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April 9 - 15, 2007

Optimism Among Angels

Angel group leaders expressed optimism about the climate for investments in early-stage businesses in 2007 in the first-ever survey by the Angel Capital Association (ACA). This optimism came at the same time angel groups reported increases in investments in 2006 over 2005, with a 23 percent increase in average total investment dollars by group and 34 percent growth in the average number of deals the groups funded. In the Angel Group Confidence Report of North American angel group leaders, ACA found that angel groups forecast that the quantity and quality of entrepreneurial investment proposals will increase in 2007, that more than 80 percent of groups will continue investing in seed and early stage companies, that there is a strengthened opportunity for more positive exits, and more plans to co-invest with other sources of capital. Not only do the angel organizations expect deal flow to improve, but they expect investment activity to continue at the same level or increase somewhat this year over 2006. Almost all angel group leaders (96.5 percent) predicted that their group would invest in a new company in 2007—with 77 percent planning to invest in three to nine companies. Five percent think they will invest in ten or more companies.

Learn more about the Angel Group Confidence Report.

Expanding the R&D Tax Credit

In the last decade many nations have made innovation-led economic development a centerpiece of their national economic strategies. Unfortunately, the United States has not kept pace. Since the late 1980s, the US has fallen from 1st to 17th among OECD nations in terms of providing the most generous tax treatment of R&D. A new paper, “Expanding the R&D Tax Credit to Drive Innovation, Competitiveness and Prosperity,” argues that as a result, addressing America’s competitiveness challenge will require policies that do more than boost the supply of innovation resources. In it, author Robert Atkinson calls on Congress to significantly expand the Research and Experimentation Tax Credit. Other suggestions include: make the R&D tax credit permanent, double the rate of the regular credit from 20 percent to 40 percent, expand the Alternative Simplified Credit, create a flat credit for collaborative R&D, allow firms to expense in the first year expenditures on research equipment, and exempt the credit from the corporate Alternative Minimum Tax.

Download the latest paper by ITIF’s Robert Atkinson, “Expanding the R&D Tax Credit to Drive Innovation, Competitiveness and Prosperity”

Venture Capital’s Economic Impact

Last month, the National Venture Capital Association (NVCA) released its analysis of the economic role of US-based venture-backed companies. The NVCA database, developed by Global Insight, tracks 23,500 companies. Overall, the US has about 5.8 million companies with employees. This small sample of venture-backed companies has a big impact. Together, these firms account for 16.6% of US GDP, and 9.0% of US private sector employment. These firms also outperform comparable companies without venture backing. Between 2003 and 2005, employment at venture-backed firms jumped 4.1 percent while overall national employment grew only 1.3 percent. The top sectors for venture-backed companies are: media/entertainment/retail, computers/peripherals, industrial/energy, financial services, and software.

Access the 2007 National Venture Capital Association report, Venture Impact: The Economic Importance of Venture Capital Backed Companies to the US Economy (Third Edition).

Entrepreneurship in Silicon Valley

Silicon Valley’s economic success has long been attributed to entrepreneurship. The region has long had a reputation as a good place to start a business. But, does the data really support this claim? A new study sponsored by the US Small Business Administration’s (SBA) Office of Advocacy takes a closer look. Robert Fairlie, of University of California-Santa Cruz, assessed business start-up rates in Silicon Valley in the late 1990s and after the dot-com bust. Surprisingly, he finds that Silicon Valley’s entrepreneurship rates (measured by start-up activity) are only slightly higher than national averages, and actually fall below those of other major metro areas. He also finds that start-up rates have jumped after the dot com crash. Fairlie speculates that high wage rates and low unemployment in the late 1990s led some potential entrepreneurs to opt for a high-paying job as opposed to the entrepreneurial path. His research also shows that Silicon Valley’s start-up activity is strongly affected by new immigrants and by the generally high education attainment levels found there. While start-up rates do matter, this research indicates that other factors are also needed to explain how Silicon Valley works.

Access the March 2007 US Small Business Administration Office of Advocacy-sponsored report, Entrepreneurship in Silicon Valley During the Boom and Bust, by Robert Fairlie.

Rural Entrepreneurship Case Studies

The RUPRI Center for Rural Entrepreneurship has released a new series of case studies that examine various programs designed to support entrepreneurs in rural America. Three new studies are now available. One study examines innovative local programs in the Northwest, and includes case studies of initiatives in Minnesota, Montana, North Dakota, and Iowa. A second case study evaluates the Kentucky Entrepreneurial Coaches Institute, an effort to train “coaches” and mentors for rural business owners. Finally, a third study assesses strategies for energizing youth entrepreneurs in small towns and rural communities.

Access these new studies from the RUPRI Center for Rural Entrepreneurship.

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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All stories © 2007 The Public Forum Institute
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