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  • Economist Live Chart: 'American Dynamism Dimmed'

    We have come to understand that failure is an important part of success. Or, to be more precise, not being afraid to fail, and learning from failure, is an important part of innovative thinking. But the live chart below, from The Economist , presents a stark picture of failure in the U.S. economy. Since the global economic crises, the number of failed companies each year has exceeded the number of startups.
  • Kauffman Sketchbook: Visionaries

    Do you have passion for something? Good. Can you channel that passion in a methodical, productive manner? And learn from failure? And actually find a way to get momentum and more passion from setbacks? You may have what it takes to start a company. In this Kauffman Sketchbook , Dave Gilboa and Neil Blumenthal share what they learned from starting and running Warby Parker --a company that disrupted the eyewear manufacturing and retail sector. Their thoughts provide some interesting insights into how the contemporary marketplace is working, and what it rewards in new companies and new approaches.
  • Kauffman Sketchbook: Crowdfunding

    The latest installment in the Kauffman Foundation 's Sketchbook series is about raising funds for a startup. This being 2014, the Kauffman team ignored the venture capitalists and instead went to Slava Rubin for instruction. Rubin is the CEO of Indiegogo , a crowdfunding site. Here's Rubin's explanation for how crowdfunding helps connect entrepreneurs with capital, animated:
  • Richard Florida on the Urbanized Economic Landscape

    Once, not too long ago, New York City was the place where financing for new tech business came from--not so much where the new firms were being started. The money flowed out, mainly, to Silicon Valley, and, to a lesser extent, Cambridge. Now, New York City is one of the top spots for companies that are receiving venture capital. At the same time, San Francisco now has more startup activity than the Silicon Valley. It is all a part of an important movement back to urban centers, and what Richard Florida calls a "knowledge energy growth model." In this interview with McKinsey Insights , Florida lays out the relationship between creative economies, cities, new companies, and VC firms in this new growth model:
  • Kauffman Sketchbook: The Entrepreneurial Mindset

    Gary Schoeniger , founder of the Entrepreneurship Learning Initiative , is trying to spread the word about the need for "entrepreneurship education," around the world. And he seems to focus his message on developing an "entrepreneurial mindset." This Kauffman Sketchbook , from the Kauffman Foundation 's multimedia team, illustrates that mindset, while knocking down some pervasive myths about the entrepreneurial process:
  • Crowdsourcing About to Get Bigger

    PBS Newshour points out something we missed in the 2012 JOBS Act. That not-so-little piece of legislation changed the rules on crowdfunding, allowing companies to raise up to $1million a year via small donations online. Karla Murthy reports on the change, and asks, "is it a good idea for investors?"
  • 'Unscaling' and Power to the Little Guy

    Care for a bit of optimism on behalf of the American worker/consumer? Hemant Taneja , a managing director at General Catalyst , says that while we are living in a grim time for the "little guy," good things are coming. There is a paradigm shift underway, and it has everything to do with accessible technology and "unscaling." From the Harvard Business Review online: But the tide is about to turn. A series of breakthrough technologies and new business models are destroying the old rule that bigger is better. By exploiting the vast (but cheap) audience afforded by the Internet, and taking advantage of a host of modular services, small becomes the new big. The global business environment is decomposing into smaller yet more profitable markets, so businesses can no longer rely on scaling up to compete, but must instead embrace a new economies of unscale. Unscaling has emerged over decades. FedEx offered overnight delivery services in the 1970s, letting anyone ship a product anywhere, fast, at a modest cost. Around the same time, Chinese companies like Foxconn were developing less expensive approaches to manufacturing, and opening those facilities up to product designers across the globe. These two changes alone allow a lone innovator in Austin to build a world class product in China and ship it to Berlin — and that’s a revolution for someone with a good idea. Two decades later, Amazon and eBay launched online marketplaces that allowed small businesses to sell their goods to global consumers, creating enormous marketing power even for the little guy. However, like an orchestra missing several of its musicians, these platforms did not offer the complete ensemble needed for small businesses to compete effectively. That has now changed. New platforms abound: Facebook and Twitter for social marketing, YouTube for video distribution, and iPhone and Android for mobile. Payment processing was once a legal and financial nightmare, but today companies like Stripe and Square have made it simple for anyone. Using such tools, companies that embrace economies of unscale compete with far larger competitors. Warby Parker offers prescription eyeglasses over the Internet at $99 a pair in dozens of attractive styles. They leverage a whole range of services — from the logistics of parcel carriers like UPS to customer analytics software and social media marketing — to build a new business with extremely high customer satisfaction rates. With only a couple dozen employees, they have taken on the world’s largest manufacturer and seller of glasses, Luxottica, which last year had a market cap greater than $13 billion. Read Economies of Unscale: Why Business Has Never Been Easier for the Little Guy here .
  • Kauffman Sketchbook: 'Passion Incorporated'; Ingredients for a Successful Startup

    Neil Grimmer is the CEO and co-founder of Plum Organics , so he knows how much people--or at least the people who have helped make his company a fast-growing brand--care about ingredients. So for this Kauffman Sketchbook video, Grimmer talks about the ingredients for success in product development and building a strong new company:
  • Kauffman Sketchbook: 'Startup Nation'

    American-born entrepreneur Jon Medved has spent a lot of his time, energy, and money in Israel. The work has paid off for him, and for the startup culture in his adopted home country. In the latest Kauffman Sketchbook , Medved describes how business culture and government policy encourage startup activity:
  • A Startup Story About Vodka, a Methodical Approach, and Unexpected Success

