Empowering Small Business

Where Entrepreneurs Go to Learn

The New York Times just released an article in its Small Business section, fielding additional research from a Fortune Small Business study, that analyzes the best places to learn entrepreneurship out of the 3,000 colleges that offer courses in the field.

For undergraduate entrepreneurial programs, the top ranked colleges were Babson College, Indiana University, Syracuse University, the University of Arizona, and the University of Pennsylvania. Those seeking the highest ranked schools for graduate entrepreneurial education should seek out Babson, Harvard, Indiana University, M.I.T., Stanford, Syracuse, the University of Arizona, University of California at Berkeley, UCLA, the University of North Carolina at Chapel Hill, and the University of Pennsylvania.

Online entrepreneurial programs are another great place for busy entrepreneurs looking to build core small business building skills; the highest ranked online learning environments can be found via Boston University, the University of Houston at Victoria, the University of Wyoming, and Western Carolina University.

Engaging in cross-disciplinary studies is also a smart choice for entrepreneurs who need to get grounded in entrepreneurial basics and in an additional field of their choice; the topic programs for cross-disciplinary studies included Cornell, M.I.T., Stanford, the University of North Carolina at Chapel Hill, and Wake Forest.

Executive education programs that are time limited in nature and highly intensive are another smart route for busy entrepreneurs looking to elevate their "game" in meaningful ways. The top schools for executive education in entrepreneurism were Babson, Harvard, Northwestern, Stanford, the University of  Chicago, and the University of Texas at Austin.

Shivonne Byrne, Innuity CMO

SBA Unveils Loan Program Reform Initiative

In efforts to make the agency more small business-friendly and results-focused, the Small Business Administration (SBA) announced today that it is rolling out several major reforms to make its loan programs more effective and easier to use.

After conducting primary research on small business needs and examining ways to improve services, the SBA has crafted a loan reform initiative comprised of a set of new processes and products that have the potential to increase their outreach to small businesses in underserved markets; enhance relationships with lending partners; and strengthen the agency's ability to help small businesses start and grow.

Components of the Loan Program Reform Initiative include:

1. New Standard Operating Procedure: A shorter and more lender-friendly procedure that is remarkably shorter and better organized.
2. Streamlined Tab System: Helps lenders organize their loan purchase package by breaking down sets of documents.
3. 45-Day Pledge: The SBA is offering lenders major incentives to speed up processing time.
4. New, Improved Products & Services: Includes its Rural Lender Advantage. Community Express Loan Program and new Patriot Express Pilot Loan.

Today, the SBA processes more than 100K loans per years, twice the amount it did five years ago; currently there are more than 300K SBA-backed loans outstanding. To combat this problem, the agency is standardizing its review process, reengineering its processing centers, and upgrading its central training so as to eliminate the backlog and prevent future occurrences of it.

Shivonne Byrne, Innuity CMO

VC Exits Not Impacted by Market Volatility

The National Venture Capital Association (NVCA) just released a report that showed that the average disclosed mergers and acquisitions transaction value reached in highest level since 2000 in Q3, 2007.

Of note, 67 venture-backed mergers or acquisitions were completed for a disclosed total value of $7.7 billion according to the Exit Poll report by Thomson Financial and the NVCA. These numbers represent a 104% increase from Q3, 2006, when 41 disclosed deals equaled $3.8 billion in value. Better yet, the average disclosed acquisition value hit its highest mark since Q4, 2000.

In Q3, 2007 there were also 12 venture-financed initial public offerings (IPOs) representing $945.2 million, which represents some increase over this same quarter last year which saw eight offerings representing $934.2 million.

However, while the  NVCA applauded venture-backed companies success in navigating stock market volatility and subprime hurdles, "exit strategies will be facing challenges over the next several quarters."  Their data reveals that the closing period for acquisitions is extending and that VC-backed companies are trading below their offering prices, "signaling potential market weakness."

From a market threat standpoint, it is important to note that while these issues are "surmountable" they do have the potential to force business course corrections and thus impact the overall health of the exit market.

Shivonne Byrne, Innuity CMO

Angel Money on the Upswing for Small Businesses

The Angel Capital Association (ACA) just reported in their new mid-year survey, the "Angel Group Confidence Report," that angel groups across the country are meeting expectations set early this year to increase 2007 investment activities in early stage companies over 2006 levels.

The participating angel groups continue to forecast 2007 gains over 2006 in number of investments made, the quality of business opportunities presented by entrepreneurs, and co-investment activity with other investors. Additionally, the study also found that angel groups and venture capital firms have improved their integrated investment relationships, with 74% believing that overall relationships between these two groups have improved over the past three years.

