Posted on 07/11/2002 7:05:29 AM PDT by PeterPrinciple
WASHINGTON, DC - May 14, 2002 - Interest by would-be entrepreneurs to start new businesses declined last year as the economic recession and lingering effects of the dot.com crash dampened enthusiasm for launching risky new ventures.
The trend is expected to continue for the near term with a strong rebound later in the year, according to the "Global Entrepreneurship Monitor (GEM) 2001 National Entrepreneurship Assessment for the United States of America," conducted by Babson College and the Kauffman Center for Entrepreneurial Leadership. Results of the study were announced today at a luncheon meeting of the Congressional Economic Leadership Institute, hosted by the National Commission on Entrepreneurship.
According to the GEM study, entrepreneurial activity in the U.S. last year plunged 30 percent to 11.7 percent of adults from 16.7 percent in 2000. The measurement reflects the percentage of the U.S. adult population involved in the start-up process or in a business less than four years old.
Enthusiasm to take the entrepreneurial plunge fell even sharper, with only a little more than one out of every three adults (35 percent) believing that good opportunities will develop over the next six months. This compares to one out of every two adults (52 percent) in 2000 and 57 percent in 1999.
"Retrenchment is expected in an environment where the number of initial public offerings has declined sharply and the venture capital community has pulled in its horns," said Andrew Zacharakis of Babson College, who served as the lead U.S. GEM researcher. "Innovation and willingness to take risks often take a hiatus during times of instability, especially in the face of the technology backlash resulting from the Internet bust."
The GEM report further points out that the beleaguered venture capital community faces additional pressures. The report concludes that there will be additional venture capital-backed companies closing their doors in the months ahead and predicts a severe shakeout of the venture capital industry with some of the younger, unsuccessful venture capital firms closing down. Additionally, those venture capital firms that are still investing have become leery of investing in seed-stage companies. Rather, they are investing in follow-on rounds of financing of private companies that still show promise but are unable to raise money in the public markets.
On a positive note, however, the report discloses that informal angel investment in the U.S. last year remained strong, amounting to $129.2 billion.
But although the United States appears to have temporarily lost some of its entrepreneurial enthusiasm, the GEM authors/researchers point to several positive findings that bode well for a strong rebound in entrepreneurship activity. "The demographic structure, beliefs and cultural heritage of the U.S. population provide the basis for strong optimism regarding a resurgence of entrepreneurial activity in the near future," said Larry W. Cox, co-author of the U.S. GEM report and director of Programmatic Research at the Kauffman Center for Entrepreneurial Leadership.
Among the strengths Cox points out:
A large percentage of older entrepreneurs (age 45 to 64) which translates into deeper industry experience, large networks and greater personal capital for fueling high potential ventures;
A high ratio of women to men involved in entrepreneurial activities, thus signaling broad-based participation in economy-building entrepreneurial processes;
A positive perception that the government is supportive of entrepreneurship and that current government regulations are not too burdensome, fomenting a belief that there are few roadblocks to venture creation and growth;
A training and educational infrastructure that fosters creativity, self-sufficiency and personal initiative, as well as explicitly teaches entrepreneurship;
Cultural and social norms that support self sufficiency;
A general belief that there is sufficient equity and debt financing to launch and grow new ventures, despite certain 'capital gaps.' The GEM research is an expansion of the groundbreaking 1999 GEM report, which analyzed entrepreneurial activity in 10 countries to determine the complex relationship between entrepreneurship and economic growth. The scope of the project tripled for 2001 with research teams from 29 countries participating.
Editor's Note: An executive report of the GEM findings can be found at the Kauffman Center's Web site: www.entreworld.org.
Established in 1992 by entrepreneur and philanthropist Ewing Marion Kauffman, the Kauffman Center for Entrepreneurial Leadership is the largest organization focused solely on entrepreneurial success at all levels - from elementary students to high-growth entrepreneurs. The Kauffman Center works to accelerate entrepreneurship in America by reaching individuals of all ages through two focus areas: the delivery of entrepreneurship education and development, and the promotion of an entrepreneurial environment. The Kauffman Center is fully funded by the Ewing Marion Kauffman Foundation. For more information visit our Web site at www.entreworld.org.
Babson College in Wellesley, Mass., recognized internationally as a leader in entrepreneurial management education, grants BS, MBA and custom MS degrees through its Undergraduate Program and the F.W. Olin Graduate School of Business at Babson College, and offers executive development programs to experienced managers worldwide through the Babson School of Executive Education. The College's for-profit venture, Babson Interactive LLC, develops distance learning programs and business simulations for executives and graduate students. More information about Babson is available at www.babson.edu.
The National Commission on Entrepreneurship was established to educate and communicate about the critical role entrepreneurs play in driving our nation's economic growth. The Commission's mission is to develop a public policy agenda that will help protect and promote the nation's flourishing entrepreneurial economy. The Commission serves as an important resource for policymakers, informing them about the key barriers constraining entrepreneurs and recommending public policies and programs that support and contribute to their success. Founded with support from the Ewing Marion Kauffman Foundation, the Commission is headquartered in Washington, D.C. It is a nonpartisan, non-profit organization with a three-year charter. The Commission's work is governed by an operating Commission of prominent and successful entrepreneurs from various commercial segments across the U.S. The Commission also seeks counsel and input from expert advisory panels on key issues of importance to the entrepreneurial sector. Visit our Web site at www.ncoe.org.
