Howard Leonhardt Blog
A Progressive Agenda for Fostering Entrepreneurship
June 24, 2011, 10:01 am
We are pleased to announce that on Thursday, June 30, Amy will be speaking on a panel discussion celebrating the release of Democracy’s newest issue, featuring a centerpiece symposium on promoting a progressive entrepreneurship agenda.
Responding to the Jobs Crisis:
A Progressive Agenda for Fostering Entrepreneurship
June 30, 2011
12:00 pm – 2:00 pm
National Press Club
529 14th Street NW, 13th floor
Washington, DC
Lunch and refreshments will be served.
To RSVP, please email rsvp@democracyjournal.org or call (202) 263-4386.
Small businesses and startups are the real engines of our economy. Any plan to bring about economic prosperity needs to focus on entrepreneurs. But what should government be doing to promote entrepreneurship?
In the summer issue of Democracy, they explore this question and offer some ideas of our own. With the generous support of The Ewing Marion Kauffman Foundation, they have assembled some of the leading experts in entrepreneurship and innovation policy. Their symposium on fostering entrepreneurship covers a broad range of priorities. From promoting minority business ownership and enacting smart immigration reform to teaching entrepreneurship in our schools and encouraging innovation clusters, progressives can unite behind an agenda that promotes entrepreneurs.
The California Stock Exchange
May 17, 2011, 10:26 am
The California Stock Exchange
Purpose
1. To ensure most the capital coming into small companies is able to be used by the company to create jobs and implement their business plan rather than going to lawyers, accountants, insurance cos., printers and bureaucrats.
2. To reduce the time and complexity of raising capital.
3. To modernize communication between companies and investors utilizing all major electronic digital tools including social media.
Relevant background facts
1. The founder of CalX, Howard J. Leonhardt, was also the founder of Bioheart, Inc. an adult stem cell company in clinical trials for treating advanced heart failure. The company was the only biotech IPO of 2008 and raised $6.5 million towards their goal of raising $7 million to finance the final leg of their Phase II/III clinical trials. Unfortunately over $4 million of the raise was taken by bankers, lawyers, accountants, insurance cos and regulatory agencies, thus leaving the company short of funding the completion of their clinical trials. This experience prompted the formation of The California Stock Exchange and these suggested reform measures.
2. To create the jobs and economic growth necessary to get us out this recession CalX founders believe we need to fully fund over 6000 venture backed emerging companies annually. The first quarter of 2011 only 11 venture backed companies achieved IPOs and none of them were small IPOs under $8 million.
3. INTEL one of California’s leading tech employers was an $8 million IPO. There are many potential INTELS out there today that are not getting funding.
4. The current financial regulations make a successful under $8 million IPO almost impossible to achieve. What the country needs most is hundreds and thousands of successful under $8 million IPOs.
CalX Small Business Finance Reform Measures
• Capital may be raised over the internet utilizing all social media and video conferencing tools available.
• No underwriting fees. Savings up to $1.8 million per offering.
• SEC fees reduced by 50% from $10,000 to $5,000
• NASD Fees reduced by 50% from $3000 to $1500
• Printing of prospectus requirements eliminated. Savings $100,000
• Accounting fees eliminated. Savings up to $200,000.
• Legal fees eliminated. Savings $300,000.
• Blue Sky Fees reduced by 50% from $25,000 down to $12,500.
• Exchange entry fees reduced from $64,000 to $1,000
• Exchange annual fees reduced from $12,000 to $1,000
• Transfer agent and registar fees reduced from $5000 to $1000. eFilings.
• Accredited investor qualification reduced from $1,000,000 without home to $500,000 with home.
• All companies on CalX Exchange pool into same shareholder litigation insurance pool.
• All companies on CalX Exchange pool into same health insurance savings plan.
• All companies on CalX Exchange pool into same D&O insurance coverage.
• All companies on CalX Exchange pool into same liability insurance coverage plan.
• All companies on CalX Exchange pool together into groups of 15 for microloan coverage under mutual consent.
• Registered brokers can make 10% capital raises including after market sales.
• Non-registered brokers/consultants can make 5% on capital raises including after market sales. Non-registered brokers include web sites and blog writers.
• All brokers registered and non-registered can work hand in hand with no barriers with research analysts to get information out on companies and industry segments. No glass walls in firms.
• Companies can publish and distribute their own research analysis.
• Companies, brokers, employees, officers can defend their companies and post truthful information and even personal opinions about their own company or their competitors on any internet forum page without hindrance.
• Venture Capital firms or accredited angel investors investing more than $1 million may receive a 25% discount on securities purchases.
• Private placements can be made online over the internet with full marketing capabilities with up to 250 non-accredited shareholders without registration (up from 35).
• Audited financials not required for companies with revenues under $8 million and/or capital raises under $8 million.
• Information posts on websites, blogs, Twitter and Facebook pages qualify as public disclosure of information.
• Angel investors can write off their tax returns up to $200,000 in losses in investments in small companies.
• Zero capital gains on small company investments.
• Our small board companies can raise $1000 each from any investor unlimited numbers and $50,000 each from accredited investors unlimited numbers.
