NDE-news: April 4 - 8, 2005

Week of April 4 - April 8, 2005

Welcome to the National Dialogue on Entrepreneurship, an initiative of the Public Forum Institute made possible by a grant from the Kauffman Foundation of Kansas City. Through NDE-news, we bring you short summaries and analyses of various trends driving the innovation economy. Subscribe now to receive your weekly copy. Archived issues are available online. Links to the day's entrepreneurship stories from across the nation and around the world are posted each weekday on the NDE main page - bookmark it and stay informed about the latest entrepreneurship news.

Angel Investing Numbers for 2004

The latest numbers from the Center for Venture Research at the University of New Hampshire show that angel investing enjoyed a big uptick in 2004. Roughly 48,000 ventures received angel financing in 2004, a 24% increase from 2003’s numbers. Total investment reached $22.5 billion, an increase from 2003’s total of $18.1 billion. This total is slightly higher than the amount invested by institutional VC firms in 2004. Much like VC investors, angels like technology businesses. Software and healthcare services/medical devices are the most popular sectors among angel investors.

The other interesting news is that angel investing is becoming a relatively common activity. Approximately 225,000 individuals made angel investments in 2004. This year’s study also examined minority participation in the field. Minorities represent 3.6% of angel investors, while accounting for 5.4% of firms that make presentations to angel investors. This under-representation is not reflective of performance as there are few differences in the subsequent performance of angel-financed, minority-owned businesses.

View the analysis of the 2004 National Angel Investor Market, from the Center for Venture Research at the University of New Hampshire’s Whittemore School of Business and Economics.

VC Overhang Good News for New Businesses

While angel investing is growing, VC money is still being left un-invested according to a new survey from Dow Jones/Venture One. The survey examines the current VC “overhang,” the amount of funds raised by VC firms that have not yet been invested. The survey finds that US -based VCs have yet to invest roughly $53.6 billion. Of this total, $32.7 billion has been earmarked for new portfolio companies. These funds have been raised since 1999. Industry experts offer two primary insights about this overhang. First, it largely results from the huge fundraising boom of 2000. In that year, large amounts were raised but could not be profitably invested after the stock market downturn. Second, the overhang is good news for new businesses. As VCs begin to invest these dollars, the potential for investment in new portfolio companies improves.

A review of this Dow Jones/Venture One survey, “Overhang of Venture Capital Funds at $53.6 Billion,” is available here.

Better Data on Federal Contracting for Women-Owned Businesses

A new National Research Council report claims that federal agencies don’t really have a grasp on exactly where women-owned businesses are under-represented in federal contracting. Thus, it is impossible for them to identify and focus resources on those contract opportunities where women-owned firms have been excluded. The report’s authors recommend that the SBA and other federal agencies improve their data collection and present such data in a manner and form that is useful both to policymakers and business owners. In addition, they recommend that SBA develop a research agenda that offers a more comprehensive look at the role of women-owned companies in government contracting. Analyzing Information on Women-Owned Businesses in Federal Contracting offers a detailed look at the challenges facing the Small Business Administration as it tries to open up more contract opportunities for women.

Access the 2005 National Research Council report, Analyzing Information on Women-Owned Businesses in Federal Contracting.

Enterprise and Innovation in New Zealand

For the past few years, New Zealand has been a top economic performer among countries in the Organization for Economic Cooperation Development (OECD). In particular, it has been a standout on most measures of entrepreneurship, including start-up rates and the regulatory environment for new businesses. The New Zealand government has recently released its latest assessment of economic indicators, and, not surprisingly, the news is good. This year’s assessment shows that New Zealand’s innovation performance (measured by R&D spending, patenting and other metrics) is improving. In the area of enterprise development, the country boasts high start-up rates, but does face challenges in converting these new start-ups into highgrowth gazelle businesses.

Access the Growth Through Innovation: Economic Development Indicators 2005, by the New Zealand Ministry of Economic Development and The Treasury.
Learn more about New Zealand’s broader growth and innovation framework.

The Future of Nanotechnology: The Government View

The latest report in the field of nanotechnology comes from the President’s Council of Advisors on Science and Technology (PCAST). The PCAST is a 24-member body of experts, chaired by venture capitalist Floyd Kvamme, which advises the White House on key technology issues. PCAST is putting the finishing touches on its first report on nanotechnology, but the initial findings were previewed at a PCAST meeting held on March 22. The basic message is “full speed ahead.” The US continues to hold a strong, but eroding, international lead in nanotechnology research. Government programs are being well managed, and potential health risks of nanotechnology are under review. The PCAST report recommends that R&D spending be more widely distributed instead of being concentrated on a few “grand challenges.” It also recommends closer government-industry cooperation, especially with small business via the Small Business Investment Research and Small Business Technology Transfer (SBIR/STTR) programs.

Review the preliminary findings of the National Nanotechnology Advisory Panel Report.

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