Small Talk: Jobs data contradictory
Over the last week there have been some wins and losses for small businesses in terms of new job data.
On the win side of the ledger, a new Intuit survey shows 44 percent of small businesses say they plan to hire in the next 12 months. The data is included in a San Francisco Chronicle story profiling a local Web startup – Airbnb.com – that is doing its part, having hired seven people since April, at a time when national unemployment has reached a 26-year high of 10.2 percent.
But that optimism is tempered by a USA Today story that said the main reason the unemployment rate jumped in October was due primarily to small businesses cutting staff. It seems that while some small companies are starting to hire again, they are still outnumbered by the ones laying off their workers. The story quotes Moody’s economist Mark Zandi, who explained there is a bias towards big companies in how the Labor Department compiles its payroll survey, which showed October job losses were down nearly 50 percent (190,000) from the average of 357,000 in May, June and July.
BANKRUPTCIES HURTING OBAMA EFFORTS
Small businesses are trimming staff, because many of them can’t get the loans they need to stay afloat until the economy picks up again. The Obama administration is ramping up efforts to get more money into the hands of small business owners, but the President’s efforts have been hamstrung by the bankruptcies of two of the country’s biggest small-businesses lenders: CIT and Advanta.
CIT lends to more than a million U.S. small businesses, while Advanta – a small business credit card lender – is trying to collect close to $3 billion in outstanding loans to 360,000 clients. The idea of both CIT and Advanta calling in markers has sent small businesses into a panic. The filings, which came just a week apart, may well be why Obama has chosen next week to stage a small business forum in Washington, in which U.S. Treasury Secretary Tim Geithner and Small Business Administration head Karen Mills will engage small business owners on the best way to get them more financing.
Sensing an opportunity, JPMorgan Chase & Co. announced yesterday it is stepping up lending to small businesses by $4 billion. A Reuters’ story suggested JPMorgan, which received $25 billion in public TARP money, could also be responding to government pressure to do its part to help get the small business economy back on its feet.
The VC gender gap: are VCs sexist?
– Jeff Bussgang is a General Partner at Flybridge Capital Partners, an early-stage venture capital firm in Boston. This post originally appeared on Bussgang’s blog www.seeingbothsides.com. The views expressed are his own. –
I find the preponderance of males in VC an annoying and stubborn phenomenon. When I first entered the start-up game as an entrepreneur in the mid 1990s, I didn’t think much of the “VC gender gap” as there were plenty of women executives around. In fact, between one third and one half of the executive teams at my two start-ups (Open Market and Upromise) were women.
As the father of a capable, ambitious daughter, perhaps I’m over-sensitive to the issue, but since becoming a VC seven years ago, I find it amazing that only 5-10 percent of the VC industry is made up of women. Only 25 percent of all VC partnerships have a single women partner and only 7-8 percent has more than one women partner. Anecdotally, even fewer women are “management company GPs” as opposed to “employee GPs” – in other words, true owners of VC funds as opposed to deal partners. What other major industry remains 90-95 percent male-dominated? What’s the deal?
An outstanding Kauffman Institute study, “Gateways of Venture Growth,” analyzes this issue and comes up with some thoughtful but unsurprising conclusions. They point out that the industry remains very clubby, and the lack of female role models creates a self-perpetuating cycle. Professor Myra Hart of Harvard Business School writes, “Women trying to launch or further careers as VCs have fewer first-degree connections with those (men) in positions to hire or promote them.”
Another issue that holds women VCs back is the fact that the academic backgrounds of VCs tend to be in technical areas, such as computer science, engineering and biotechnology where, again, females are in the minority.
In talking to my women VC friends, they reinforced these two major issues, but held out some cause for optimism going forward. Irena Goldenberg of Highland Capital in Europe (and formerly an associate with us at Flybridge Capital before she went to HBS and then Geneva), believes there are more female VCs in life sciences as the medical field has a higher ratio of women to men then, say, engineering. Our senior associate, Robin Lockwood, told me she thinks VC profiles simply lags entrepreneur’s profiles. As more women entrepreneurs emerge, more women will become VCs.
Here’s a thought-provoking observation that an anonymous woman pointed out to me (and please do not accuse me of channeling Larry Summers on this – I’m just passing along what I heard): she believes the VC industry is male-dominated because men are more wired to take risks than women. Gambling, she points out, is more popular amongst men than women. Thus, risk-taking with capital is more likely to be comfortable for men than women.
The issue of female entry and success in a male dominated industry is not new. I agree that piercing a male social network and lack of female role models are road blocks but I disagree that men are “wired” for risk taking. This sounds like “risk taking” is genetic. I think a factor to recognize is that men and women learn who they are and how to act through role modeling and the expectations of others at an early age. This identity then becomes reinforced as their lives proceed.
It seems the barriers that exist for women leaders in VC firms may be parallel to that in law firms. The demands placed on rising through the ranks for women in these types of firms conflicts with their family role. The expectation of long hours and to be available 24/7 can serve as barrier to women because of the incongruity with their family life.
I applaud Jeff Bussgang for tapping into all available talent without regard to gender. I’m curious if the females in the VC industry have the same kind of exposure to high risk – high reward business opportunities as men?
A “silver lining” for entrepreneurs?
A new study shows that bear markets and recessions can actually be good times to start a new company.
The report, produced by U.S.-based entrepreneurial think-tank the Kauffman Foundation, suggests that despite the widespread pain felt during tough economic times, an “entrepreneurial silver lining” can encourage long-term business growth and job creation.
In fact, the authors of the report found that more than 50 percent of the companies on this year’s Fortune 500 list and just under half of those on Inc.’s 2008 list of fastest-growing companies were started during a recession or bear market.
But why do startups appear to fare better during tough economic times?
One explanation is that recessions and bear markets actually present valuable business opportunities for entrepreneurs, who tend to be influenced more by their own instincts than by the economic climate at large.
“A downturn might actually act as an extra spur to founding a new company, if the founders perceive that their prospective competition might be weakened,” the report states.
Rising unemployment during a recession also frees up a bigger portion of the workforce, leaving more people (some with generous severance payments) to start new businesses and more potential employees to be snapped up by new companies.
I think this is very true and we’ve been experiencing this ourselves. Whilst no-one likes a recession we’ve managed solid growth throughout it, small businesses can be very agile and tend to be more resource conscious anyway so can survive very well.
In 2002, there were approximately 23 million small businesses in the United States according to the US SBA (Small Business Administration).