• CalX company CEOs, COOs or CFOs have to hold open forums to answer questions from any investor once each quarter.
• CalX Exchange company shareholders directly elect directors for the member companies and set their salaries, benefits and stock option packages.
• All IPOs should be Dutch Auction style and should be fully open to all investors from the beginning.
• All CalX Exchange listed companies require a minimum of one officially designated endorsing investor and maximum of three with experience in that sector that has done due diligence on the company and is willing to have their name and information posted as an endorsing investor. These investors will receive a 50% discount on the currently traded price of the shares.
Social Entrepreneurship: The MicroConsignment Model
May 11, 2011, 9:01 am
Written By Brett Smith
Brett Smith: Teach them to fish, and then lend them a rod and reel.
As an innovative way to alleviate poverty, a number of social entrepreneurial approaches have focused on enabling poor people to help themselves through the power of entrepreneurship. Micro-credit has provided billions of dollars in start-up and growth capital to encourage micro-entrepreneurs around the world to launch their own enterprises to lift themselves out of poverty.
The majority of the methods employed are designed to provide financial resources – and while this has been successful in some circumstances, it has not been as effective in many others. Examples around the world suggest that financial capital alone may not be sufficient to spur effective entrepreneurship among people who may lack business acumen, a vetted opportunity, and a network of advisers.
To unleash more micro-entrepreneurs around the world, social entrepreneurs have begun moving to models that reduce risk for the micro-entrepreneur. Following the growth of micro-credit, the micro-franchise approach has gained traction by providing a proven business model to micro-entrepreneurs that may lack an entrepreneurial opportunity. Moving beyond micro-credit and micro-franchise, a new approach called the MicroConsignment Model has emerged as a first step on the ladder of micro-entrepreneurship at the Base of the Pyramid.
The MCM – developed by Ashoka Fellow Greg Van Kirk – acts as an initial distribution channel to provide access to basic products – eyeglasses, water filtration buckets, cook stoves and solar lamps – for rural villagers in “Base of the Pyramid” markets. It creates opportunities for villagers to act as micro-entrepreneurs to their fellow citizens, arming the individuals with the education, training and products necessary to successfully market and sell essential products in developing countries – especially in very rural areas.
It also lowers the barriers to entrepreneurship by providing micro-entrepreneurs with an opportunity to ‘test drive’ a business by investing only their time. Equally important, it reduces potential negative outcomes for micro-entrepreneurs by eliminating the need for start-up capital and avoiding financial failure because the goods are consigned – eliminating the potential for the havoc that can result from outstanding loans or failed franchises. In this way, the MCM adheres to the Hippocratic Oath of development: first, do no harm.
The Chinese proverb suggests, “Give a man a fish, you feed him for a day. Teach a man to fish, you feed him for a lifetime.” In much the same way, the MicroConsignment Model provides micro-entrepreneurs with the necessary business training to market and sell products to other consumers at the Base of the Pyramid. Moving beyond teaching, the MCM also provides micro-entrepreneurs the pole, the tackle and a fishing partner. The pole and tackle include previously vetted products that add substantial economic or health related benefits to rural villagers as well as centralized marketing and administrative systems and a network of people to help support the entrepreneurial efforts. In this way, the MCM facilitates the development of new approaches that fit between donations (which are often short-term oriented and not responsive to consumer wants) and large multinational corporations (which are often initially resistant to enter markets where distribution channels are underdeveloped and margins are lower).
Over the last seven years, the MicroConsignment Model has been developed and expanded throughout several regions of Guatemala. Initially developed for the distribution of cook stoves, it has expanded to a more complete basket of products including eyeglasses, vegetable seeds, solar lights and water purifiers. Additional product testing has begun on energy products, hearing aids, and water pumps. Building on this successful implementation in Guatemala, the MCM has grown to Ecuador, Nicaragua and South Africa. Further expansion is now being evaluated and/or pursued by other Ashoka Fellows in other parts of Central America, South America, and Africa – while additional products and partnerships are extending the reach and impact of MicroConsignment programs already in practice.
Though the current applications, the MicroConsignment Model has provided more and more micro-entrepreneurs with income opportunities and additional villagers are gaining access to basic products that they would likely not otherwise have reasonable access to.
There has been tremendous growth within business schools focused on the creation of economic and social value including corporate social responsibility, sustainability, and social entrepreneurship. Many have encouraged a specific focus on better education and understanding of markets in the developing world – and other Base of the Pyramid markets.
Social Entrepreneur Corps is one example of an experiential approach to furthering these educational opportunities. The program, which has partnered with top business schools and leading social entrepreneurship programs, allows students to spend 8 weeks in the developing world working side-by-side with micro-entrepreneurs executing the MicroConsignment Model. To date, students from schools including Columbia University, Duke University, Miami University of Ohio and Notre Dame have sent hundreds of students through Social Entrepreneur Corps.
The innovation of the MicroConsignment Model provides such a mechanism that can be scaled to contribute to the alleviation of poverty of millions. However, the MCM is just the beginning. To tackle poverty more globally, the MCM should serve as a starting point that offers potential partnership opportunities for multinational corporations to learn about Botton of the Pyramid markets and to test market products and service in those markets. It also offers an opportunity for those same corporations to learn from and contribute to the development of best practices in these markets – and to scale social impact to alleviate poverty in the short-term and have significant economic impact in the long-term.
