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Week of May 15 - 21, 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.

Summertime is just around the corner, and that means that NDE will soon be publishing its annual Summer Books issue. If you would like to recommend recently published books for our review, send your thoughts to us at books@nde-news.org.

Tax Cuts To Be Extended

A top priority for the current Administration – and for many business owners – has been the extension of tax cuts first enacted in 2001 and 2003. These tax cuts were part of an economic stimulus package and have become a cornerstone of the Bush Administration’s domestic policies. Last week, House and Senate negotiators agreed to extend many of these tax reductions. They include a two-year extension (through 2010) of reduced rates (no more than 15%) on capital gains and dividend income, an increase in the exemption for the Alternative Minimum Tax (AMT), and a two-year extension of Section 179 expensing for small business. Under this latter provision, small businesses will be allowed to expense (i.e., deduct in the first year) $100,000 of their investments in depreciable assets, such as new equipment. The main tax cut battle was between the House and the Senate. With last week’s agreement, the bill should easily move forward and President Bush should soon sign the bill into law.

To learn more about the Conference Report to H.R. 4297, the Tax Increase Prevention and Reconciliation Act of 2005, visit the THOMAS website at thomas.loc.gov or the US House of Representatives Ways and Means Committee site at: http://waysandmeans.house.gov/media/pdf/taxdocs/050906longsummary4297.pdf

Strengthening America’s Innovation Base: VCs Enter the Fray

Business leaders across the US are getting increasingly concerned and ever more vocal about America’s eroding competitive position. The latest salvo comes from the National Venture Capital Association (NVCA), which has recently announced a new initiative: MAGNET USA (Maximizing America’s Growth for the Nation’s Entrepreneurs and Technologists). MAGNET USA will advocate on behalf of four important priorities: 1) Building a larger home-grown base of mathematicians and scientists; 2) Attracting and retaining the world’s brightest talent; 3) Increasing funding for basic research; and, 4) Improving access to growth capital. Along with other recent business-led initiatives, MAGNET USA should help raise public attention about these important innovation issues.

To learn more about the National Venture Capital Association’s MAGNET USA initiative, visit http://www.nvca.org/pdf/MAGNETReleaseFinal.pdf.

Fast-Growing Latino Entrepreneurs

Recent Census Bureau data indicate that entrepreneurship among America’s Hispanic population is booming. Many of these firms are new start-ups, but plenty of fast-growing gazelle businesses are also being birthed by Latino entrepreneurs. The May 2006 issue of Hispanic Business profiles three impressive serial entrepreneurs who have built world-class technology businesses. Among those profiled are Frank Huerta of Recourse Technologies (Internet Security), Fabian Oliva of Refense Technologies (Wireless internet security), and Michael French of Network Architechs (Network Infrastructure). All three profiles offer instructive lessons for all parts of the business life-cycle: from start-up to growth to exit via an initial public offering or through mergers and acquisition.

To access the series of articles profiling leading Latino technology entrepreneurs, visit www.hispanicbusiness.com. The profiles appear in the May 2006 edition of Hispanic Business.

Upcoming Census Bureau Center for Economic Studies Seminars

In the next several weeks, the U.S. Census Bureau’s Center for Economic Studies will be holding four seminars that promise to tackle some very interesting issues. Topics include: Establishment and Firm Dynamics: New Evidence and Macro Implications (May 25); The Outsourcing of R&D (June 1); Dynamics of Workplace and Firm-level Wages (June 8); and, Self-Employment and Entrepreneurship: Reconciling Household and Administrative Measures (June 15).

The CES was established to encourage and support the analytic needs of researchers and policymakers throughout government, academia, and business. Its research program is centered on empirical analysis of confidential microdata collected in the Census Bureau's regular survey and census programs. For a complete schedule of upcoming seminars, and a look at papers from previous seminars, visit http://webserver01.ces.census.gov/index.php/ces/1.00/seminarslist

Comparing US and European Venture Capital Performance

A new European Commission economic paper examines how European venture capital (VC) firms stack up when compared to their American counterparts. The short answer? Not very well. American firms provide a significantly higher return on investment when compared to European VCs. Over a twenty-year period (1983-2003), European VC firms had an average internal rate of return (IRR) of 2.3% (over five years) and 8.3% (over ten years). In comparison, the five and ten year IRR for American VC firms was, respectively, 22.8% and 25.4%. When comparing performance in early stage investing, the US advantage was even more pronounced. US firms are also quicker return cash to investors. This indicates that their investments are both more profitable, and achieve liquidity at a much faster rate. To their credit, the authors don’t sugarcoat the results. They note that the 1990s technology boom explains some of the differential between US and European performance, but they also recognize that many of the challenges facing European VCs are home-grown. They also warn that continued poor performance may force European VCs to invest elsewhere or discourage future investments in European VC firms

To access the March 2006 European Commission Economic Paper, “Profitability of Venture Capital Investment in Europe and the United States” (No. 245), by Catarina Dantas Machado Rosa and Kristiina Raade, visit
http://europa.eu.int/comm/economy_finance/publications/economic_papers/2006/ecp245en.pdf

Europe’s Most Innovative Companies

Now for some good news from the European desk. The latest issue of Red Herring includes its annual list of Europe’s 100 most innovative companies. The list includes firms from Europe and from the Middle East. Red Herring’s selection process is based on nominations and does not entail a rigorous assessment of company performance. However, the list does uncover some interesting and innovative firms. For example, Germany’s BrainLAB is developing a GPS system for the human body that will allow doctors to better target treatment (such as radiation or laser therapy) to affected locations. France’s Total Immersion has developed new methods for augmented reality, the use of live video imagery in videogames and other uses. The firms are selected for their technologies, quality of management, and their competitive positions in the marketplace. Communications is the hottest sector, accounting for 32 firms on the list. Great Britain has the most listed firms (28), followed by Israel and France (17 firms each).

Red Herring’s list of the Top 100 European Companies can be found in the May 8, 2006 issue of Red Herring. It is also available on-line at:
http://www.redherring.com/Article.aspx?a=16765&hed=Top+100+European+Companies.

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All stories © 2006 The Public Forum Institute
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