Bbr Volume 2 Issue 2

10/27/2008

Vol II Issue II

Table of Contents 

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News Analysis—Government Intervention [3-4]  News Briefs [5-7] Got Cash?—Capital for the Entrepreneur [8-9]  Startup Tips [10]  Industries Suited for Startups [11-12]  America’s Top Entrepreneurial Cities [13-16]  Qualities of an Entrepreneur [17-18]  Pitfalls to Avoid [19-20]  Profiles of Startup Companies [21]  Anderson Summer Entrepreneurship Institute [22-23] Anderson Management Development Program [24]

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News Analysis:

Government Intervention—the End of Capitalism? By Fred Kim Senior Staff Writer Many have criticized a series of the government measures to prevent the financial system from collapsing. We can divide the critics into two based on what aspect of the plans they dislike. On one hand, there are people who are afraid that the intervention would permanently alter the government’s role in the country’s economy, ending the capitalism era. On the other hand, there are people who are simply not convinced that the infusion of a large amount of taxpayers’ money is designed to help the overall economy, not just the few guilty parties on Wall Street. From its involvement in the acquisition of troubled Bear Stearns by JPMorgan back in March of this year to the $700 billion bailout plan that was passed this month, the government of the United States has committed about $1 trillion so far to shore up the crumbled financial system. Does this signify the collapse of capitalism and free markets in the US? Would this enormous amount of money spent by the government be effective in solving this crisis?

What history tells us By no means is this financial crisis new in the 200 plus years of history of the United States. Triggered by the famous stock market crash on October 29, 1929, the Great Depression lasted about 10 years, with its ending coinciding with the onset of World War II. The current financial crisis resembles the Depression in that both the housing price and the stock market plunged enormously, deflation set in and a huge number of banks collapsed. In the case of the Great Depression, the overall condition of the economy and financial markets did not start to recover until 1933, when the Roosevelt administration initiated a series of drastic government measures. Although Roosevelt’s decisive actions involved extensive government interventions in the system, it did not end the era of capitalism. Thus, it is unlikely that current government measures would put an end to American capitalism; it will merely reestablish the government’s role in regulating and overseeing free markets. Experiences of other nations offer further insight into the effectiveness of the government intervention during the financial meltdown. Sweden saw a devastating series of bank failures in the early 1990s. However, the country could recover quickly thanks to its government’s swift actions. On the other hand, Japan provides an example of prolonged economic downturn as a result of no significant government help in its financial system.

What the experts say Obviously, the current state of the financial crisis cannot be seen as an identical event to the Great Depression. For that matter, the historic financial crises in other countries have different

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variables other than government intervention that might have affected the outcomes. So far, the actions of the U.S. government have not yielded much of a positive result. For instance, the Federal Reserve has been steadfast in keeping the rates low in order to provide ample liquidity in the financial system. However, it has not been able to lower interbank lending rates. Many banks are unwilling to lend their money to other banks at such low rates. Thus, the Federal Reserve’s commitment to keep the rates low is not helping the interbank lending market at all. Also, the government has been putting a great effort to limit foreclosures. For instance, as soon as it took over IndyMac, it ceased the bank’s foreclosures. It is an understandable measure in that rampant foreclosures are at the core of this whole financial mess. However, tight restrictions on foreclosures deter mortgage lenders from giving out loans because, without any collateral, they will lose all their money in case of default. In fact, restrictions in foreclosures keep the mortgage market from reviving.

Conclusion During the congressional hearing, Ben Bernanke, chairman of the Federal Reserve, compared the current financial markets as a patient with clogged arteries. If left untreated, the patient will inevitably suffer a heart attack. His remarks are confirmed by the negative ripple effects of Lehman Brother’s collapse. Many experts, from economists to bankers, also agree that the government remedy is critical in solving the current financial problem; but they insist that government measures should address the overall financial system instead of just a part of the problem.

