Banks withdrawing credits lines to small businesses. An Anonymous Banker at BizBox has the inside story on how and why banks are slashing and burning small business credit lines. He estimates the impact could be $20 billion in working capital lost to small firms, a good number of whom were perfectly good bank customers who'd never missed a payment. His point is that banks aren't just foregoing lending—they're actively pulling back on money they'd already made available.
Weird business of the day. The New York Times has a fascinating (and quite amusing) video about two Pakistani entrepreneurs negotiating an incredibly precarious situation. They sell $1 million worth of intimate leather goods from a basement factory in Karachi. Because Pakistan is culturally conservative--and because the brothers must contend with the threat of extremists--the brothers keep the sexual nature of their business secret, even from their employees and wives. Though the business is unique, the circumstances of its founding should sound familiar to many an American entrepreneur. With an $800 loan they bought a computer and started searching on Google. Best quote: "The first product we explored was the straightjacket--and we never stopped!" (Warning: The video is a little racy.)
Lessons from a failed startup. Frank post-mortems from entrepreneurs who have failed are hard to come by, which makes Jordan Cooper's account of his recent failure especially welcome. (Via Dave Eisenberg.) Cooper founded Untitled Partners last year with a plan to sell fractional shares in fine art. He raised more than half a million dollars from VCs and then the economy collapsed. Cooper goes through a number of mistakes--he hired too soon, he spent too much money on professional services, and he was not connected closely enough the the mission of the company--but the biggest problem was the economy. Says Cooper, "How do you say 'you just lost half your net worth, want to buy some expensive fine art?' in a way that is appropriate, appealing, and in good faith? Ultimately, we did not find an answer to this question."
Do web entrepreneurs still need venture capital? Late last year Y Combinator's Paul Graham posited that VCs, not startups or innovation, could be the real casualty of the recession. peHUB links to a post in the Bits blog that expands on Graham's thesis. Robert Hendershott, a professor at Santa Clara's b-school makes the case that as the cost of starting a web company decreases (entrepreneurs can now compute in the cloud and rent technology instead of buying it outright), founders will be able to finance their ventures with savings, friends and family, and credit cards. Rather than investing the time in developing a company toward an IPO, founders are selling smaller, immature companies. The VC model, which was developed in order to launch and expand capital-intensive semi-conductor companies, now has little relevance. iPhone App Store developers, for example, can find out if their idea has some traction within a few weeks. Incubators like Y Combinator or Kleiner Perkins iFund, are good examples of tweaking the broken VC model to support very young companies, says Hendershott. Stay tuned for our upcoming June cover story on Paul Graham by Inc. senior writer Max Chafkin.
More reasons to start thinking about succession planning. Business valuations are dropping, but that cloud may have a silver lining. The Boston Globe explains why the current economy is actually an ideal time to plan and execute your succession planning strategy. For a look at some families that have made a success of succession, check out this Inc. cover story.
The TARP, county by county. Want to know how much cash institutions in your hometown have received through the Troubled Asset Relief Program? Subsidyscope.com, a website started by The Pew Charitable Trusts, has created an interactive map with the answers. You can view percentage of deposits held by TARP recipients, the percentage of total branches operated by a TARP recipient, and more. (Via The New York Times.)
Detroit's woes reach Main Street. The U.S. auto industry may be too big to fail, but the same can't be said for the small dealerships, many of which are family-owned, which are facing the axe. With Chrysler cutting 789 dealerships and GM set to shut down more than 1,000, the nation's newspapers are looking at how the loss of these small businesses will hurt the local community. Here's how the effects are being felt in Virginia, Chicago, and Los Angeles.
Who's watching Hulu? Old people. Well, okay, not exactly old, but the streaming video site's fastest-growing demographic might surprise you. People between the ages of 35 to 49 represented 30 percent of Hulu's viewership in April and spent more time on the site (an average of 416 viewers) than any other demographic, says New Tee Vee. That age bracket has also helped Hulu grow 490 percent year over year.
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