Category: Entrepreneurship

Fewer Startups and Slower Growth Among the Fewer: Double Whammy to Economic Growth

(p. 7B) Previous studies have shown that, despite the success of firms like Facebook, the number of startups has dropped sharply, from about 13 percent of all firms in the late 1980s to about 8 percent in 2011. Now, a new study from the National Bureau of Economic Research reports that the expansion of the remaining startups — which traditionally has been much faster than the growth of existing companies — has slowed considerably. By some measures, it now barely exceeds the average of older companies.
So there’s a double whammy: fewer startups and slower growth among the survivors. This could be one reason why the recovery from the Great Recession has been so sluggish, with the economy’s growth averaging about 2 percent annually from 2010 to 2014, much slower than earlier post-World War II recoveries.

For the full commentary, see:
Robert J. Samuelson. “Our rate of startups is stalling at an inopportune time.” Omaha World-Herald (Sun., Dec. 20, 2015): 7B.

I strongly suspect, but am not sure, that the NBER working paper referred to above, is:
Decker, Ryan, John Haltiwanger, Ron Jarmin, and Javier Miranda. “Where Has All the Skewness Gone? The Decline in High-Growth (Young) Firms in the U.S.” NBER Working Paper # 21776, Dec. 2015.

Process Innovations from “an Uber of Trucking” Can Increase Transport Efficiency

(p. B1) Investors are pouring millions of dollars into startups hoping to disrupt the $700 billion trucking industry, the latest example of Silicon Valley’s efforts to upend the traditional economy.
A series of startups are vying to become an “Uber of trucking,” leveraging truck drivers’ smartphones to quickly connect them with nearby companies looking to ship goods. The upstarts aim to reinvent a fragmented U.S. trucking industry that has long relied on third-party brokers, essentially travel agents for trucking who connect truckers with customers.
Silicon Valley’s interest in trucking has accelerated in recent months. San Francisco-based Trucker Path Inc. says it is aiming to reach a $1 billion valuation next year. The latest entrant, Seattle-based Convoy, said Tuesday it had raised $2.5 million in seed funding from investors including Amazon.com Inc. founder Jeff Bezos, Salesforce.com Inc. founder Marc Benioff, eBay Inc. founder Pierre Omidyar and Uber Technologies Inc. co-founder Garrett Camp.

For the full story, see:
JACK NICAS and LAURA STEVENS. “Startups Accelerate Efforts to Reinvent Trucking Industry.” The Wall Street Journal (Tues., Oct. 27, 2015): B1 & B6.

Disney Used Money from His Cartoons to Fund the “Audacious” Breakthrough Snow White

(p. C2) The 1920s were no doubt a time much like our own, full of people who could see ways to advance and exploit new technologies, and Disney was one of those. But plenty of people have ideas; only a few manage to make them reality. Like many an Internet entrepreneur, Disney was able to do so because of a combination of serendipity and tenacity. You can read a lot into that sketch of a mouse he came up with.
“He doesn’t have the financial backing to support what it is he’s doing,” Carmenita Higginbotham, an art historian who teaches at the University of Virginia, says of his early career. “He wants to be a bigger voice than he is. And it’s a perfect metaphor, him being this small mouse, this seemingly insignificant figure or individual within this big industry that he wants to break into.”
The parallel to the Internet age is also evident in the speed of his ascension. His “Steamboat Willie” cartoon featuring Mickey Mouse in effect went viral after its premiere at the Colony Theater in New York in 1928, propelled by its innovative merging of image and sound.
That gave him enough credibility and money to try something audacious: “Snow White and the Seven Dwarfs,” a project that, we’re told, he outlined to his staff in 1934 by calling a meeting and enacting all the parts himself.
“What Disney was proposing had never been done, never even been tried: a feature-length, story-driven cartoon,” says the narration, read by Oliver Platt. There followed a typical Hollywood story of cost overruns and jeopardized deadlines — the animation technique used required more than 200,000 separate drawings.

For the full review, see:
NEIL GENZLINGER. “The Mind that Built the House of Mouse.” The New York Times (Sat., SEPT. 12, 2015): C1-C2.
(Note: the online version of the review has the date SEPT. 11, 2015, and has the title “Review: PBS’s ‘Walt Disney’ Explores a Complex Legacy.”)
(Note: Genzlinger is reviewing the two part documentary on “Walt Disney” that aired on the “American Experience” series of PBS on Mon., Sept. 7 and Tues., Sept. 8, 2015.)

