Planning for a Crush of Startups
A Venture Capitalist's Outlook
The cost of starting a business is declining so expect an explosion of startups, says venture capitalist Paul Graham of Y Combinator (BusinessWeek.com, 9/26/07), a backer of startup companies, in an essay on his Web site. "When starting a business was expensive, you had to get the permission of investors to do it. Now the only threshold is courage." Among the implications:
• Standardization of investment terms, especially for initial "angel rounds." This speeds up the investment process and reduces legal fees, Graham says. Y Combinator is "using the same paperwork for every deal we do" and has "commissioned generic paperwork that all the startups we fund can use for future rounds."
• More acquisitions of young companies by corporations, as they "develop standardized procedures that make acquisitions little more work than hiring someone." According to Graham, Google (GOOG) is setting the pace. "They buy a lot of startups—more than most people realize" and "they're figuring out how to do it efficiently."
• "Younger, nerdier founders." Graham argues that because less effort will need to go into convincing investors, and more into actually launching the business using a few tens of thousands of dollars raised from relatives, "younger and more technical founders will be able to start startups than could before."
• More competition. While "that doesn't erase the advantage of increased cheapness," he says, "you won't be able to sit on a good idea. Other people have your idea, and they'll be increasingly likely to do something about it."
One requirement that won't change is the importance of "startup hubs" like Silicon Valley. That's because face-to-face meetings with investors and other backers will remain central to all startups. Y Combinator feels such contact is so important that "we make people move for Y Combinator, and it doesn't seem to be a problem. The advantage of being able to work together face-to-face for three months outweighs the inconvenience of moving."
Predicting the Small Business Vote
Online payroll service SurePayroll recently released a survey of 450 small business owners that forecasts which way the small-biz vote will go in the 2008 Presidential election. The survey shows that of the 84% of small business owners who said they plan to participate in their state's primary or caucus, 59% of them favor Republicans.
"During a time when Americans seem to be screaming for a change in political philosophy, small business owners are saying the Republican Party still holds the key to success," SurePayroll President Michael Alter said in a press release. "This is bad news for Democrats. If they want to win, they need to do a better job reaching this community."
Name-Dropping to Venture Capitalists: Not a Good Idea
Saying something like, "Bill Gates loves what I'm doing" isn't good etiquette for a few reasons, namely "it raises questions about why Bill isn't backing you" and "it sounds tacky," writes Mark Davis of DFJ Gotham Ventures on his blog. A better approach: "Get them to join your advisory board or invest in your company."
How About Disposable Prepacked Lunch Boxes?
Advanta Bank's Ideablob.com invites visitors to submit their business ideas for feedback and enter a monthly contest to win $10,000. Prepacked lunch boxes is one of the most popular recent ideas. Two others: a real estate Web site "that finally rids the world of real estate brokers" and a Web site to search for available wedding or business meeting event space.
Fewer than 3% of businesses owned by women hit the $1 million annual sales level, while twice that percentage of men hit $1 million. "That astounding statistic…drove me to write this book," writes Susan Wilson Solovic in the introduction to The Girls' Guide to Building a Million-Dollar Business (AMACOM; October, 2007). Why the discrepancy? One problem is in different approaches to money between men and women, she writes. "When are women going to wake up to reality? What's wrong with making money?" Another is that women are "primarily caretakers of children…" And there's the reality of "gender bias," she writes. The author offers decidedly traditional approaches for women, though: things like focus, persistence, networking, and passion. The author's many examples could inspire women business owners with their eye on the $1 million revenue target.