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News Briefs By Grace Chan Senior Staff Writer

Credit rating agencies probed by Capitol Hill Major credit rating agencies are being questioned for vouching for mortgage-backed securities. It is now becoming more and more apparent that executives and employees at these credit rating agencies were often aware of the flaws in the AAA ratings given to thousands of mortgage-related securities, whose subsequent downgrades helped to plunge the nation into a financial crisis."The story of the credit rating agencies is a story of colossal failure,” said Rep. Henry Waxman (D-CA), chairman of the House Oversight and Government Reform Committee. “Millions of investors rely on them for independent, objective assessments. The rating agencies broke this bond of trust, and federal regulators ignored the warning signs and did nothing to protect the public. The result is that our entire financial system is now at risk,” he continued. Documents show that these credit rating agencies were pressured by bond and securities issuers to “inflate” ratings, ultimately putting investors at risk. Standard & Poor’s, as well as Moody’s and Fitch, Inc., reaped large profits evaluating mortgage-backed securities, giving them top ratings as long as housing prices went up. One of Moody’s top executives, Raymond McDaniel, said, “Issuers of mortgage-related securities awarded business to companies that produced inflated assessments.” These credit rating agencies are important because the high grades they give out assured investors that their money should be safe. The inflated ratings led investors to buy mortgagebacked securities in enormous numbers. This exposes an inherent conflict of interest, as credit rating agencies are paid by bond and security issuers, not the investors who rely on these ratings to make their investments.

Argentina faces a possible second default within a decade Argentina President Cristina Fernandez de Kirchner plans to seize over $29 billion dollars worth of private pension funds, which increased concerns that the nation is headed towards its second default in a decade. Kirchner’s decision further damaged the market, which is already battered by falling commodity prices and slower growth. It spooked investors and triggered deep plunges in Argentine stocks and bonds. The last time the government sought to tap workers’ savings to help finance debt payments was in 2001, just before it stopped servicing $95 billion of obligations. South America’s second largest economy hasn’t had access to international capital markets since its 2001 default. Holders of about $20 billion of defaulted bonds rejected the government’s 2005 payout of 30 cents on the dollar. The cost of protecting Argentina’s bonds against default soared yesterday, as five-year credit default swaps based on Argentina’s debt jumped 2.38 percentage points to 32 percentage points. Credit default swaps are designed to insure against defaults. While the proposed takeover may decrease the chances of default in the short-term, it creates long lasting damage to the credibility of the Argentine government and its financial system. It also does little to reassure or encourage people to invest in its domestic financial industry.

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Talk of GM-Chrysler merger stalls, Chrysler slashes 25% of its workforce Troubled carmakers General Motors and Chrysler are looking to combine operations in order to eliminate billions in overlapping costs. Even though GM has about $21 billion in cash and Chrysler has about $11 billion on hand, both companies may face cash shortages in the future due to declining auto sales. GM is spending more than $1 billion dollars a month to keep afloat until the markets recover, but it may well run out of money before auto sales improve. The merger between GM and Chrysler would change the face of the automobile industry as Detroit’s Big Three (Ford, Chrysler, and GM) becomes Detroit’s Big Two and some automobile brands may well be dropped. Out of Chrysler’s three brands: Chrysler, Dodge, and Jeep, only Jeep is considered strong, while GM’s Buick, Pontiac, and MC brands are considered troubled. The merger also faces major opposition from the United Auto Workers union and the companies’ dealers. It is likely that a merger would result in another round of job cuts, and just closing the factories and dealerships would take a lot of cash. However, the UAW would probably not block the decision to close down factories and buyout more workers if it prevents bankruptcy. On Friday, Chrysler announced job cuts of 5,000 workers or 25% of its workforce, which likely signals the end of its independence. GM and Chrysler have declined to comment on the sale or merger talk. Cash-starved GM would benefit by gaining access to Chrysler's $11 billion, while Nissan-Renault may be interested in forming an alliance with Chrysler to increase its North American presence.

OPEC faces split, over plunging oil prices and oil quotas The Organization of Petroleum Exporting Countries (OPEC), which formed five decades ago to unite oil producers, is facing division as its members debate whether to cut oil production and raise prices as the world heads into a global recession. Last week, Britain’s Prime Minister Gordon Brown said, “*It is+ absolutely scandalous that OPEC is considering cuts as the global economy risks falling into recession.” The debate puts Saudi Arabia, OPEC’s biggest producer and U.S. ally, against Venezuela and Iran. Both countries disagree with U.S. foreign policy and pushed for higher oil prices. On Friday, it was announced that OPEC would cut oil production by 1.5 million barrels a day, but even so, prices remained largely unchanged due to a decreased demand for crude oil. Crude oil is now trading at $64.15 per barrel, down 56% from its all time-high of $147.27 reached on July 11, 2008. So why are oil prices so important? Saudi Arabia only needs oil prices of about $30 per barrel to balance its government budget, while other countries such as United Arab Emirates (UAE) needs $45 per barrel; Qatar $55; Iran $100; and Venezuela’s number is $120. Oil option trading shows that many investors believe that oil will fall below $50 per barrel in the next few days. OPEC has noticed a marked decrease in demand, and a report by the U.S. Department of Transportation noted that Americans have drastically changed their driving habits. People are relying more on carpooling and public transportation. The decline in oil prices is also contributed to the strengthening dollar. Investors usually buy commodities such as crude oil to hedge against a weakening dollar, and then sell those investments when the dollar rebounds.

