Goodbye to a Silicon Valley Icon; Small-Biz Stress Tips
BY Kasey Wehrum
A hiring tax credit? With unemployment near ten percent and the recovery proceeding slowly, lawmakers are mulling something that hasn't been tried since 1977: paying companies to hire workers. The New York Times reports that the Obama economic team and lawmakers from both parties are "researching" a plan whereby employers would receive a tax credit of several thousand dollars per new hire. Economists say it could jump-start the economy and help small companies, but "critics of the idea argue that businesses hire based on actual demand for their products, and a minor subsidy for adding an employee will not make up for the collapse in demand across the broader economy."
Remembering a Silicon Valley original. Today's Wall Street Journal has a nice look at the life and achievements of Craig Johnson, a Silicon Valley lawyer who played a major role in fueling the Internet boom of the late 1990's. As the founder of Venture Law Group in 1993, Johnson created a law firm that focused exclusively on start-ups; so much so that it even dropped computer giants Intel and Oracle from its roster of clients. Among the big names VLG helped launch are Yahoo, Drugstore.com, and Hotmail. In addition to traditional legal services, VLG also gave business advice and helped arrange venture funding. Guy Kawasaki, who worked with Johnson on the start-up Garage.com, said of him, "The great value he brought was his sense of business development--who was your customer, how would you sell it to them, far and above what an ordinary lawyer or business consultant might do."
The next evolution of venture capital: royalty-based financing. When the VC investment model came along 50 years ago, it turned the industry on its head. Now royalty-based financing, applied to early stage companies, could make as big an impact, reports Xconomy. Rather than buying equity in a startup, an investor gets a cut of a company's monthly revenue, with a limit of, for example, 3 to 5 times the initial investment. The incentive is clear: rather than waiting 5 to 10 years for a exit, investors start seeing returns immediately. This could be a boon for startups that haven't received attention from investors in the past due to their lack of potential for a huge IPO or exponential growth. The downside, for investors, is that their return is limited. This model started in Boston, but is gaining ground in Seattle, in part from seed stage fund Founder's Co-Op. (Hat tip, peHUB.) Check out senior reporter Kasey Wehrum's article on what you need to know to deal with angel investors, including comments from Founder's Co-op general partner Andy Sack.
Six ways to cope with small-business stress. Entrepreneurs can encounter stress because they're growing fast--or because they're not, writes Jay Goltz, who's currently running 5 small businesses in Chicago. In his New York Times column, Goltz gives six steps to coping with the pressure ("I often think stress should be spelled $tre$$"). First, figure out what the real problem is. The need for more sales or more credit is often a symptom of larger problems like bad marketing or poor management. Then, try to distinguish between fear and anxiety. "Go to a professional if you have to," writes Goltz, or just hit the gym. The rest of his tips--forgive yourself, get some perspective, take responsibility, and think positive--may not be innovative, but it's a good reminder if you find yourself in the middle of a freak out.
SBA small-biz spending doesn't add up. Although $93.3 billion has reportedly been given to small businesses, it appears that a large chunk of that money has actually wound up going to large corporations. So far, the SBA has scrapped $6 billion in contracts that were incorrectly attributed to small- and medium-sized businesses. "The numbers continue to suffer from inaccuracy," said Tom Sullivan, the former chief counsel for advocacy at the SBA, as told to CNN Money. "I think we're three or four years away from knowing exactly what they mean."
Hard times for American Apparel. You can accuse American Apparel founder Dov Charney of a lot of things (and, in fact, many people have), but you can't accuse him of failing to keep things interesting. The iconic clothier, who is known for his risque advertisements, pro-immigrant stance, and his, ahem, unconventional beliefs about sex in the workplace, has managed to create a retail powerhouse by selling t-shirts to hipsters. Until recently Charney's biggest problem was a handful of sexual harassment lawsuits, but American Apparel, now a public company, has been battered by the recession. Having laid off 1,500 workers recently, the company is still in dire financial straights, Business Insider reports. It released an SEC filing disclosing that it is in danger of breaching covenants with its lenders.
The Wright stuff. Will Wright wasn't content to mastermind hugely successful games like Spore and The Sims under the thumb of Electronic Arts, so in April he up and left to start his own company, Stupid Fun Club. In an interview with Venture Beat Wright channels Tom Hanks in Big and discusses how he's thinking outside the desktop box. "We're not restricted to one type of entertainment. We're kind of looking for ideas that cross a lot of different boundaries," he says. He also expressed an interest in online fan communities and harnessing the enthusiasm of people who use your product to create a richer, more engaging experience. "The community around The Lost show on TV is one of my favorites," he says, "It's awe inspiring."
Staff editor KASEY WEHRUM has written for Inc. magazine on subjects ranging from the businesses behind professional bull riding to gadget inventor and father of the infomercial, Ron Popeil. His work has appeared in the New York Times, Worth, Budget Travel, and on MSNBC.com. He lives in Brooklyn.