This is a part of the economy that we don't see in the popular media
But I am apparently alone in arguing that computers and information technologies still are the wave of the future; that these technologies currently are "on hold" while the "last mile" is hooked up; and that after every company got its web sites and webmasters, there was a giant pause in the industry as people assess where to go next. This is exactly what the auto industry did from about 1907-1915, when Ford really began slashing costs on per-unit production, and it is also where we were 20 years ago when the chip manufacturers began slashing chip prices that sparked the boom.
When the economy tanks, people can become quite creative just to put food on the table.
What else is new?
The notional value of trading in 'cooking-pot exchanges' is immense even at present. Like the traded services themselves, it is intangible; but if one were to attempt to put a price tag on every Web site, free program and bit of advice offered on the Net, the market has a notional value of at least $100 billion. Of course if one were to try (as many do, by and large unsuccessfully) selling services at their notional prices, the market would collapse.
No doubt there has been great technological change and benefits derived from the high-tech sector.
But the trend was also severely overhyped by charlatans, hucksters, con-artists, incompetents, pimps and other assorted non-productive burdens.
The bubble has burst. Technology will continue to progress, but the gold rush is over.
Yes, tools are available.
And technology will continue to improve those tools,
just like tools have been improved ever since Man first utilized a sharpened stick or stone to perform a task.
The Market is much colder in rendering its judgement than even the wildest "free market" demagogues can envision.
The bally-hooed "Information Age" is merely being absorbed into the same-old economy we've always had.
The part about 'tools' that has changed is that it took a hundred years for the effect of the priniting press to cause societal shifts, however, now technology advances at an exponential rate within our lifetimes (see the advances in micro-chips from 1950 to today.)
The transition from the Industrial Age to the Information Age will be as radical as the transition from an Agrarian Society to an Industrial Society (see the Civil War).
There remains a question as to how violent this transitional period will be. The observation that 19 illiterate Arabs could wreak several hundreds of billion dollars worth of damage on this mighty nation-state, is not a positive development. But as the elected elite debate the price of corn in 2006 whilst the neo-Cons argue the minutiae of troop movements in the Sahara Desert, it should be clear that the rules of the Industrial Age are simply obsolete.
Actually, Johannes Gutenberg invented the printing press in 1450 and Martin Luther initiated the Protestant Reformation in 1517 -- a time span of 67 years. (Although reformist thought can be traced to others who predate the printing press).
Nevertheless, with this early example of improved information technology, you've cited evidence of societal change, not economic change. OTOH, the Industrial Revolution clearly precipitated economic change.
Similarly, while the improved communications of the "Information Age" may precipitate social change, the economics of high-tech manufacturing are merely refinements of the Industrial Revolution.
Granted, the two are closely intertwined, but they must not be mistaken for each other.
Industrial Age politics were formed around tremendous investment in capital equipment that could not be easily moved. Factories, mills, assembly lines... The robber barons quickly turned to statism and statist ideologies much the way the landed aristocracy in Germany created a welfare state to counteract the new labor politics of blackmail, the sit-down strike, and fundamentally scary ideologies like Marxism and Anarchy. Since the capitalist elite were small in number and like Lincoln, essentially unconnected to the tradition of American Conservatism, the state became the most powerful entity, similar to German Industry capitulating to the Nazi's to prevent a Red take-over.
This political equation existed until the 1950s when there was a tax rate of 93% on the profits from big business. At that time, with the USSR and Europe in ruins, there was simply no place else for capitalists to go.
Information Age politics will feature an end to urban areas that are unsafe and un-defensible (witness 9/11)and logically, a return to the localism paleo-cons so desire. The question is, will it be a violent transition or a peaceful one.
LOL!!! No, now it is you who is argueing "the minutiae of troop movements in the Sahara Desert".
It is generally acknowledged that the "Information Age" brought about by the printing press precipitated the social change of the Protestant Reformation. A strong case can also be made that the flow of thought and ideas enabled subsequent socio-political changes also, as disparity between the "haves and have-nots" became more readily apparent: the rejection of the European feudal system and monarchies, etc. Indeed, it even laid the groundwork for the Industrial Revolution.
No doubt social and economic change are closely intertwined and influence each other. But as stated previously, the impact of improved communication should not be mistakingly thought to have economic influence. The primary affect is social, ANYBODY can make use of the new "tools". The economic impact at this point in time is unknown, But it is my opinion that the social upheaval will transcend the economic nirvana envisioned by the wealthy elite. (An observation or prediction, not a wish or desire on my part.)
No doubt it will be violent.
Improved flow of information will only serve to make the "masses' increasingly aware of economic disparity and fuel their dissatisfaction. It will not inspire them to be more educated, thoughtful and philosophical about their perceived condition.
The economic elite will typically seek to impose "order" by force, with typical resistance by those who physically outnumber them.
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