Posted by: Nick Leiber on February 1, 2011
Yesterday the White House launched its Startup America Partnership, a private sector campaign that is part of recent initiatives by the Obama Administration to better support--and thus wring more jobs out of--high potential ventures.
The campaign isn't limited to early-stage companies or specific sectors or regions. "Our focus is as much on what we think of as 'speedups,' not just startups, says Startup America's chair, Steve Case, best known as co-founder of AOL and an architect of its ill-fated merger with Time Warner. "Our primary focus will be on accelerating the growth of high-growth companies. They have to be demonstrating that they're pursuing some product or service that really has the potential to scale. With the capital or mentoring or partnerships or what have you, they can break through and go to the next level."
Beyond spurring more of this type of 'growth' entrepreneurship, metrics for the campaign's success are fuzzy. "We're soliciting ideas from everybody," says Case, who calls the campaign a "multiyear effort."
While it seems like business as usual for the venture capital arms of large corporations that have committed to invest millions of dollars in participants, Case says "it's a sign companies are willing to step up and encourage entrepreneurship." He acknowledges the campaign "still has a lot of work to do."
Case, chairman of the Case Foundation and CEO of Revolution, which has invested his own money in 20 or so companies such as LivingSocial and Zipcar, says the effort gives him an opportunity to "give back in a broader way; not just focus on the handful of companies and entrepreneurs I work with directly but try to be supportive of the White House's more broad agenda and the country's need."
For entrepreneurs who want to get involved, Case is looking for ideas that justify making Startup America a priority in the White House. "We recognize there are lot of good ideas out there that we're not aware of. We want to make sure we are aware of them before we set our priorities."
Case is most eager to hear about ways to accelerate ecosystems that support entrepreneurship. For example, "MassChallenge, TechStars, and others that are sort of incubators-accelerators: how do you scale them up in markets where they currently exist and bring them to markets where they don't exist? [As an example,] I'll use my own personal experience in Washington, D.C. 25 years ago when we started AOL, there really wasn't an entrepreneurial ecosystem here--now it's developing quite nicely... Which is great but there are a lot of regions where that has not yet happened and we're hoping to nurture that in the years ahead."
Posted by: Nick Leiber on January 31, 2011
Last week Sharon Vosmek, the CEO of Astia, a not-for-profit group created to help companies run by women that need outside capital, stopped by our offices to appear on Bloomberg TV's Street Smart show and catch us up on Astia's progress.
Our conversation was wide-ranging. Vosmek explained where Astia's early-stage companies are likely to find venture capital financing these days (corporate venture arms of behemoths such as AOL, Intel, and, believe it or not, Bosch). She also dug into ways to increase America's economic competitiveness (advise and fund overlooked innovators around the country).
Today Astia and over a dozen formidable foundations, tech companies, and educators (including the Kauffman Foundation, Google, and the Network for Teaching Entrepreneurship) announced an initiative to do just that.
Coordinated by the White House, the Startup America Partnership gets players in the startup ecosystem to make investments in and provide expertise to high-potential ventures. Among this year's commitments: IBM is pledging $150 million; HP more than $4 million; and Facebook is launching Startup Days, a new series of training events to be held around the country.
This Bloomberg News story takes a look at Steve Case's role as head of the campaign. More on individual participants' commitments on the Startup America website.
Posted by: John Tozzi on October 21, 2010
Small businesses in the New York area show "unabated demand" for loans and "widespread reports of unmet credit needs," according to a new survey by the Federal Reserve Bank of New York. Of the 59 percent of businesses responding to the poll that applied for credit in the first half of 2010, only half got any loan approval at all, and three quarters said their full borrowing needs were not met. (The PDF of the report is available here.)
The online poll, which surveyed 426 small businesses in New York and neighboring states in June and July, adds some useful data points to what has become a central question of the recovery: Why has borrowing declined among small businesses? The volume of outstanding loans to small businesses has dropped by $45 billion, or about 6 percent, since 2008, according to data from bank regulatory filings.
The New York Fed survey suggests that the contraction isn't driven by lack of demand from borrowers. Deteriorating business conditions for applicants may play a role. Two-thirds of business polled reported that their sales declined since 2008. Companies that successfully got credit tended to be more established, showed sales growth through the recession, or were able to use their profits to fund their businesses in 2008.
While the health of businesses influenced whether or not they succeeded in getting loans, it didn't influence whether or not they applied for credit. "High sales performers and businesses that were having either stagnant sales or declining sales applied at roughly similar rates," says Claire Kramer, a senior analyst at the New York Fed's Community Affairs group, who co-authored the report. That finding, the report says, "casts doubt on suggestions that smaller, younger, financially weakened, or underperforming firms are drivers of credit demand."
The forms of credit with the highest approval rates were financing for vehicles and equipment (63 percent of applicants were approved) and personal credit cards (46 percent approved). The forms that were approved least often were applications for business loans (20 percent approved) and new business credit lines (27 percent approved). Companies that had obtained credit successfully in 2008 were not any more likely to be approved, the survey found.
