NDE-news: March 27 - April 2, 2006

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Week of March 27 - April 2, 2006 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.
How Entrepreneurial Firms Help Spawn More Entrepreneurs: The Case of MicroStrategy Successful regions can generally point to a handful of companies or research institutions that have spawned whole generations of new companies. For example, many of Silicon Valley’s early entrepreneurs were first employed at Fairchild Semiconductor in the 1950s. This process of “entrepreneurial spawning” is a critical but often neglected part of the innovation process. A recent Washington Business Journal cover story examines a similar process in the Washington DC region. MicroStrategy, a McLean (VA) software firm founded in 1989, has been a major incubator of new companies in the region. According to the article, 21 former MicroStrategy managers have started twelve new software firms in the past six years. This tremendous outpouring of entrepreneurial energy is even more impressive when one considers that, for many observers, MicroStrategy was a classic dot-com bust. While the firm had a colossal collapse in 2001, its recent performance has been fairly strong. But, even in the worst of times, the firm induced a strong culture of entrepreneurship in its staff. The fruits of that work are evident in the DC Metro region today. The lesson? Corporations that nurture entrepreneurial thinking and behavior can become important “incubators” for entrepreneurial regions. The article, “Saylor’s Soldiers, by Ben Hammer, appears in the March 17-23, 2006 edition of Washington Business Journal. It is also available on-line at: http://washington.bizjournals.com/washington/stories/2006/03/20/story7.html
The Power of Basic Research In our rush to promote entrepreneurial development, we may often downplay the importance of basic research as a key underpinning of an innovative economy. A new paper from Kent Hill, a professor at Arizona State University, presents a useful primer on why universities and basic research are critical to American economic competitiveness. Hill’s paper, “Universities in the U.S. National Innovation System,” argues that universities must continue to emphasize their role in supporting basic research, i.e. research designed to advance knowledge as opposed to supporting specific products or services. At present, only 20% of all basic research in the US is performed by the private sector. Colleges and universities account for 60% of such research, with government accounting for the remaining amounts. Washington is the largest funder of basic research, paying for 57% of the total. Hill argues that recent efforts to enhance university technology commercialization should not supersede continued university investment in basic research. He concludes that this university focus on basic research is one of the true keys behind America’s strong national innovation system. To access a copy of the March 2006 Arizona State University’s L. William Seidman Research Institute Working Paper, “Universities in the U.S. National Innovation System,” by Kent Hill, visit http://wpcarey.asu.edu/seidman/reports/innovation.pdf
European VC Numbers 2005 was a very good year for European entrepreneurs, at least among those who were seeking venture capital (VC) investments. Preliminary numbers from the European Venture Capital Association indicate that 2005 may have been the best year ever for private equity investing in Europe. Overall, more than 60 billion euros (approximately $73 billion) was invested in private equity firms in Europe last year. The vast bulk of this investment ($45.6 billion euros) was devoted to buyout funds, with twelve billion euros invested in venture funds. The numbers represent a huge increase over 2004—a doubling of total investment in private equity, and a 44% increase in venture capital fundraising. A total of roughly 43 billion euros (roughly $54 billion) was invested in European firms last year. This figure is an all time record for Europe, easily topping the previous record of $36.9 billion euros invested in 2004. While the final numbers are still being developed, these preliminary figures indicate that equity investing in Europe is doing quite well. The European Venture Capital Association’s data is developed in collaboration with Thomson Financial and PriceWaterhouseCoopers. To view a press release describing EVCA’s current expectations about 2005’s investing numbers, visit http://www.evca.com/images/attachments/tmpl_8_art_190_att_935.pdf. A final report on 2005’s performance will be released in June.
The Boom in Hispanic Entrepreneurship We’ve seen a number of recent stories about the boom in Hispanic entrepreneurship, and now we have hard numbers to back it up. In a report released this week, the US Census Bureau shows a major spike in the number of Hispanic-owned businesses. Reporting on data from the 2002 Economic Census, the report notes that the number of Hispanic-owned firms in the US tripled between 1997 and 2002. Overall, nearly 1.6 million Hispanic-owned firms generate nearly $222 billion in annual revenue. Still, Hispanic-owned firms are only a small portion of the total US business base of more than 23 million individually-owned businesses. Given the increasing number and stature of Latinos in American society, we can only expect this growth rate to continue, and even accelerate, over the coming years. To access the March 2006 U.S. Census Bureau report, Hispanic-Owned Firms: 2002, visit http://www.census.gov/prod/ec02/sb0200cshisp.pdf.
Where Do Federal Dollars Go? A new report from Wisconsin’s Public Policy Forum examines how Southeastern Wisconsin (i.e. the greater Milwaukee region) is doing in terms of attracting federal dollars. Those from outside the state of Wisconsin may be particularly interested in two aspects of the report. First, it summarizes earlier research on the top metro areas for federal funding. Not surprisingly, most of the top five recipients—Raleigh-Durham, Boston, Albany, San Diego, and Denver--also happen to host major universities or research centers. Second, the report offers some useful tips for how Wisconsin, and other similarly situated regions, can do better in terms of attracting federal investment. Conventional wisdom notes that Wisconsin does poorly because it lacks a large defense industry or representatives who sit on Congressional appropriations committees. The report recognizes that these factors might play a role, but that community leaders can take action to attract federal dollars. Specifically, it recommends that the region be more aggressive in its efforts by promoting larger projects, by investing more local funds in such efforts, and by doing a better job of marketing existing local efforts that are doing well. To access the March 2006 Public Policy Forum Regional Report, High Stakes Game of Risk: How to Attract More Federal Dollars to Southeastern Wisconsin, visit http://www.publicpolicyforum.org/pdfs/FedFunding.pdf. This report summarizes research from a September 2005 Public Policy Forum study that reviews how major metropolitan areas have fared in terms of attracting federal investment. That study, Competing for Economic Development Dollars: How the Milwaukee Region Fares, is available at: http://www.publicpolicyforum.org/pdfs/CompetingEconDev.pdf
Angels to Converge on New York Leaders of more than 120 angel groups from the United States and Canada, representing more than 5,000 individual angel investors, will join with early-stage venture capitalists in New York City on April 26-28 for the North American Summit of the Angel Capital Education Foundation (ACEF). The ACEF Summit marks a continuing professional evolution of the angel group investor industry. As the venture capital community itself evolved and became more sophisticated, so have angel investor groups. In the past several years, an increasing number of angels -- typically high-net-worth individuals and “cashed out” entrepreneurs -- have joined together to form angel groups in order to pool resources and investment expertise. As a result, many of today’s angel investors are far more educated about investment. For more information on the ACEF Summit, visit www.angelcapitaleducation.org.
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Week of March 27 - April 2, 2006