As reported in other Empowering Small Business blog posts, angel investors are high net worth individuals who make equity investments into what are usually early stage or growing companies, usually in the start-up period. In many urban communities, angel groups have formed to more systematically review and evaluate business investment opportunities. (The Seattle area has the Alliance of Angels, Puget Sound Venture Club, and the Tacoma Angel Network.)

Fifty percent of this survey's participants said their angel group's deal flow had seen increases in quality and quantity, year over year, during the first six months of 2007 and they expect this trend to continue. In the first half of 2007, these angel organizations reported an average of 3.7 investments versus an average of 7.4 investments in 2006.

The Confidence survey also showed increases in the numbers of investors per angel groups as well as the trend of investing along side with other angels and early-stage venture capital firms. In the first six months of 2007, the average number of accredited investors per group jumped from 41 to 52.5 investors. Close to half (49.2 percent) of these angels reported that they "syndicated" - that is, invested along side or followed on - investments made by VC firms or other angel groups.

The Angel Capital Association is a professional alliance of U.S. and Canadian angel groups, with more than 155 affiliates and member groups representing over 6,000 angel investors.

Shivonne Byrne, Innuity CMO

Kauffman Foundation's Top Ten Tools for Entrepreneurs

The Kauffman Foundation (a leading foundation for entrepreneurship) eVenturing website just published a very useful checklist and toolkit for helping entrepreneurs set-up, manage and improve core operational processes. Titled the "Top Ten Tools and Templates for Entrepreneurs," this offering provides practical agreements, models, samples, and worksheets to guide entrepreneurs through starting up and growing their businesses to profitability.

Listed below are the tools most viewed by entrepreneurs over the last year:

• Sample Buy-Sell Agreement: Outlines the concepts and language needed to understand how to set-up a Limited Liability Corporation (LLC)
• Daily Forecasting Cash Flow Model: Provides a sample cash-flow spreadsheet designed to monitor business cash flow on a daily process.
• Due Diligence Checklist: Lists information needed to effectively negotiate a company sale or its purchase.
• Sale Compensation Tool: A spreadsheet tool that the shows the core components of a sales compensation plan, including business development goals, total bonuses and commissions, and sales compensation payment schedules.
• Sample Balance Sheet: This tool uses a sample balance sheet for a one-year-old business and provides a line-by-line explanation of the most common categories used to report the value of a company's assets, liability, and equity.
• Partnering Proposition Worksheet: A worksheet that demonstrates how to facilitate recruitment of strategic partners by establishing processes from first call to deal close.
• Incentive Compensation for Sales Executives: A sample sales compensation plan that illustrates how to keep tract of quotas by department and per representative, commission accelerators, payouts and reporting.
• Sample Multi-Shareholder Agreement: A sample buy-sell agreement appropriate for companies with multiple shareholders.
• Business Strategy Worksheet: A process-based tool to set business strategy and evaluate that strategy against overall growth plans.
• Sample Job Ad: A sample advertisement to recruit a top executive.

Shivonne Byrne, Innuity CMO

Inc. & Clinton Foundation Expand Mentoring Program for Entrepreneurs

Last Friday at the Inc. 500 Conference in Chicago, former President Bill Clinton announced a joint initiative between the William J. Clinton Foundation and Inc. to expand an inner-city mentorship program to entrepreneurs across the nation.

Named The Inner City Entrepreneur Initiative, the mentorship program brings together inner-city business owners with successful entrepreneurs for the purpose of sponsoring professional growth, building professional networks, and sharing lessons learned in the trenches. Each mentor and entrepreneur team will work together over the course of a year on developing business and growth strategies relevant to the entrepreneur's operations.

This program originally kicked off in 2006 as a pilot program with entrepreneurs in Harlem and the Bronx, and because of its successes The Clinton Foundation and Inc. will be launching the program in other major U.S. cities including Atlanta, Boston, Chicago, Los Angeles, New York, Oakland, Philadelphia, and Pittsburgh.

Clinton believes that with the right type of mentoring, entrepreneurs working together can "help transform their local economies" and see this type of B-2-B giving (and giving in general) as being a key microtrend that can have significant and positive impact on major societal and business challenges.

Shivonne Byrne, Innuity CMO

Small Businesses Creating Almost All New Jobs

According to a just published report by the Small Business Administration, businesses with 20 employees or less account for 90 percent of all U.S. businesses and have created 97 percent of all new jobs. This data is just one statistic based on Census data from 1988-2004, the most recent year available.