The survey concludes that the "second look" reviews that some banks have started, along with technical assistance for businesses, could help more applicants become viable borrowers.
The New York Fed's findings about credit demand contradict other survey evidence, including from the National Federation of Independent Business, that suggests lending is down because businesses don't want to borrow. The NFIB's latest monthly member survey said that 91 percent of respondents reported that their credit needs were met, including 53 percent that were not interested in borrowing.
The survey, along with an earlier one from the Atlanta Fed, adds to the limited set of data about small business lending. The New York Fed plans to release a second report based on the same data in early 2011, and similar surveys are planned by other Federal Reserve Banks, including Boston and Cleveland, says Jeffrey Smith, a spokesman for the New York Fed.
Posted by: Nick Leiber on August 3, 2010
Two months ago, we wrote about Blinds.com, a Houston blinds e-tailer that was struggling to determine whether to hire additional workers. The boss, Jay Steinfeld, told us his business was profitable and had "plenty of cash," so he could afford to take on new staff. But he was worried about the state of the housing market, crucial for any home furnishings retailer. Government initiatives weren't top of mind.
Still, as we talked, he did acknowledge that his team was taking into consideration some of the Obama Administration's incentives to hire. His CFO, Marilynne Franks, said that the Hiring Incentives to Restore Employment Act's tax credit for hiring unemployed workers, which took effect in March, would soon be paying off for the company. She figured Blinds.com would be eligible for tax credits for 8 or 10 of the 35 employees it had brought in since the beginning of the year.
By way of background, the HIRE Act works like this, per the IRS website: Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) can qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.
Now, as WebCPA reported yesterday, the Treasury Department has just updated its monthly estimate of eligible workers, showing that from February 2010 to June 2010, businesses hired 5.6 million new workers who had been unemployed for eight weeks or longer. That means the businesses that hired them are eligible to receive up to an estimated $10.4 billion in HIRE Act tax exemptions and credits.
The IRS form to claim the exemption is available here.
Posted by: John Tozzi on July 23, 2010
Washington is poised to launch its most direct attempt to revive small business lending since the financial crisis with a plan to invest up to $30 billion of federal money in small banks and give them incentives to re-lend that money to Main Street companies.
The Small Business Lending Fund, outlined by President Obama in his State of the Union speech six months ago, cleared a key Senate vote to end debate July 22 as two Republicans broke with their caucus to support the measure.
The full bill, which includes business tax breaks and enhancements to Small Business Administration loan programs, could come to a vote as soon as July 27, according to Richard Carbo, spokesman for the Senate Committee on Small Business. The House passed a version June 18.
The fund would invest in small banks--those with less than $10 billion in assets--by purchasing preferred stock, which would pay the government a dividend of 5 percent. The cost of that money would decrease to a dividend as small as 1 percent if banks boost their small business loans over 2009 levels by 10 percent. For banks that do not increase their small business lending, the capital would become more expensive, with the dividend rising to 7 percent.
Bank lending to small businesses has dropped to $670 billion from $710 billion since 2008, according to data filed with regulators. Obama and Federal Reserve Chairman Ben Bernanke have connected the drop in small business credit to weak job growth and urged banks to increase the flow of loans to creditworthy businesses. "The formation and growth of small businesses depends critically on access to credit," Bernanke told a forum on small business July 12. "Unfortunately, those businesses report that credit conditions remain very difficult."
Banks say lending is down because fewer companies want to take on debt and fewer borrowers are good credit risks. "Loan demand has fallen dramatically since the start of the recession," the American Bankers Association noted in a recent fact sheet. The lobby group supports the Small Business Lending Fund.
Analysts like Raj Date question whether the money will be effective, however. Date, a former managing director at Deutsche Bank who now runs the Washington research group Cambridge Winter Center, calls the program "well-intentioned" but says it won't work as well as lawmakers claim. While the bill's authors say the $30 billion in federal money invested in banks would spur $300 billion in private lending to businesses, Date estimates that the Small Business Lending Fund would support only $70 billion in new credit. Banks will use most of the money to cover losses on existing commercial real estate loans, he says.
"The amount of help is relatively small to the size of the problem," he says in an interview with Bloomberg Businessweek. Date also says that taking government money will be most attractive to the banks in the most trouble. Originally conceived as a part of the Troubled Asset Relief Program, the Small Business Lending Fund was separated from TARP to avoid discouraging banks from participating because of restrictions and the stigma associated with the bailout.
Republicans opposed the measure on the grounds that it mirrors the Troubled Asset Relief Program and "injects capital into banks with no guarantees they will actually lend," according to a policy statement. Senate Small Business Committee Chair Mary Landrieu (D-La.) said in a statement that the bill has strong protections for taxpayer money and is expected to raise $1.1 billion in dividend income over 10 years.
The bill includes other provisions intended to aid small businesses such as $11.7 billion in tax breaks on things like investing in new equipment or the sale of small business stock. The SBA provisions would increase the limits on government-guaranteed loans to $5 million from $2 million, and extend the reduced fees and higher guarantees passed last year in the stimulus bill. The law would also allow self-employed workers to fully write off their health insurance costs in 2010.