Venture Capital Backed Unicorns that Become Unicorpses

(p. 1) The technology industry’s boom over the last few years has been defined by the rise of “unicorns,” the private companies that investors have valued at $1 billion or more. Before the term came into vogue, LivingSocial was among the biggest unicorns of its day. It now offers a glimpse of what some of today’s unicorns might look like several years down the road if things go awry.
. . .
Venture capitalists anointed daily deals as the way that the Internet would invade local business, and by late 2011 LivingSocial had raised more than $800 million and reached a valuation of $4.5 billion, according to data from the research firm VC Experts. The company counted Amazon and the mutual fund giant T. Rowe Price among its investors. LivingSocial spent heavily, blanketing the airwaves with TV ad campaigns. Riding a wave of momentum, the company explored going public.
Today, LivingSocial is more unicorpse than unicorn. The company never filed for an initial public offering and consumer fervor for daily deals has cooled. T. Rowe Price has written down its stake in LivingSocial to nearly zero, data from Morningstar shows. The company’s work force has shrunk to around 800 employees from 4,500 at its peak in 2011. (Groupon, which did go public, is trading at more than 85 percent below its I.P.O. price.)
. . .
LivingSocial may soon have more company. There are now 142 unicorns that are together valued at around $500 billion, according to the research firm CB Insights. Some of those highly valued start-ups are starting to show some cracks.
Snapchat, the messaging company, and Dropbox, the online storage business, were recently marked down in value by mutual fund investors. Zenefits, a human resources start-up, has said it missed sales targets and that it is slowing its hiring. On Wednesday, the payments company Square, which was valued at $6 billion by private investors last year, priced its public offering at $2.9 billion. Silicon Valley venture capitalists such as Bill Gurley of Benchmark and Michael Moritz of Sequoia Capital have warned that a unicorn shakeout is coming.

For the full commentary, see:
MIKE ISAAC and KATIE BENNER. “LivingSocial Offers a Cautionary Tale to Today’s Unicorns.” The New York Times, SundayBusiness Section (Sun., NOV. 22, 2015): 1 & 9.
(Note: ellipses added.)
(Note: the online version of the commentary was updated on NOV. 21, 2015. The wording of the last quoted sentence is slightly different in the print and online versions. The version above is the online version.)

Bezos Built Amazon with Methodical Patience

(p. B1) There is a simple explanation for Amazon’s rise, and also a second, more complicated one. The simple story involves Amazon Web Services, the company’s cloud-computing business, which rents out vast amounts of server space to other companies. Amazon began disclosing A.W.S.’s financial performance in April, and the numbers showed that selling server space was a much bigger business than anyone had realized. Deutsche Bank estimates that A.W.S., which is less than a decade old, could soon be worth $160 billion as a stand-alone company. That’s more valuable than Intel.
Yet the disclosure of A.W.S.’s size has obscured a deeper change at Amazon. For years, observers have wondered if Amazon’s shopping business — you know, its main business — could ever really work. Investors gave (p. B11) Mr. Bezos enormous leeway to spend billions building out a distribution-center infrastructure, but it remained a semi-open question if the scale and pace of investments would ever pay off. Could this company ever make a whole lot of money selling so much for so little?
As we embark upon another holiday shopping season, the answer is becoming clear: Yes, Amazon can make money selling stuff. In the flood of rapturous reviews from stock analysts over the company’s earnings report last month, several noted that Amazon’s retail operations had reached a “critical scale” or an “inflection point.” They meant that Amazon’s enormous investments in infrastructure and logistics have begun to pay off. The company keeps capturing a larger slice of American and even international purchases. It keeps attracting more users to its Prime fast-shipping subscription program, and, albeit slowly, it is beginning to scratch out higher profits from shoppers.
. . .
Why is Amazon so far ahead? It is difficult to resist marveling at the way Mr. Bezos has built his indomitable shopping machine, and the very real advantages in price and convenience that he has brought to America’s national pastime of buying stuff. What has been key to this rise, and missing from many of his competitors’ efforts, is patience. In a very old-fashioned manner, one that is far out of step with a corporate world in which milestones are measured every three months, Amazon has been willing to build its empire methodically and at great cost over almost two decades, despite skepticism from many sectors of the business world.

