Posts Tagged ‘Mike Mandel’

Let a Thousand Flowers Bloom: New Blogs by My Former BusinessWeek Peeps

December 31, 2009

One of the upsides of the epic decline of print media is seeing the new paths taken by many seasoned journalists. I am watching this transformation take place right here at BusinessWeek, where some of my former colleagues have recently launched new blogs or turned pre-existing ones into their main outlet.

Here’s a sampling:

* Mandel on Innovation and Growth: BusinessWeek’s former chief economist Mike Mandel recently launched a new blog dedicated to covering innovation, growth, economic statistics and commentary on economic and financial reporting.

* Globespotting: Former BusinessWeek senior writer Steve Hamm has moved his globespotting blog over to a new address on WordPress.com. Hamm has also joined IBM as a communications strategist.

*Business Books Guy: BusinessWeek’s former book editor Hardy Green has launched a new blog about the book industry, with a focus on the subject Green knows very well, business books.

*The Numerati: BusinessWeek’s former senior writer Steve Baker has continued to publish the blog he launched for his book. It’s a tech-oriented site focusing on the data explosion and its repercussions for business, politics, culture, etc.

Update: I just found out about one new blog by Joseph Weber, BW’s former chief of correspondents. Weber is now an associate professor of journalism at the University of Nebraska and has started a new blog called Wide-Eyed Wonder.

Reinventing Venture Capital

June 10, 2009

Today, Paul Kedrosky released a report, “Right-Sizing the Venture Capital Industry,” as part of his work as Senior Fellow at the Kauffman Foundation.

Now, I couldn’t agree more that the venture capital industry needs to reinvent itself. That was the theme of my recent feature in BusinessWeek, Super Angels Shake up Venture Capital. But I was a little surprised by the way that Kedrosky goes out of his way to diss the venture capital industry’s role in nurturing innovation, even though I know the Kauffman Foundation has a bit of an anti-VC bent.

“The industry has become conflated with entrepreneurship in the popular imagination as well as in policy circles, with the result being a widespread and incorrect belief that venture capital is a necessary and sufficient condition in driving growth entrepreneurship,” writes Kedrosky.

Kedrosky’s big data point? Of the 900 companies on the Inc. 500 list between 1997 and 2007, he reports that only 16% received venture capital backing. It’s an interesting data point. But to then argue that “venture capital and entrepreneurship are separate phenomena,” as Kedrosky does, seems like an overstatement to me.

Obviously, most new companies do not require venture capital but the ones that do need it play a hugely important role in the economy because they tend to be the ones that grow the biggest and create the most value. Think Google, which got a $25 million injection of venture capital at a key moment in its evolution. Without that money Google might have never become Google. There are many examples like this.

The rest of the report tries to figure out why venture capital performance has been poor lately and suggests how the industry will reshape itself. The upshot? The industry must shrink, perhaps in half in the coming years.

I basically agree that the industry needs to shrink. That’s pretty much what I argued in my super angels feature. The industry has an inversion problem: Fund sizes have gotten bigger while the capital needs of companies have shrunk. $500,000 is the new $5 million, as Mike Maples said in my story.

Will it shrink in half? Maybe. Maybe not. All I know is that it will get smaller and that’s a good thing for industry and for the economy. An excess of capital ends up wasting money and the scarce time of entrepreneurs to create great companies.

The more important issue to me is that the industry needs to develop new models to finance and nurture innovation that fit today’s capital-constrained economy. Super angels will be part of the answer but it won’t solve the whole VC problem.

My colleague Mike Mandel blogged about this issue, making the point that science-oriented VC requires more money and a longer time frame to come to fruition. I think he’s right. And I’ve heard many VCs who invest in clean tech make this point.

Another big issue: Without an IPO market, there needs to be a new type of capital market that helps young companies finance their growth once they graduate beyond venture capital.

Sub-Prime Boomerang: The Danger of Over-Regulation

April 1, 2008

Over the last two days, the Bush Administration and U.S. Secretary of the Treasury Henry Paulson have outlined their proposals to overhaul the financial regulatory structure of the U.S. Ordinarily, this is the kind of topic that puts people to sleep. But thanks to the Sarbanes-Oxley laws passed after the last financial scandal, techies know that financial regulation can be a very dangerous thing.

Was there a need to reform our accounting and governance laws after the the blow-ups and fraud at Enron/WorldCom? Of course there was. Was the regulatory response appropriate? Not really. Whether it was unintended consequences or just plain ignorance, Sarbanes-Oxley has made it much more expensive and difficult for small companies to raise money in U.S. capital markets. See Henry Blodget’s rant on this topic–it’s spot-on.

Now, we are faced with another similar situation. Is there a need to overhaul our financial regulatory regime? Of course there is. But lawmakers should move more deliberately and carefully this time around. For one, the financial system is already self-correcting its problems. Second, remember that this crisis exploded in one of the most regulated parts of the economy-the banking sector. Third, the U.S. is facing increasing competition in this new multipolar world. Our financial markets have been a source of strength and competitive advantage the last 60 years. We can’t afford to screw this up.

Any reform should be guided by two principles. One, better oversight of the home lending market. Since the basis of this latest scandal was poor lending standards to home-owners, which are leading to record foreclosures, policy makers should focus their efforts om improving oversight of this sector. As a purchaser of two homes, I know that mortgage brokers are some of the most unscrupulous people who often screw over customers and provide them with inaccurrate or incomplete information.

Second, the government should focus on improving transparency in financial markets. As my colleague Mike Mandel wrote yesterday, “the most striking thing about the current problems is just how much money the banks and the investment banks have lost. They apparently had no idea of how risky their own exposure was. The supposedly smart guys were simply stupid.

For me, the main lesson from this debacle is that both banks and investment banks must be required to fully report what securities they are holding, both directly and indirectly. No more off-the-book special purpose vehicles, no more hiding derivatives under the table. If a bank or an investment bank is holding a security, they have to publish the amount and the basic characteristics.”

This is a great suggestion–and one that dovetails with the mission of the Securities and Exchange Commission. One of the smartest aspects of our securities laws is their focus on transparency through the required filing of regular financial reports. Lawmakers can not legislate away greed or a recession, nor should they try. But they can and should force commercial and investment banks to disclose all of the investments they make in a clear and concise manner. That way, investors and consumers and regulators can make their own informed decisions on how they want to deal with these assets.

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