The National Association of Seed Venture Funds, which promotes innovation
capital, had its annual conference at the Marriott Inner Harbor in
Baltimore, Maryland, October 13-15th. It's an event that brings together
angel funds, angel investors, seed and early stage venture capital funds,
funds that invest in funds, city, county, state and university economic
development professionals, entrepreneurs, business consultants along with
federal government officials from the various federal laboratories to
discuss ways to fund innovation the life blood of the United States and the
world at large.
A couple of years ago during the financial markets collapse, the government
focused on rescuing banks and the automotive industry. Money was pumped
into to insure that there wouldn't be a total collapse and to encourage
lending. The government even increased the Small Business Administration
Loan guarantee from 80% to 90%.
Unfortunately, many small businesses don't have the asset base to borrow
what they need and in the case of startup companies no assets at all.
According to Mark Heesen, the president/CEO of the National Venture Capital
Association, the number venture capital funds, especially seed stage funds,
has been shrinking along with the amount of capital being invested. In the
past year startup investments have declined 7% to $4.8 billion and the
number of startups-seed funding category dropped 11%.
The nation's entrepreneurs have become reliant on investor angels and angel
funds to provide the fuel to propel the new ventures. Institutional venture
capital funds are running out of money because the public markets have been
virtually closed for two years and many corporations have reduced or
eliminated their business development and internal venture funds. The Small
Business Innovation Research grants, provided by the federal government, are
on a respirator even though it has been a crucial source of funds for
technology startups and spinouts from established companies. Even the state
of Pennsylvania, creator of the first public-private partnership through the
highly successful Ben Franklin Fund, which provides startup companies with
capital, has seen its allocation reduced by an unimaginable 60%.
The competitive advantage for the US has always been the entrepreneurial
sector developing new products and creating jobs going back to the creation
of steel mills to car companies to the pharmaceutical industry, plastics,
computers, biotechnology, Internet and now energy.
The keynote luncheon speaker the first full day of the conference was Aneesh
Chopra, the government's chief technology officer, who reports to President
Barak Obama. He told the audience about the various research and
development programs and contests the government was running to develop
solutions to problems. He mentioned that some of the winners have formed
companies.
Mr. Chopra, who told the audience how he made enough money from a venture
investment in a company that was bought by Microsoft, that it allowed him to
take a government job. Yet when asked about insuring SBIR program and
providing capital to seed and early stage venture and angel funds to deploy
to the cash starved entrepreneurial community, his answer was that
administration was focused on running entrepreneurial contests.
The country's federal laboratories, which receive almost $140 billion, and
the vast research being developed at universities, will rot unless they are
picked up by entrepreneurs and funded to create to new well paying jobs. I
speak to Chinese and Indian business professionals, who believe their
countries will surpass the US in innovation and entrepreneurship because
their governments are increasing their investment in early stage companies.
The US used to be the destination of choice for aspiring entrepreneurs, but
that is in jeopardy because the Obama administration doesn't have a clear
well defined plan and the major parties are more interested in bludgeoning
each other than job creation.
The question will be for next year's conference is whether the Obama
Administration realizing how discontented the public is over the lack of
jobs and the strong possibility that the House of Representatives will be
lead by Republicans will his administration provide the necessary capital to
revitalize America's entrepreneurial community.
Marc Kramer
Columnist for Forbes.com, The Bulletin and Smart CEO
Entrepreneurial Commentator KYW News Radio 1060 AM
(Sunday-11:25 am, 2:55 p.m., 6:25 p.m., 9:55 p.m. 1:25 a.m. and 4:55 a.m.)
Contributing Editor of NetNews, a publication of the National Association of
Seed and Venture Funds
Author of Five Books
484-288-0594
www.kramercommunications.com
