Big American companies don't have much to gain from all this. They've been multinational for ages. When they needed to do business in Germany, they just hired 300 locals to do their bidding in the native language. But small companies now have access to similar international markets. The founder of a little company I never dreamed could go international told me, "We're over there trying to establish a European market. We've gone from zero to 50% of our sales overseas while the U.S. market got saturated."
Combine this phenomenon with the Internet as an incredibly cheap and far-reaching distribution channel. All a small company has to do is be good, and the world will beat a path to its door. That's never been true before.
Of course there's a flip side to the elimination of market barriers. Just as other markets are no longer safe from you, neither is your market any longer safe from others. In the short term, Americans will have an advantage: the big foreign multinationals are already here, and there isn't enough of an overseas small-company economy to come at us. But in the longer term, new competitors will enter. And even sooner, your domestic competitors who succeed at tapping foreign markets (often at better margins) will be stronger and therefore tougher to handle at home.
-- David Birch, founder and president of Cognetics Inc., an economic research company in Cambridge, Mass.
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I was driving through a mountain village in Portugal recently, and all of a sudden my car phone rang. It was my secretary, catching me on a cellular phone in the middle of the night. I mumbled "unbelievable" for about half an hour. Ten or 15 years ago, a phone call like that took days.
-- Gordon Segal, founder and CEO of Crate & Barrel, a chain of home-furnishings retail stores with headquarters in Northbrook, Ill.
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Many small companies will face a competitive disadvantage in the so-called borderless world of free trade and investment, where the size, access to capital, and political influence of the global giants will be more decisive than in the past.
-- Richard J. Barnet, Distinguished Fellow at the Institute for Policy Studies, in Washington, D.C.
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We've got people with the knowledge, the dream, and the education. And the money has been there. The public has been financing them. There will be more of that. The 1946 crop of baby boomers hit 50 this year. They make more of their own investment decisions, and they are inclined to buy smaller companies. The NASDAQ volume exceeds the New York Stock Exchange volume on certain days. As public vehicles, those companies will have a better ability to get ahead. If they need additional capital and they are performing, they can raise it in 10 days. And they can use different tools to do that: additional equity, convertible debentures, straight debt. We're going to see more of those companies continue to grow, and some of them are really going to break out. It's wonderful.
-- Muriel Siebert, founder of Muriel Siebert & Co., a national discount brokerage firm with headquarters in New York City, and the first woman to own a seat on the New York Stock Exchange
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I expect more start-ups will be merged with larger companies because they will not have the staying power to become big companies by themselves. I don't expect to see many new companies joining the ranks of Hewlett-Packard, Intel, or Microsoft. What could change my opinion is an invention of the magnitude of the steam engine or the electric motor. The last such invention was the transistor in 1948.
-- Arthur Rock, principal of Arthur Rock & Co., a venture-capital firm in San Francisco
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Keep Your Eye on the Angels
All the attention that's being paid to the availability of credit for small businesses is going to fade, and we're going to have to pay a lot more attention to the availability of early-stage risk capital. Entrepreneurs just don't fit into what debt providers are designed to do. And venture-capital funds have left the start-up field, particularly when we're talking about less than $1 million.
But one of the real changes is going to be the enormous explosion in the participation of private equity investors in emerging companies. Those private equity investors are the self-made entrepreneurs of the past generation. For the past 10 years I've followed the Forbes 400 richest people in the United States. In 1984 something in the neighborhood of 40% of the Forbes 400 were described as self-made megamillionaires -- or what you might call "first-generation money." By 1994 that number had doubled.
The capital and know-how of our country's self-made millionaires are two of our least understood and largely untapped economic resources. Self-made entrepreneurs love to nurture other entrepreneurs. And they typically bring their know-how as well as their capital to the table. In many cases that know-how is more powerful in building a company than the capital itself.
The participation of the growing population of "angels" is going to become more visible. The market mechanism right now for angel financing is really very inefficient and random: who knows whom, who mentioned something on the golf course, who talked to his or her accountant lately about who's looking for money. That marketplace is also horribly time-consuming. Next to capital, time is the scarcest resource entrepreneurs have.
-- Bill Wetzel, director emeritus, Center for Venture Research, University of New Hampshire, Durham, N.H.
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In computer markets, companies must get big very quickly, or they don't make it at all. That means that we as venture capitalists have to think of management structures that can deal with very quick growth. You can't build the team one person at a time. We encourage our companies to get their complete management teams together early on so they don't end up doing it on the run.
