Image via Wikipedia

The performance by a representative of the National Federation of Independent Business on a PBS show last night should eliminate any doubts that the organization is anything but a mouthpiece for the Republican party.

Judy Woodruff had on the show Bill Rys from the NFIB and John Arensmeyer, who runs Small Business Majority, a small business advocacy group, which presents itself as an alternative to the NFIB. They were there to discuss President Obama’s latest small-business proposals.

And, of course,  Rys had nothing but criticism for every single one of Obama’s proposals–the $5,000 tax credit for hiring, the $30 billion in TARP money for community banks to increase lending and so on. Not a positive word about any of it.

But, most telling was his reliance on the concept of uncertainty.  In one exchange, he said:

continue »

Invest in startups–and share the wealth when (and if) they hit it big. That’s a creative approach some early-stage investment funds and business incubators are experimenting with these days.

The latest is First Round Capital, which has an exchange fund for entrepreneurial founders.  Entrepreneurs can get a stake in a pool of all participating portfolio companies if they agree to forgo a percentage of stock in their own startup. From the perspective of the entrepreneur, it reduces the chance that, if their own venture fails, they have nothing to show for their efforts. For First Round Capital, it also gives entrepreneurs a reason to want other fellow investments to succeed–and, perhaps to offer one another some help.  Managing director Josh Kopelman was quoted in TechCrunch as saying that could be anything from sharing interview techniques and technical management strategies to sales leads.

The program shares some similarities to a four-month equity exchange program called the Founder Institute, which launched last summer.  In reality, the Institute is more of a quasi- venture accelerator-business incubator, through which startup founders, some of whom haven’t yet left their days jobs, get access to mentors and workshops; those who attend long-distance can participate online. There’s also the usual opportunity to present to potential investors at the end of the program.

But, the equity exchange part of the deal is the following: The Institute takes 3.5% of each company. Technically, that is done through warrants, which become part of  a bonus pool shared with startups, as well as mentors. The idea here, again, is that founders share in each others’ success. And, as a result, they’re more likely to collaborate–ensuring further success.

You scratch my back, I scratch yours, and we both come away with a startup that works.

An innovative and possibly risky experiment in social -enterprise incubation and funding just kicked off in San Francisco.

Called West Coast Village Capital, it’s a 12 week program with 24 social- enterprise entrepreneurs, based on the following philosophy: that startup founders can make funding decisions about one another as well as official investors.  The backer is First Light Ventures, which is part of Grey Ghost Ventures.

To that end, the program splits the participants up into six groups; they meet weekly to help each other out.  The entrepreneurs themselves decide who goes where. So, someone who’s strong in web 2.0 and weak in marketing might team up with a marketing-savvy colleague who lacks a background in tech . Every three weeks, the entire group meets to discuss whatever issues seem to be most pressing.

Then, here’s the new part, at the end, the entrepreneurs vote to decide who receives money from the fund. Four to eight people will get either $25,000 or $75,000. You’re not allowed to vote for yourself, of course. But you are supposed to vote for the most “investment ready” starutps, not the most “investment worthy”, according to April Newman, venture partner. (First Light might also invest in other companies that don’t make the cut).

This program, actually, is one of four launched by First Light. Others are in New Orleans, Boulder, and Dasra, India. Each also has a somewhat different model. Also, the others are run by existing organizations, such as Idea Village in New Orleans and the Unreasonable Institute in Boulder.   But, they’re all based on the same idea that entrepreneurs themselves make the funding decisions.

Also, to judge from the San Francisco experience, the startups chosen to participate cover a refreshingly diverse array of businesses. It’s not the usual web-only suspects.  For example, New Avenue builds eco-friendly, low-cost homes in empty spaces–backyards, say–to reduce sprawl.  RainSaucers has a rainwater collection system for family homes in the developing world. Senda sells fair-trade sporting goods. A portion of each sale is used to donate equipment to organizations using sports as a tool for social development.

Newman says the real test will be in a year or more, after the program is over, when administrators can see which and how many startups get funding from outside investors.  It’s an experiment, after all, not a work carved in stone.

Business plan competitions are like a friend who’s good for a laugh but not particularly reliable otherwise.  That is, they’re limited.

For example, they favor sexy web, technology, and life sciences businesses.  All the rest are usually out of luck.

However, a blog on the You’re the Boss site asserts that some contests take a different tack:

But there are competitions now that encourage and reward service, consumables and other non-tech companies — though their numbers are fewer and their winners get less attention.

These include: standalones, like the yearly Good Neighbor Pharmacy Business Plan Competition held by the National Community Pharmacists’ Association to promote independent pharmacy ownership, and separate tracks within larger competitions, like the Morehouse College Business Plan Competition, which has a best “consumable industry” prize alongside “energy,” and “science & technology.”

via Can Main Street Win Business Plan Competitions? – You’re the Boss Blog – NYTimes.com.

It also mentions Temple University and Babson College.

Well, all this is true. But the fact is, of the dozens and dozens of competitions, the number that include non-tech, boring old retail and such is minuscule.

But, how could it be otherwise? Aren’t most angel, VCs and other investors geared to the sexy tech folks? And, if that’s where the money is, wouldn’t you expect the would-be entrepreneurs to be there, too? And, since the media focuses  on such investors and companies, wouldn’t you expect  the other winners to “get less attention”, as the post says?

Bottom line, the phenomenon screams a lot about the basic bias of the investment-media complex. Of course, tech-web etc. companies, if they hit it right, can make a stupendous return for their investors. But, there’s money to be made in other types of businesses.

You’d just never know if from most business plan competitions.

Women entrepreneurs are going to create a lot of jobs over the next eight years, especially compared to their male counterparts.  And the current crisis in bank lending could be one factor.

That’s according to research from the Guardian Life Small Business Research Institute.  It found that female-owned firms will create 5 to 5.5 million jobs by 2018; the Labor Department predicts that there will be a total of 15.3 million jobs by that year.

There are a lot of factors, ranging from higher growth rates for industries and jobs usually dominated by women to higher college graduation rates.  But what really interested me was this comment:

The projection also reflects the timely fact that female-owned businesses, more often self-funded than male-owned ones, are therefore less reliant on bank financing at a time when many say small business lending practices are more restricted.

via Women-Owned Businesses: America’s New Job Creation Engine – Forbes.com.

In other words,  historically women have had a harder time finding funding from banks. And, partly as a result, they tend to find other ways to finance their businesses, including self-funding. This has posed quite a problem for women, of course.

Except, now it looks as though it might be a proverbial blessing in disguise.  Because the lack of bank funding available these days may be hurting women-owned busineses less than those run by men.  (It also may help that many women-owned firms tend to be service businesses and may need less funding than other companies).  As a result, the growth prospects for female-run companies may be better in the long run.

Isn’t that ironic?