Other information in the report includes job creation, business births and deaths, industry growth, and regional differences. The states representing the highest number of new small businesses in urban areas for the last fiscal year of this time period are California, Florida, New York, and Texas.In terms of more rural regions, Texas and Missouri have experienced the greatest growth of new small businesses.

In summary, small businesses grew more in this last year than the previous year because of the small numbers of firm closures and the overall increase in new small businesses.

Hot "growth" cities such as Las Vegas and Orlando have experienced notable population growth in the last few years of this study, and small business new firm growth in these cities reflect the overall population growth.

The study cites that as the national economy prospers, the average small business company size is inclined to increase.

A new feature of the study is the addition of state specific data, not just for this time period but also going back into the mid-1990s. This way the SBA will be able to track market segments' impact by geographic region.

Shivonne Byrne, Innuity CMO

Kauffman Report on the New Generation of "Business Idols"

The Kauffman Foundation, a leading foundation that is dedicated to advancing entrepreneurship in the U.S., just released a report on an emerging trend in start-up venture formation - the growth of the "accelerator" model in seed stage/early stage company development. Like American Idol which is based on grooming leading contestants for a career launching and promoting records in the music industry, the "Business Idol" formula features a similar contest-based method of selection, funding and management nurturing.

Kauffman's findings indicate that not only is the "Business Idol" trend a rapidly growing phenomenon in the U.S., it is also gaining in popularity in Europe and throughout the world. A core reason behind this new development is the shift in how venture capital is being deployed post the dot com bust. From 2000 until 2005, seed-round investments by the venture capital community dropped from 281 deals to 63 per VentureOne. Although the stock market has been heating up, Kauffman believes that VCs will not return to heavily supporting seed-stage investments.

In the absence of this financial channel, the importance of angel investors has dramatically risen - those individuals or investor groups that function independent of a formal management organization. Kauffman notes that angels invest their own money in early stage ventures that meet their assumptions of future high-growth for a variety of reasons that extend beyond just wanting to earn the highest returns. Their research posits that angels fund deals (normally in their areas of expertise) so as to contribute to local economic growth, apply their expertise in a real-world company environment and find personal enjoyment-enrichment.

In addition to the angel community and the growing formation of angel resource groups (see the Angel Capital Association), Kauffman reports that the "Accelerator" or "Business Idol" model is catching on as an alternative to early stage financing and company development. They have redefined this model as a full partnership that provides much more than space and common management services to start-ups. Accelerators actually help form companies in terms of becoming a legal entity, interviewing - hiring - developing the management team and lending its own management know-how and time. In truth, the accelerator actually becomes part of the emerging start-up throughout its entire early stage development.

This makes a lot of sense from the start-ups perspective. In the early company development stages there really isn't a need for a full-time CEO, VP Marketing or CFO - although their input and guidance is critical to determining a successful long-term business strategy and overseeing operational progress over different functional areas. Working with an accelerator gives the start-up access to the resources they need, without the huge expense and commitment normally required.

To access one of these "accelerator organizations" Kauffman reports that companies "audition their skills" and compete for slots on an accelerator's team, with the business idea normally being less important than the individuals and their history and experience. Accelerators operate this way because they see that many new ideas, not just one new company idea, will emerge from bringing together groups of potential entrepreneurs.

Today accelerators appear to be focusing on specific industries or sectors and selecting a critical mass of people with common backgrounds to come up with the next generation of new technologies and products. Accelerators that are operational today include The Foundry, Inc. in Menlo Park, CA (medical device development); The Accelerator Corporation in Seattle, WA (biotechnology); and YCombinator in Mountain View, CA (software and web development). Similar models are forming at venture firms and universities, which are also featuring competitions and intensive training.

Shivonne Byrne, Innuity CMO

Global Small Business Technology Study

The International Council for Small Business (ICSB) just announced the results of a global technology study, conducted with support from DELL Inc., that examined small business customer technology needs in 12 countries including Australia, Brazil, Canada, France, China, Germany, India, Japan, Mexico, the UK and the US. Over 1,800 small business technology buyers participated in a 15-minute online survey and 150 similar targets were involved in an one-on-one interview. 50% of the total participants represented businesses with 1-9 employees and 50% represented businesses with 10-99 employees.