For the full commentary, see:
Manjoo, Farhad. “STATE OF THE ART; Long Game at Amazon Produces Juggernaut.” The New York Times (Thurs., NOV. 19, 2015): B1 & B11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date NOV. 18, 2015, and has the title “STATE OF THE ART; How Amazon’s Long Game Yielded a Retail Juggernaut.”)

Do Entrepreneurial Results Excuse Entrepreneurial Arrogance?

(p. A1) Robert Whaley is a professor of finance at Vanderbilt University’s Owen Graduate School of Management and the developer of the two major so-called fear indices — the VIX and VXN on the Chicago Board Options Exchange — that are used to make bets on market volatility.

READING Right now it’s “Becoming Steve Jobs,” by Brent Schlender and Rick Tetzeli. It has a somewhat different take than Walter Isaacson’s “Steve Jobs.” I felt Isaacson’s version was a little negative. But what the books have in common is that Jobs was sheer genius. So what if he was arrogant? Consider what he’s done. We wouldn’t have iPhones and iPads if it wasn’t for his vision. I absolutely think that excuses his behavior. If everyone just wanted for people to look back and say you were kind, how would we move forward?

For the full interview, see:
KATE MURPHY. “Download: Robert Whaley.” The New York Times, SundayReview Section (Sun., SEPT. 6, 2015): 2.
(Note: the bold above is in the original. The first paragraph quoted above was written by the interviewer Kate Murphy. The paragraph following the word “Reading” is the response by the interviewee Robert Whaley.)
(Note: the online version of the interview has the date SEPT. 5, 2015.)

The Steve Jobs books mentioned by Whaley, are:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.
Schlender, Brent, and Rick Tetzeli. Becoming Steve Jobs: The Evolution of a Reckless Upstart into a Visionary Leader. New York: Crown Business, 2015.

Those Who Try Japanese Toilets, Praise Them with “Cultish Devotion”

(p. D12) Last year, Bennett Friedman, who owns a plumbing showroom in Manhattan called AF New York, took a business trip to Milan. On the morning of his return he faced a choice: stop in the bathroom there or wait until he got home. The flight was nine hours. He waited.
The move seems almost masochistic. But in his home and office bathrooms, Mr. Friedman had installed a Toto washlet. To sit upon a standard commode, he said, would be like “going back to the Stone Age.”
“It feels very uncivilized,” he said.
For those who own Japanese toilets, there is a cultish devotion. They boast heated seats, a bidet function for a rear cleanse and an air-purifying system that deodorizes during use. The need for toilet paper is virtually eliminated (there is an air dryer) and “you left the lid up” squabbles need never take place (the seat lifts and closes automatically in many models).
. . .
Most washlet owners, then, are converted after trying one out in the world. At a boutique hotel, say, or on a trip to Asia.
Such was the case with Robert Aboulache. Before he and his family went on a vacation to Japan, he said, friends who had visited the country told him he would love the toilets. “I thought, ‘How great can the toilets be?'” Mr. Aboulache said. “They were amazing. Some have noisemakers to cover up the sound. You can pivot that little sprayer. The water can be heated or not. We got home, and I thought, ‘This is not the same.'”
Three days later, Mr. Aboulache went online and bought a Toto washlet, which he installed in the shared upstairs bathroom of his home in Los Angeles as a surprise for his wife and son.
“We’ve been delighted,” he said. “It’s our favorite toilet.”
. . .
Mr. Friedman, too, is an enthusiastic proselytizer for washlets, in his showroom and out in social situations, something you gather he would do even if he didn’t sell them.
Whenever he talks about their virtues, he said, “I feel like one of the Apostles passing the word of God.”

For the full story, see:
STEVEN KURUTZ. “For Its Devotees, the Seat of Luxury.” The New York Times (Thurs., NOV. 19, 2015): D12.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 18, 2015, and has the title “The Cult of the Toto Toilet.”)

Health Care Mandate “Freezes You at a Time When You Need to Be Moving Fast”

(p. B4) When LaRonda Hunter opened a Fantastic Sams hair salon 10 years ago in Saginaw, Tex., a suburb of Fort Worth, she envisioned it as the first of what would eventually be a small regional collection of salons. As her sales grew, so did her business, which now encompasses four locations — but her plans for a fifth salon are frozen, perhaps permanently.

