If only Norm Brodsky got to him in time. On Slate today, there's a great cautionary tale about the failure of an all-too-charming coffee shop in Manhattan's Lower East Side. Like many entrepreneurs, Michael Idov fell in love with the notion of running his own business. Not surprisingly, he was soon reminded of the unfortunate realities of start-up life -- trivialities like profit margins and sales volume, for instance. Describing an impeccably pedigreed pastry chef he hired, Idov writes: "Hercule, as I'll call him, embodied every French stereotype in existence: He was jovial, enthusiastic, rude, snooty, manic-depressive, brilliant, and utterly unreliable. His croissants were buttery, flaky, not too big, and $1.25 wholesale. We sold them for $2 and threw away roughly 50 percent—in other words, we were making a negative quarter on each croissant."
Mint reports on the economy. Aaron Patzer, the youthful founder of Mint, has access to some pretty amazing data. Patzer's built a website that does the gargantuan task of providing a single place to track all of your bank accounts, credit cards, and investments. Mint's automatically tracks info from thousands of banks and over 900,000 users. As a result, Patzer's got a uniquely intimate view of our economy. At TechCrunch, Patzer outlines what this data means for entrepreneurs: "Is [the data] Great Depression bad? That's a qualitative question I can't answer. But what the data, the hard facts, mean for you — if you run a consumer business — is that your customers are spending $400 less each month than they were a year ago, have burned through half of their savings, and on average have taken on an additional $5k in debt." For more about Patzer, check out our coverage in last year's young entrepreneur feature.
Angel funding is drying up. According to the New York Times, many angel investors are waiting out the recession. There's a lot of scary anecdotes in the piece, including word of fewer angel investments, smaller deals, and shrinking valuations. "Many professional angels — those who invest as a full-time job, rather than as a side project — are still financing start-ups, if at a slower pace," the Times writes. "They say the best opportunities come during downturns, as companies' valuations fall significantly. The median valuation of start-ups seeking angel financing fell 25 percent, to $3 million, from the third to the fourth quarter of 2008, according to Angelsoft, a Web service for angel investors and entrepreneurs." For more, see our complete guide to angel investing, and our look at some of the top angel groups.
When the crowd gets tired. The last few years have the witnessed the rise of countless companies that rely on input from their customers. Jeffrey Kalmikoff, one of the entrepreneurs behind Threadless (read about it here) has been thinking about what would happen if those customers got tired of participating. He says that while individual members in a community may quit, the community as a whole is likely to be more resilient. And, ultimately, a community-based business is still going to be judged based on the quality of the products it produces, not the size of its community.
Five steps to a successful tech transfer. In a white paper released today, the University of Southern California's Stevens Institute for Innovation takes a critical look at university-VC relations and offers tips to improve the spin-out process. "Unfortunately, university technology transfer professionals and venture capitalists have often struggled with cultural disconnects, hampering efforts to make maximum impact for university research," said Krisztina "Z" Holly, executive director of the Institute. The paper's advice: focus on the inventors behind the intellectual property, be ready to make a deal, and excise "academese" from your business plan.
Doubledown media to cut its losses. It was probably inevitable, but Doubledown Media, the formerly high-flying magazine start-up that catered to Wall Street traders, private jet buyers, cigar smokers, and professional athletes, is kaput, according to Folio. The company blamed the economy, but Doubledown was undoubtedly hurt by a raft of litigation over the past two years, including a legal battle with the founder of Private Air magazine and with former New York Mets star (and founder of The Players Club magazine) Lenny Dykstra.
Lessons from the last burst bubble. As the saying (sort of) goes, those who don't learn from recessions are doomed to repeat them. Thankfully, the New York Times has compiled lessons from previous downturns. A few: keep marketing, hire great talent now if you can afford it, and give back to the community—besides being the right thing to do, the good will creates loyal customers.
Microfinance for entrepreneurs? Though they're usually associated with far-flung places like Bangladesh, there are several microfinance institutions in the U.S. that offer money for entrepreneurs. While U.S. programs are often smaller, they can be a godsend for those who can't get capital from big banks. But, as this article from American Banker points out, giants like Citi, are eyeing microfinance as a way to acquire new customers and reap big profits. The result: a struggle for "the soul of microfinance," over whether their priority is to alleviate poverty or make money.
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