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Week of August 1 - August 5, 2005Welcome 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. |
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Small Business Health Care Costs: Help is on the Way?
The rising cost of health
insurance continues to be public enemy No. 1 for many small business
owners and entrepreneurs. The House of Representatives acted this week
to pass H.R. 525 (by a vote of 263-165), the Small Business Health
Fairness Act of 2005. While there is still a long way to go before this
plan becomes law, the bill’s backers contend that it could offer some
help to small business owners. H.R. 525 authorizes the creation of
Association Health Plans (AHPs) that allow small firms to band together
and collectively buy insurance through national associations at reduced
rates. Business groups such as the U.S. Chamber of Commerce and the
National Federation of Independent Business back H.R. 525, but the view
is not unanimous. Some groups, such as the National Small Business
Association, argue that this plan could actually increase premiums and
lead to lower quality benefits packages. An alternative piece of
legislation would have provided some guarantees regarding the price and
quality of various health care plans, but didn’t garner as much support
and fell in favor of H.R. 525. Look for more debate in the Senate later
this year. |
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When we think of innovative
places, we often think of big cities or regions with research
universities like Cambridge or MIT. But is this conventional wisdom
correct? Does innovation mainly occur in populous areas? A new paper
from researchers at the Federal Reserve Bank of Kansas City examines
this question. They note that more populous places are, at the aggregate
level, “more innovative” because inputs to innovation (e.g. specialized
services) are cheaper. Moreover, because there are more people in these
regions, the chances for learning from others are greater. These
knowledge spillovers are the real competitive advantage of cities. But,
does this doom rural communities or less populated areas? Not at all,
contend the authors. They argue that locational advantages become less
important as technologies mature and their development paths become more
predictable. At this point in the technology life cycle, less populated
regions enjoy a competitive advantage as they can combine both
innovation and lower operating costs. By tracking the location of
patenting, the authors indicate that this pattern does indeed
characterize the development of many leading technologies in the US
economy. |
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Three Ingredients in Recipe for Economic Growth
In an increasingly global
market, American industries must better use the country’s innovative
spirit to maintain its competitive advantage. In a July 19 forum hosted
by the Woodrow Wilson Center for Scholars, author and professor Richard
Florida drew lessons from his newest book, The Flight of the Creative
Class, to offer a three-part recipe to keep that spirit alive:
technology; talent; and tolerance. Unlike traditional factors of
production like natural resources and prices, Florida argued that
entrepreneurial talent is highly mobile, forcing the U.S. to compete to
attract the best creative minds to the country. His recommendations
included policies that loosened stringent student visa requirements
enacted after 9/11, efforts to control housing prices near
entrepreneurial hubs and policies that promote economic equality and
social tolerance. |
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The Latest Venture Capital Numbers... and Angels on the Rise The latest figures on venture capital investing (for the 2nd quarter of 2005) are out, and they continue a pattern of pretty good news. Venture investing totals continued to grow in the second quarter, reaching $5.8 billion (a jump from Q1 2005’s total of $4.9 billion). Seven hundred and fifty firms received investments in this quarter. While one quarter’s results don’t constitute a trend, a couple of things stand out. First, investing in both early stage and later stage deals grew at the fastest rate. This may reflect the lifecycle of funds, with some VC funds closing their investments in older funds, and others just beginning to invest new dollars (in new firms) from more recent funds. Meanwhile, VC firms seem to be doing a good job in terms of raising new dollars. Data on Q2 fundraising are also promising. They indicate that 43 VC funds raised $6.1 billion and 38 buy-out and mezzanine funds raised $22.1 billion. These totals represent the largest average commitment size since the year 2000.
In the same survey, three
member groups of the Angel Capital Association (ACA) were named among
the top 100 Venture Capital Firms For Entrepreneurs for 2004. Ranked by
number of “first sequence financings of seed/startup or early-stage
companies,” ACA members Tech Coast Angels of Irvine, CA, posted 7th
(tied with 4 other groups), and both The Angels’ Forum & Halo Fund of
Palo Alto, CA, and Band of Angels of Menlo Park, CA, posted 12th (tied
with 5 other groups). |
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How State Bankruptcy Rules Affect Entrepreneurs New federal bankruptcy rules go into effect this October and many have argued that these tougher rules will have a negative effect on entrepreneurs. State laws seem to have a similarly profound effect on entrepreneurs, according to a new study, A Spatial Model of the Impact of State Bankruptcy Exemptions on Entrepreneurship, funded by the US Small Business Administration’s Office of Advocacy. State bankruptcy rules have a strong effect on how new firms operate, especially when there are clear-cut differences in such laws between two neighboring states. The research finds that the presence of higher bankruptcy exemptions in one state will significantly reduce the probability that residents of neighboring states will start firms in their own state of residence. While the report focuses on bankruptcy, it also presents some other interesting results:
The July 2005 SBA Office of Advocacy-backed report, A Spatial Model of the Impact of State Bankruptcy Exemptions on Entrepreneurship, by Aparna Mathur of the University of Maryland, is available at www.sba.gov/advo/research/rs261tot.pdf |
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2006 Inner City 100: Call for Entries
What makes a fast-growth
company? According to the Initiative for a Competitive Inner City (ICIC),
it’s a powerful idea, an enterprising leader, a strong workforce, and a
great urban location. ICIC and its partner Inc. magazine are now calling
for entries for the 2006 Inner City 100, a listing of 100 of the fastest
growing companies in America's inner cities. Published in the June issue
of Inc. magazine, the Inner City 100 have nationally become emblematic
of urban business agility and success. The 2006 list hopes to uncover
even more inner city gazelles. |
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