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Freddie Mac’s stealth campaign to kill oversight regulation Three years ago, Freddie Mac covertly hired DCI, a Republican consulting firm, to target Republican senators to kill legislation for greater regulation and oversight. The regulatory overhaul bill proposed by Senator Chuck Hagel (R-Neb) was submitted to the Senate in 2005. At that time, all GOP members of the Senate Banking, Housing, and Urban Affairs Committee supported the legislation, while all Democrats opposed it. Hagel, along with 25 other Republican senators, unsuccessfully petitioned Senate Majority Leader Bill Frist to allow a vote on the bill. They wrote, “If effective regulatory reform legislation is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system and the economy as a whole.” While these senators were pushing for this bill, DCI was targeting 17 Republican senators to defeat it. In the end, the bill died because of a lack of sufficient Republican support and Democratic opposition. The Republican senators targeted by DCI began hearing from their prominent constituents and financial contributors that they should work to defeat Hagel’s bill because it would harm the housing boom. Eventually, nine of the 17 targeted Republicans did not sign Hagel’s bill. Mike Buttry, Hagel’s chief of staff, said, “’It is outrageous that a congressionally chartered government-sponsored enterprise would lobby against a member of Congress’s bill that would strengthen the regulation of that institution. America has paid an extremely high price for the reckless, and possibly criminal, actions of the leadership at Freddie and Fannie.”

Yahoo slashes 10% of workforce On October 21, Yahoo (YHOO) announced that it would cut about 1,500 employees, or 10% of its workforce, in the fourth quarter in order to reduce cost. Despite its decision to cut jobs, Yahoo has mainly matched Wall Street’s forecasts and earnings reports, and in light of the current economy, Yahoo’s earnings report could have been worse. In the past few months, Yahoo’s stock has been pummeled by worries that companies would cut their online advertising expenses because of the economic slowdown. Online advertising includes Internet display ads such as banners and videos. Earlier this year, Yahoo turned down many takeover bids from Microsoft (MSFT), a move that largely frustrated several shareholders. Currently, Yahoo is trying to broker an ad-sharing deal with its main opponent, Google (GOOG). However, this partnership has been put on hold as the Justice Department is investigating whether such a deal would result in an online advertising monopoly, which would violate anti-trust laws.

Analysts cautious on American Express The current financial crisis is taking its toll on American Express (AXP) as the beleaguered credit card giant reported a 24% drop in profits. The slowdown in consumer spending is hurting the company. Standard & Poor’s placed the company on CreditWatch negative while Moody’s downgraded the company. However, the company has stressed that it can fund its business for another year, and it has access to funding from the federal government. Some people have expressed their opinion that American Express may need to consider a merger if the markets do not stabilize.

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Got Cash? Capital for the Entrepreneur By Benjamin Lo Staff Writer You have that world changing idea – package, wrapped, and ready to go – but what do you do now? One of the top reasons why most entrepreneurial ideas never get off the ground is a lack of funding. While the majority of potential entrepreneurs are intimidated by the idea of raising capital, this does not need to be you. For all startup businesses and ideas, the concern for capital is something all entrepreneurs must consider. Even if you have the next Google or Facebook it will be hard for you to go anywhere without the proper funding for your company to produce your product or market your idea.

“Picking the right method to help your idea and company grow can mean the difference between starting a monumental company and being on your way toward debt.”

Most people have the misconception that there is only a limited number of resources available to finance their entrepreneurial projects. Instead, there are numerous methods of funding that are readily available for startups. The hard part of finding a source of capital is discovering which one suits your business best. Picking the right method to help your idea and company grow can mean the difference between starting a monumental company and being on your way toward failure.