Key findings include:

1. IT plays a major role within small business organizations worldwide - and 66% indicate that IT is extremely important for their business
2. These smaller businesses see IT as helping them achieve core objectives - which are to better serve customers and grow their businesses - with 57% of small business industry experts  stating that IT plays an extremely important role in the growth of individual small businesses
3. There are common IT challenges that small businesses face, independent of geography-culture
4. Small businesses also share similar "pain points" throughout the world - and they see that these pain points can hurt their competitiveness and cause customer dissatisfaction. Pain points include limited IT budgets; time needed to research, understand and select appropriate IT systems; and internal team discomfort with technology and the time needed to interact to learn and use the technology on a daily basis
5. Small businesses go to more than "one place" for help when they also looking to IT solutions

Interestingly enough, of the small business experts, researchers and educators also surveyed 88% think that most small business owners could financially benefit from a greater awareness of IT options. In probing this issue further with both small business owners and experts, the findings indicate that small business owners don't know sources to explore or places to look for IT solutions that match small business needs.

On a broader basis, the survey shows that 82% or small business experts think that internal financial constraints limit the use of IT in small businesses, while 91% of small business owners state that their top IT products are worth "every penny" of the financial investment they made. The opportunity is clearly there in small business for products, such as Innuity's subscription-based small business Internet technology solutions, that cost-effectively help these organizations meet their dual primary objectives of better serving customers and growing their business.

Shivonne Byrne, Innuity CMO

How to Pitch to Angels

Angel investors, those wealthy individuals who invest in the vicinity of $50K to $1M in emerging companies, represent an increasingly important financing strategy for entrepreneurs seeking start-up capital. One of the side benefits of having angel investors is that many have earned their own wealth through running successful businesses, and they are interested in "staying in the game" and finding productive ways of applying their knowledge and experience. As a result, invested angels can provide a great deal of subject matter expertise to entrepreneurs and serve as committed advisors to the company - in addition to providing much needed cash infusions.

Many metropolitan communities have angel investor communities, made up of individual investors, who are looking to fund new companies in order to gain equity stock ownership with an eye on ROI. To start the angel fundraising process, entrepreneurs should first determine if their community has angel groups - whether formal or informal.

But before presenting to angel groups, or individual angel investors, entrepreneurs should educate themselves about what makes "angels" tick - what motivates them, what they are looking for in business plans, what type of returns do they expect, etc. It's not a simple exercise, and it's important to understand the psyche of these early stage investors. So, here's a good list of books (compiled originally by the Kauffman Foundation) to dig into and assimilate so you are prepared for those important angel pitch meetings.

1. Angel Financing for Entrepreneurs: Early Stage Funding for Long-term Success. Susan L. Preston. Answers the basic questions about angel investors - their profiles, how to find them and what they want to see in business plans. Great appendix referencing websites, directories, and basic start-up templates.

2. A Good Hard Kick in the Ass: Basic Training for Entrepreneurs. Rob Adams. Think about the return on investment and not just your great technologies and products. It's a hard shift for entrepreneurs, but that's what angels are looking for. Confirm that a market exists for what you are selling, and be sure to have conducted customer research before you get in front of potential investors.

3. The Venture Capital Cycle. Paul Gompers and Josh Lerner. What is the world of professional investors, and how do VCs approach the process from the initial investment stage to exit strategies? A thorough analysis of early stage investing.

4. Attracting Capital from Angels: How Their Money and Their Experience Can Help You Build a Successful Company. Brian E. Hill and Dee Power. What's due diligence, evaluations and dilution - and how do you approach angels and benefit from their experience? A must read for talking to the angel investment community.

5. State of the Art: An Executive Briefing on Cutting-Edge Practices in American Angel Investing. John May and Elizabeth F. O'Halloran. A good collection of articles and interviews comprised from angels investing groups in the U.S.

6. Every Business Needs an Angel: Getting the Money You Need to Make Your Business Grow. John May and Cal Simmons. A time-honored book with lots of practical tips on the step-by-step interactions entrepreneurs need to take with angels. A good, hands-on reference manual.

7. Terms Sheets & Valuations: A Line by Link Look at the Intricacies of Venture Capital Term Sheets and Valuations. Alex Wilmerding. What's common stock, preferred stock and dilution and what will these terms mean to your business? A well-used guidebook for navigating investment deals.

8. The Art of the Start: The Time-tested, Battle-hardened Guide for Anyone Starting Anything. Guy Kawasaki. The get real, get current and get going manifesto for how to make a go of your start-up business. Pay attention, Guy Kawaski is everywhere and knows everyone in technology. Read his blog, too.

Shivonne Byrne, Innuity CMO