanthropist. Through hard work, determination and a strong competitive nature, he became the world’s first billionaire. Rockefeller chose to change his entrepreneurial pursuits away from making money towards giving it away. From his equity position in Standard Oil, a company he co-founded, he felt the need to disperse his wealth to those less fortunate and formed the Rockefeller Foundation; this started the rise of American social philanthropy.
Entrepreneurs often find opportunities and success in spite of great odds and obstacles. Madam CJ Walker was one such person who identified a gap in the market—hair care products for black women. CJ Walker became the first self-made female black millionaire in the United States. At one point, she employed over 3,000 women and had a wide range of hair and skin care products.
Muhammad Yunus is an example of a selfless global entrepreneurial leader. After seeing the impact of his first micro-loan and the way in which he was repaid, Yunus began to envision a model that could work anywhere. He found that the poor would often quickly repay their loans with few problems. By the early 1980s, Yunus had expanded to other developing countries and in 1983 formed The Grameen Bank, the institutional home of his micro lending practices both of which were recognized with a Nobel Peace Prize in 2006.
Microsoft founder Bill Gates’ entrepreneurial skills are varied. His company revolutionized the computer industry, ushered in the internet age, and had a deep and profound impact on the daily lives of people around the world. Because of this persistence and risk taking, he shaped the evolution of the information age making Bill Gates the world’s richest man in 1995. In 2000, the Bill and Melinda Gates Foundation was founded with the goal of alleviating many of the problems that are afflicting the world’s poorest people and has grown into one of the premier philanthropic organizations in the world.
The role of global entrepreneurial leaders throughout history indicates the diversity in backgrounds, mindsets and goals that spawn entrepreneurial actions, decisions and leadership. From public sector to private, for-profit to non-profit, in science, arts, religion, medicine, politics and business, and across industries, the variety of forms that entrepreneurial leadership takes is clear.
For the contemporary entrepreneur who actually starts his or her own business, the experience is filled with enthusiasm, frustration, anxiety and hard work. There is a high failure rate due to poor sales, intense competition, lack of capital, or lack of managerial ability. The financial, social and emotional risks are high, as are the rewards. As history has shown, the individual’s reward can easily set the stage for an accelerated impact on the larger community, region, country, or even the world.
Robert D. Hisrich, Ph.D. is the Garvin Chair of Entrepreneurship and Director of the Walker Center for Global Entrepreneurship at Thunderbird School of Global Management. He is the author of numerous publications and books including the textbook, Entrepreneurship; the most widely used text on the subject, published in nine languages. A self-described serial entrepreneur, Dr. Hisrich has established and sold numerous companies.
Global Entrepreneurship Week: November 15th-21st
This week is Global Entrepreneurship Week. Nearly 100 countries participate in GEW every November, and each year there are more than 40,000 events that occur around the world with over 10 million participants.
The United States is second (UK is first) on the list of countries participating with 414 scheduled events and 37,665 people participating.
What featured events are happening during the Week?
There are a number of featured events that demonstrate the global scope and scale of the initiative. Some of these featured events include:
- Global Cleantech Open Ideas Competition 22 countries
- Speednetwork the Globe 50 countries
- Startup Weekend 15 cities around the world
- Global Student Entrepreneur Awards 8 countries
- Creativity World Forum 12 Districts of Creativity 12 countries
- EO 24 38 countries
- Your Big Year England
- La Fête de l’Entrepreneur France
- YBI Global Forum Mexico
- The Hunger Project Sweden
Global Entrepreneurship Week has several great sponsors:
Check out the list of ASU's Global Entrepreneurship Week events (some are open to the public)
ASU GEW events