Starting in January, the Affordable Care Act requires businesses with 50 or more full-time-equivalent employees to offer workers health insurance or face penalties that can exceed $2,000 per employee. Ms. Hunter, who has 45 employees, is determined not to cross that threshold. Paying for health insurance would wipe out her company’s profit and the five-figure salary she pays herself from it, she said.
“The margins are not big enough within our industry to support it,” she said. “It’s not that I don’t want to — I love my employees, and I want to do everything I can for them — but the numbers just don’t work.”
. . .
For some business owners on the edge of the cutoff, the mandate is forcing them to weigh very carefully the price of growing bigger.
“There’s kind of a deer-in-headlights moment for those who say, ‘I have this new potential client, but if I bring them on, I have to hire five additional people,'” said Philip P. Noftsinger, the payroll unit president at CBIZ, a financial services provider for businesses. “They’re really trying to assess how much the 50th employee is going to cost.”
. . .
For businesses that use many seasonal, variable-hour or temporary workers, like those in the hospitality industry, simply figuring out how many qualifying employees they have can be a challenge.
“I think companies are going to have to work with their payroll processor for the basic data, and then their accountant or attorney about what certain items mean,” Mr. Prince said.
The expense and distraction of all that paperwork is one of the biggest frustrations for one business owner, Joseph P. Sergio. His industrial cleaning company, Polar Clean, which is based in South Bend, Ind., but dispatches teams nationally, has just under 50 core employees. One of its business lines is disaster restoration, and after a flood or hurricane, its temporary staff balloons.
Mr. Sergio offers health insurance to his permanent staff, but the premiums have risen so quickly that he had to switch to a more restrictive plan, with a higher deductible. He is reluctant to go over the 50-employee line and incur all of the new rules that come with it. That makes bidding for new jobs an arduous and risky exercise.
“I’ve had to pull my controller and a couple of top people to sit and spend days going through this,” he said. “If you ramp up, and it pushes you over 50, there’s all these unknown costs and complicated rules. Are we really going to be able to benefit from going after that opportunity? It freezes you at a time when you need to be moving fast.”

For the full story, see:
STACY COWLEY. “ENTREPRENEURSHIP; Health Care Law Leads Business Owners to Rethink Plans for Growth.” The New York Times (Thurs., NOV. 19, 2015): B4.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 18, 2015, and has the title “ENTREPRENEURSHIP; Health Care Law Forces Businesses to Consider Growth’s Costs.”)

Quiet Author Founds Start-Up to Help Introverts

(p. 10) Last month, 50 executives from General Electric gathered on the fourth floor of a SoHo office building for a “fireside chat” with Susan Cain, the author of the 2012 book “Quiet: The Power of Introverts in a World That Can’t Stop Talking,” which has sold two million copies worldwide.
. . .
A talk about “Quiet” she gave at a 2012 TED conference has been viewed more than 11.6 million times online. And she has delivered more than 100 speeches since then, sometimes commanding five figures for an appearance. (She also does pro bono work, she stressed.)
. . .
“Writing a book is rewarding,” Mr. Godin said he told her. “But it doesn’t change most people’s lives.”
And so Ms. Cain, who has been coached in public speaking, is now promoting Quiet Revolution, a for-profit company she has started that is focused on the work, education and lifestyle of introverts, which she defines roughly as people who get their psychic energy from quiet reflection and solitude (not to be confused with people who are shy and become anxious in unfamiliar social situations). Extroverts, by contrast, thrive in crowds and have long been prized in society for their ability to command attention. Many people share attributes of both, she said.
Ms. Cain and Paul Scibetta, a former senior executive at J. P. Morgan Chase whom she met when they both worked at the law firm Cleary Gottlieb Steen & Hamilton in the 1990s, have set up a Quiet Leadership Institute, working with executives at organizations like NASA, Procter & Gamble and General Electric to help them better understand the strengths of their introverted employees.
. . .
Mike Erwin, a former professor of leadership and psychology at West Point who served in the Iraq and Afghanistan wars, invited Ms. Cain to speak to cadets in 2012 after he finished reading “Quiet.” He didn’t understand students who were reticent to talk in class or who wanted to explore every risk before jumping into a task. “I’m an extrovert,” he said. “And, as I look back at my career, I wrote off a lot of people who didn’t speak up or want to be in charge.”
In May, he was appointed chief executive of the Quiet Leadership Institute, where he is helping project managers at NASA learn how to lead teams populated with introverts (a common personality type in science). At Procter & Gamble, Mr. Erwin said, executives in research and development are exploring, among other things, how to help introverts become more confident leaders.

