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Week of May 22 - 28, 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.

State Venture Capital Survey

Dozens of states are getting in the game of supporting venture capital investments, and we’re now starting to talk about some real money on the table. A new survey from the National Association of Seed and Venture Funds (NASVF) finds that 44 states now operate 151 different programs with more than $5.5 billion committed to the programs. As expected, the programs are quite diverse, with different target markets and different source of funding. A majority of programs focus on seed stage investments, or even earlier stages such as pre-seed or the research stage. A plurality of program managers (32%) see job creation as a primary objective. A small portion (15%) cite return on investment as their primary goal. While most funding (63%) comes directly from public coffers, programs do not simply provide direct public cash outlays to firms. Programs use a variety of tools, including tax incentives, incentives to private investors, and other techniques to manage their investment efforts.

Access a review of the May 2006 “State Venture Capital Program Study” from the National Association of Seed and Venture Funds.

Small Business and Innovation

An interesting new National Federation of Independent Business (NFIB) Research Foundation poll looks at small businesses and innovation. It finds that few small businesses view themselves as major innovators. Ten percent of surveyed small firms purposefully innovate or invent with plans to sell or lease new products, services or technologies. However, those who do rely on innovation put a lot of emphasis in this area. Innovations or inventions account for all of the sales for about 20% of this group, while accounting for more than 50% of sales for another half of the group. While most small firms don’t consider themselves to be “major” innovators, they aren’t simply doing the same old stuff. Forty-two percent of survey firms had introduced at least one new or significantly improved product, service, process or design in the previous year.

To access the NFIB National Small Business Poll on Innovation (Volume 5, Issue 6—2005), visit http://www.nfib.com/page/researchFoundation

Small Business in Ireland

A new Irish report’s title—Small Business is Big Business—tells us a lot about one of the important factors in Ireland’s economic resurgence. The study from Ireland’s Small Business Forum examines the impact of small firms on the Irish economy. Over 97% of Irish businesses employ less than 50 people, and these firms employ 39% of the Irish workforce. This adds up to 770,000 people---more than half of Ireland’s total private sector, non farm-related, employment. This Small Business Forum report is the first such study in ten years, and times have clearly changed. Since 1995, the number of small businesses in Ireland grew by fifty percent. The report does not provide only good news. It also highlights future challenges. Ireland’s small firms are still not very productive, and rank below small firms in other European nations. The report concludes with a series of recommendations for improving access to finance, technical assistance, and other tools needed to improve these productivity figures.

To access the May 2006 report of Ireland’s Small Business Forum, Small Business in Big Business, visit http://www.forfas.ie/sbf/index.html

Microfinance in China

It seems like we read daily stories about the economic boom in China. It appears that Chinese microfinance could also be on the verge of booming—if a few key reforms move ahead. A recent Knowledge@Wharton story profiles what’s happening in the world of Chinese microfinance. While Asia has been a global leader in microfinance, China has been something of a laggard. Programs only got started in the mid-1990s, and they have expanded quite slowly. That’s too bad, as rural China is an area ripe for these innovations. At present, 30 million rural Chinese live on less than a dollar a day, and an additional 30 million live on less than twenty-five cents per day. China’s few programs are not operating very efficiently. Current regulations keep foreign investors out of China’s microfinance market, so most programs can only provide technical assistance. Large financial firms—both Chinese and non-Chinese---are starting to fund training and business support efforts. But, providing training without access to capital will not do much to stimulate new business development in rural China. To succeed, China will need to expand its commitment to microfinance and revise current regulations that block its adoption of effective practices.

To access the May 10, 2006 Knowledge@Wharton article, “Microfinance in China: Growth and Struggle,” visit http://knowledge.wharton.upenn.edu/article/1471.cfm

Sarbanes-Oxley, Round ??

In April, a special advisory committee recommended that the US Securities and Exchange Commission (SEC) consider exemptions to the Sarbanes-Oxley law to help reduce the law’s burden on smaller public companies. Last week, the SEC responded, rejecting the proposal. The SEC plans to implement a number of steps to improve Sarbanes-Oxley implementation but will not support sweeping exemptions for smaller public companies. For now, that’s the last word unless Congress opts to intervene. And, not surprisingly, that might happen. A bipartisan group of Senators and Representatives, led by Senator Jim DeMint (R-SC), has introduced legislation (S. 2824) to address this issue and provide some relief to smaller public companies. Hearings have not yet been held, but we can expect further discussion throughout this Congressional session.

To view a press release detailing the Securities and Exchange Commission’s decisions, visit http://www.sec.gov/news/press/2006/2006-75.htm.

To learn more about S. 2824, visit the Library of Congress’ THOMAS website at http://thomas.loc.gov. 

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All stories © 2006 The Public Forum Institute
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