Equity vs. Debt Regardless of from whom or where you raise capital, as an entrepreneur, you must consider both equity and debt. Equity is the monetary value of a business and, more importantly, the part of the company that is not owed to creditors. Basically, equity can be considered as the right to share in the potential future profits of the company. When deciding whether or not you would like to finance your startup using equity, you need to ask yourself whether you are willing to share a stake of the ownership of your company for capital. Are you ready to allow others to influence the decisions made in the future for cash now? Are you willing to provide a certain percentage of your profits to another entity? Getting capital based on your company’s equity often involves venture capitalists or angel investors. On the flipside, entrepreneurs have the choice of getting capital on the basis of debt. With this option, you can go into debt by borrowing with the promise of paying it back with interest in the future. Debt financing is often preferred for those who want full control of how their company will develop. Debt financing often involves traditional banks or credit unions. Often times, the best choice for your company will probably be a combination of the two – working with venture capitalists and banks. It is often wise to use some form of equity backed financing to establish part of the capital that would enable you to better utilize debt financing in the form of lower interest rates when you borrow. The key to finding capital for any startup is picking the right group to back your company. Do not get stuck thinking that

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there is only one way you can find cash, and, instead, research all your options. Institutional venture capital, angel investors, startup financing, and bank loans are just a few of the major sources of capital for entrepreneurs.

Institutional Venture Capital Venture capitalists are by far the most talked about method of financing any startup, but it is often not the best option. Venture capital often comes at the stake of ownership or equity. Startups will receive capital in return for a share in the company. Venture capital is most reasonable for companies that are too small to raise capital in public markets and too immature to receive a bank loan. In exchange for the high risk that venture capitalists assume by investing in smaller and less mature companies, they usually get significant control over company decisions, in addition to a large portion of the company's ownership, which means big shares in the company’s future profits. At the same time, many venture capitalists will come in to help manage and develop your company as they too have a stake in your success.

Top Venture Capitalist for Early Stage Startups

Angel Investors Angel investors are similar to venture capitalists except that your capital is often received from an individual as opposed to a venture capitalist firm. Like institutional venture capitalists, angel investors demand a stake in your equity and can ask for up to 50% in ownership and profits depending on the maturity of your business. Angel investors tend to be easy to find and can often be located at many universities that offer entrepreneurship programs.

Startup Financing Startup financing is often the most generic form – and many times the first – for raising capital that an entrepreneur will think of. Startup financing is a very broad range of financing that avoids professional firms and services, including partnering with friends and family, your own savings, and financing your assets. While combining money among friends may not raise the $500,000 that often gets tossed around with venture capitalists and angel investors, startup financing does eliminate many of the risks associated with these professional services such as paying back high interest and forfeiting ownership.

Bank Loans Bank loans from many commercial banks would require you to go into debt. What this entails is that, as an entrepreneur of your own company, you will be forced to pay back more than what you will borrow in the form of interest. While this may be the most conventional method, it does require you to return more than what you borrow. Similar to equity financing, the less mature your company, the higher the interest rate on your loan. While this method eliminates the risk of losing ownership, it does present the risks of having to borrow against your home, insurance policies, retirement funds, and other personal assets. Picking the right method for capital when you first start your business is vital toward any successful business. The more time and research you put in when your business is still developing will help build the foundation toward future capital and a successful business.