For the full story, see:
LAURA M. HOLSON. “Instigating a ‘Quiet Revolution’ of Introverts.” The New York Times, SundayStyles Section (Sun., JULY 26, 2015): 10.
(Note: ellipses added.)
(Note: the online version of the story has the date JULY 25, 2015, and has the title “Susan Cain Instigates a ‘Quiet Revolution’ of Introverts.”)

The Cain book mentioned above, is:
Cain, Susan. Quiet: The Power of Introverts in a World That Can’t Stop Talking. New York: Crown, 2012.

How Democratic Operatives Fight Innovation-Crushing Regulations

(p. B1) SAN FRANCISCO — Over the last few years, so-called sharing companies like Airbnb and Uber — online platforms that allow strangers to pay one another for a room or a ride — have established footholds in thousands of communities well before local regulators have figured out how to deal with them.

. . .
Chris Lehane, a Washington political operative who now serves as Airbnb’s head of global policy and public affairs, framed Proposition F (p. B10) as a hotel-industry-led attack on the middle class.
In this city of about 840,000 people, roughly $8 million was raised by groups opposed to Proposition F — about eight times the amount raised by the proposition’s backers, according to records filed with the San Francisco Ethics Commission.
Much of that money was spent mobilizing Airbnb hosts and users, Mr. Lehane said. Still, he repeatedly homed in on one of the company’s most important talking points: Airbnb’s victory was a win for the middle class.
“Cities recognize where the world is going, right, they understand that you’re either going to go forward or you’re going to go backward,” he said. “They understand that in a time of economic inequality, this is a question of whose side are you on: Do you want to be on the side of the middle class, or do you want to be opposed to the middle class?”
. . .
Companies like Airbnb and Uber have become multibillion-dollar companies by employing a kind of guerrilla growth strategy in which they set up a modest team of workers in a city and immediately start providing their services to the public, whether local laws allow them to or not.
. . .
Mr. Lehane, a former political operative in the Clinton administration, was nicknamed the Master of Disaster for his no-holds-barred approach to winning political fights. David Plouffe, a former adviser to President Obama, is now a senior adviser to Uber and a member of its board.
Mr. Lehane and Mr. Plouffe have both tried to frame their companies as middle-class saviors in a moment of economic anxiety and income inequality — themes that are playing out in the presidential election as well. Jeb Bush and other Republicans have bragged about their Uber rides on the campaign trail, praising these companies as the future of self-sufficient employment.

For the full story, see:
CONOR DOUGHERTY and MIKE ISAAC. “Airbnb and Uber Mobilize Vast User Base to Sway Policy.” The New York Times (Thurs., NOV. 5, 2015): B1 & B10.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 4, 2015.)

Producer of “The Godfather” to Make Six Hour TV Version of Atlas Shrugged

(p. D1) LOS ANGELES — It took a while — more than 40 years, actually.
But Albert S. Ruddy, a movie and television producer who does not like to quit, has landed rights to make his passion project: a screen version of “Atlas Shrugged,” Ayn Rand’s Objectivist bible.
Mr. Ruddy, whose canon includes films as varied as “The Godfather” and “The Cannonball Run,” almost had a deal back in the early 1970s, when he wooed Ms. Rand personally while sitting on a small couch in New York.
But Ms. Rand, who had left the Soviet Union in the 1920s and feared the Russians might acquire Paramount Pictures to subvert the project, wanted script approval; Mr. Ruddy, as adamant as she was, declined. “Then I’ll put in my will, the one person who can’t get it is you,” Mr. Ruddy recalls being told by Ms. Rand, who died in 1982.
. . .
The main thing, Mr. Ruddy said, is to honor Ms. Rand’s insistence on making a film for the future. That means redrawing its capitalists and creators, who go on strike against creeping collectivism, as figures more familiar than the railroad heiress and industrial titans who figured in a book that was first published in 1957.
“When you look at guys like Jeff Bezos, he’s not only doing Amazon, he wants to colonize Mars,” Mr. Ruddy said. He spoke by telephone last week of his plan for a mini-series in which an Internet blackout led by Bezos-like figures might shut down cellphones, banks and almost everything else.

For the full story, see:
MICHAEL CIEPLY. “Film Producer Lands Rights to ‘Atlas Shrugged’ Novel.” The New York Times (Mon., NOV. 2, 2015): B8.
(Note: ellipsis added.)
(Note: the online version of the story has the date NOV. 1, 2015, and has the title “Producer of ‘The Godfather’ Lands Rights to ‘Atlas Shrugged’ Novel.”)