    Tito Beveridge 's success gives weight to the argument that building a business has as more to do with process than it does with vision, or at least intent. As he says in this BigThink video, Beveridge started Tito's Handmade Vodka to "meet girls, write off my bar tab, and maybe make like $1,200 a month." He ended up doing that and more. And his approach--work, test, improve, work, test, improve--was one that we imagine is a big part of the story for many successful startups.
  • Kauffman Foundation: "Seeing the Unexpected"

    What are the key ingredients to successful entrepreneurship? Well, curiosity is at the top of the list, as Zach Kaplan , CEO of Inventables , notes in this Sketchbook video from the Kauffman Foundation . The ore curious an entrepreneur, the more likely she or he will find something that is "unexpected," and leverage that finding.
  • Measuring the Effect of Patent Rights on Innovation

    At Vox , Alberto Galasso and Mark Schankerman share some findings from their research into the impact of patent rights on innovation. While once economists thought that protecting patent rights was essential to encourage innovation, that now seems less clear. In fact, Galasso and Schankerman write that some scaling back of patent rights could spark more innovation, especially in the tech sector: We find that the loss of patent protection leads to about a 50% increase in subsequent citations to the focal patent, on average. This evidence shows that, at least on average, patents block cumulative innovation. One may be concerned that this is a publicity effect from the court's decision. However, we show that this impact begins only after about two years following the court decision, which is consistent with the onset on follow-on innovation rather than simply being a ‘media effect’ from press coverage associated with the court decision. We also find that the impact of patent invalidation on subsequent innovation is highly heterogeneous. There is substantial variation across broad technology areas. As illustrated by the figure below, patent invalidation has a large and statistically significant impact on cumulative innovation in the fields of computers and communications, electronics, and medical instruments (including biotechnology). However, we find only a small and statistically insignificant effect in the chemical, pharmaceutical, or mechanical technology field. We investigate the source of this heterogeneous effect and find that the technology fields where the impact of patent invalidation is strongest are characterised by two features: complex technology (where new products rely on numerous patentable elements) and high fragmentation of patent ownership among diverse firms. This finding is consistent with predictions of the economic theories that emphasise bargaining failure in licensing as the source of blockage. Read Do patent rights impede follow-on innovation? here .
  • Measuring the Importance of a Company's Founder to Its Long Term Survival

    In an effort to determine how much entrepreneurs matter, UK economists Sascha Becker and Hans Hvide sifted through data on Norwegian companies (apparently Norway keeps the most detailed records on businesses) and looked at the performance of firms after the death of their founders. They then compared that with the performance of "twin" companies that had not lost their founder. The companies that lost their founders had a 20% lower survival rate. Becker and Hvide share some of the results at Vox : We expected businesses that experienced the death of a founder-entrepreneur to have some kind of a dip in performance immediately after the death owing to the upheaval, but we anticipated there would be a bounce back. However, the results were quite surprising. Even four years after the death, most firms show no sign of recovering and the negative effect on performance appears to continue even further beyond that, as illustrated by the figure. A simple explanation for our findings could be reverse causality: poor firm performance leads to entrepreneurs having a higher probability of dying. To deal with this possibility, we look at whether there are pre-treatment differences between treated and matched controls. We do not find evidence of pre-treatment effects, as illustrated by the figure. This suggests that reverse causality is not a major force behind our findings. For how long in a firm's life does the entrepreneur matter? The very youngest companies suffered most after the founder’s death, but significant effects were still felt by companies that were up to ten years old. The degree of ownership the founder had retained matters. The death of a founder with a 50% stake had about half the impact of losing a founder who had retained a majority shareholding. The level of formal education of the founder also showed a strong correlation with the damage that person’s death could have. Those with the most highly educated founders experienced the largest drops in sales performance after the founder’s death. There was no difference between the results for family and non-family companies, between rural and urban businesses, or when comparisons were made between different sectors. It could simply be that the founder was a fantastic sales person who generated a disproportionately high level of sales. On the other hand, it could be down to a leadership effect, where the founder-entrepreneur inspires the employees to perform as best they can and without the presence, that drive slips away. Possibly, entrepreneur death induces a voluntary shutdown by heirs of unprofitable firms that provided the entrepreneur with private benefits, so that there is no social loss. Using quantile regressions, we find strong negative effects of entrepreneur death on sales and assets also among successful firms. The bankruptcy code in Norway is similar to Chapter 7 in the US bankruptcy code, i.e., bankruptcy is associated with creditors taking control and is not 'voluntary' as in Chapter 11 in the US bankruptcy code. We find that firms where the entrepreneur dies have twice the probability of going bankrupt. This, again, is evidence supporting that entrepreneurs create value. Read Do entrepreneurs matter? here .
  • Kauffman Sketchbook: Networking Know-How

    One draw of being an entrepreneur is the opportunity to be one's own boss. But progress is much harder to come by without working through ideas with others. So successful entrepreneurs work to build a network of advisers and confidants. In this Sketchbook video from the Kauffman Foundation , FastTrac president Alana Muller outlines an approach to building a strong network:
  • Kauffman Sketchbook: The Essence of Entrepreneurs

    What makes for a successful entrepreneur? Kauffman Foundation senior fellow Paul Kedroksy sums it up with one line: "They were maddened and frustrated at the world and they scratched their own itch and it turned out to be an itch that a lot of us have." Using Craig Newmark, Mark Zuckerberg, and Steve Jobs as examples, Kedrosky helps us understand this key "essence" of entrepreneurs in a Kauffman Sketchbook :
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