Dr. Brett Smith is a Professor of Entrepreneurship and Founding Director of the Center for Social Entrepreneurship at Miami University’s Farmer School of Business, in Oxford, Ohio. He also leads the Center for the MicroConsignment Model at the university.
Source: http://blogs.forbes.com/ciocentral/
What is true for England is true for the USA....
April 20, 2011, 5:08 pm
Focus on growth. Don’t argue about cuts
The battle of the economists is a sideshow. We must urgently put money into entrepreneurs’ hands
Eamonn Butler
Take two economists, and you have three points of view. The old joke still makes economists smile, because they know it is true. And right now, as newspaper letters columns show, it is more true than ever.
In December, Professor Tim Congdon and others wrote to The Sunday Times to complain that all the new money being printed by the Bank of England was merely fuelling government spending and borrowing. Last week more profs, led by Tim Beesley, toldThe Sunday Times that we must not delay in cutting costs — we had the largest debt in peacetime history, and investors would desert us.
All tosh, Professor Richard Layard and others told the Financial Times this week. Our deficit was pretty average — lower than in most peacetime years. Cuts would merely raise unemployment. On the same page, Professor Robert Skidelsky and 60 more blamed it all on the global financial crisis, but thought that economic growth would soon sort things out.
While economists argue, the indisputable facts are grim. The position of our public finances (like Greece’s) are so bad that we must cut public spending by a third. The Government is deep in debt, and we need a realistic plan to haul ourselves out of it. We have the biggest budget deficit in the OECD, 14 per cent of GDP, and that is not because of the world crisis. Our chronic overspending is two thirds of it — 10.4 per cent, of GDP, or £20 million an hour. We really cannot go on like that, as any household or small business knows.
BACKGROUND
- Tories right on cuts, say economists <http://www.timesonline.co.uk/tol/news/politics/article7026365.ece>
- UK housebuilding hits lowest since 1946 <http://www.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article7032641.ece>
- Bank slashes rates by 1% to historic low <http://www.timesonline.co.uk/tol/business/economics/article5284570.ece>
- Brown to cut Vat as winter recession bites <http://www.timesonline.co.uk/tol/business/economics/pbr/article5213582.ece>
The UK economy is very weak. The banks are shell-shocked, and not lending to businesses that need cash to tide them through hard times. Unemployment is high, business is bad, the benefit bill is growing and tax revenues have shrunk.
Surely this is not the time to make cuts in public spending. Public spending does not stimulate growth. It merely takes cash from where investors think it will create mid and long-term returns and puts it where politicians think they will get the best short-term political return.
We cannot afford to put off the evil day. We don’t even have to lose our AAA credit status. If Beesley & Co are right and foreign investors just start avoiding us as too risky, then they will demand a better return on their money, and our debt interest, already scheduled to grow to as much as the defence budget, will become unsustainable. Then we will be off to the IMF once more.
Indeed, maybe the right time to cut government spending is actually when things are bad, because government spending is inherently wasteful. In 2007, economists at the European Central Bank calculated that with a bit of tweaking, the Government could deliver exactly the same level of public services but with 16 per cent less spending. When the Government already takes nearly half the nation’s income, that saving would be a huge boost to struggling businesses all over the country.
The UK Government is the only organisation in the country exempt from international accounting standards, giving politicians a free hand to do with public spending what they have been doing with personal expenses. This needs to change urgently if we want the UK to prosper again.
The interesting thing about the economists’ dispute in the newspapers is that it is not a straight Labour-Conservative barney. The hawks include the Labour Lord Desai, the doves Lord Skidelsky, a former Conservative culture spokesman. The disagreement is not about the fact that something radical needs to be done, but only when is the best time to do it.
But there are some monetarist v Keynesian undercurrents. Lord Skidelsky wrote the book on Keynes while Tim Congdon is to monetarism as the Pope is to Rome.
One side is telling us we can’t spend our way out of bad times, and the other is saying that hairshirt economics merely gives us a terrible rash.
The Chancellor may be pleased that so many economists back his plans for spending now and cuts later. It fits conveniently with the election cycle. But for every economist, there is an equal and opposite economist. When you look at public spending, the Treasury’s liabilities — public sector pensions, for example — are six times what appears on the books. That is frightening, and the quicker we get to grips with it the better. We need to spy on the Government’s spending. Every cheque it writes should be posted online.
Lord Skidelsky is right that economic growth is our best hope. But it must go along with enough belt tightening to convince the world that we really mean business. Yet growth is not going to come from yet more government spending —we have been doing that for a decade, and the only place it got us is deep in debt, with public services that are now less productive, not more.
It is, as always, only private initiative that will grow our way out of debt. And if we start scaring entrepreneurs abroad by taking more than half their income in taxes, we really are sunk. Buckle up now.
Dr Eamonn Butler is director of the Adam Smith Institute and author of The Alternative Manifesto (Gibson Square), published this week
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