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Start Up Tips for Entrepreneurs By Christine Liu Staff Writer Starting a small business may be a daunting task, especially for those right out of college with little business experience. It requires a great amount of time, money, and effort. Often times for many people, the risks of investing in a startup business outweigh the return (or unfortunately, sometimes the lack of return). It is particularly frustrating for the younger generation of entrepreneurs who have a lot of ambition, energy, and vision for the future, but just don’t know where to start. So what should entrepreneurs do in order to maximize their success? Here are some start-up tips for entrepreneurs. Financing For younger entrepreneurs, obtaining funding can be a big hurdle to overcome. In order to get a bank loan, good credit history and sometimes an equity investment is required. But since many young entrepreneurs have a few tarnishes in their credit report from late college payments and many do not own a house for home equity credit, bank loans are not an option. Many entrepreneurs then opt for bank financing in the form of credit card debt, which is an unpredictable and risky path to take in the startup stage. Instead, getting a debit card for the first few months of business until earnings are more solid and payments can be made on time may be the best road to take. Also expand your circle of investors from only family and friends to all the different people you know. For example, the founder of Atlantic Records acquired a loan from his family dentist, and Walmart and Subway were funded from people outside of the inner family and friends circle. Another achievable source of financing is a private investor. Some private investors do like to invest smaller amounts to younger entrepreneurs who have solid ideas and business plans. Since it will be harder to land a large investment from any one private investor, get several investors who will invest smaller amounts. Focus on acquiring customers In order to keep generating revenue, focus on increasing your customer base. Be active in reaching out to customers, not with impersonal and distant brochures or flyers, but with personal, one-on-one communication, which is definitely much more memorable for the customers. Spend a good chunk of each week just focused on customer solicitation and get on the phone and pursue referrals! It may start off as a slow and arduous task, but you’ll find that an increase in customer solicitation equals customer activity growth. Management To many entrepreneurs, their business is their “baby”, and so they want to be involved in every aspect of running their business. However, there will come a point when you will have too much work to do. But don’t let this be a signal for you to hire costly staff for customer service work, which can be a big drain on funds. Instead, delegate the time -consuming work of bill paying, invoicing, market research, etc. to lower-paid employees and free yourself up to focus more on customers and cash flow. Have Accountability While many entrepreneurs want to start their own business because they want to be their own boss, it is important to have someone who can help keep you accountable, especially since it is so easy to get caught up in the daily whirlwind of starting up a business. Instead of having a mentor to tell you what to do, have a coach (a friend or a retired business colleague) who can meet with you at least once quarter to help keep you accountable.

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By Jaeman Kim Staff Writer Baby-boomers are getting older and the entire population is aging. Electronic information and communication have already established themselves as an integral part of our lives every day. More and more jobs are being outsourced to other countries. To some, this may seem insignificant, but these trends will present all sorts of new business opportunities in the coming years. When looking for new markets for goods and services to develop, it is important for entrepreneurs to understand what types of industries will allow for business growth. The following list describes several industries that will start to emerge or continue to grow at a faster rate and may be helpful when considering an entrepreneurial path to pursue. Internet Services, Data Processing, and other Information Services The Internet is becoming increasingly popular globally due to falling PC prices and increasing connection speeds. Today, the Internet is used to buy consumer products, upgrade software, store data, conduct research, and information gather information of countless types and forms. According to the Bureau of Labor Statistics (BLS), output by the Internet Service industry is projected to grow by 10.3% annually. Also, 850 million computers exist worldwide today. By 2010, that number is expected to be 1.4 billion. Considering the growth of this sector, a startup in Internet, data, and information services may become very profitable. Software Software use among homes, small businesses, and large corporations has been pretty much entrenched in the U.S. and in many other countries around the world. Due to such high reliance on software, it is expected that available software publishing jobs will increase by nearly 70% within the next decade. Software is unique in that the creation of one piece of software can lead to the creation of another. For example, the fruition of eBay led to the establishment of PayPal. With more and more software being developed, the need for complementary products will increase. Management, Science and Technical Consulting The economy and the nature of business is more complex now than ever before, and the demand for consultants will only increase. Business consultants are expected to do well based on the fact that the businesses continues to grow, both in numbers and complexity. They will need help drafting business plans, budgets, and strategies. There will also be a high demand for marketing consultants. They will play an important role in many businesses, including restaurants and retailers, who will need to differentiate not only their companies, but also the products they sell in an increasingly competitive market.

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Home Health Care Currently, the number of people in older age groups is growing faster than the total population due to the post-War baby boom. Also, advancements in medical technologies continues to extend the lives of both the ill and the elderly. This means that the number of people needing home health care will expand at an increasing rate in the coming years. Employment in specialized home health care is expected to increase by 54.5% by 2012.

Personal Financial Advisory Similar to healthcare, the number of people who will need help managing their money is going to increase. Currently, the financial advisory services demanded is projected to grow by 45.7% person. However, given the possibility that Social Security may eventually become privatized, this estimate may be significantly larger. Those who are in the tax industry is expected to be in a particularly advantageous position to begin a financial advisory business. The reason for this is that doing taxes for clients also create opportunities to offer financial advice. Another route that one can take is to work for a financial advisory firm, such as Ameriprise Financial. Although you will not have complete control over your own business, in this position, your can expand your practice and knowledge by obtaining more clients.

Childcare services When women began to enter the workforce a few decades ago, a new industry was created: childcare. Due to the increasing number of women working, this industry is only expected to get larger. Another contributing factor is that the number of hours that parents are working is continuing to increase. For these reasons, the number of people working in the childcare industry is expected to increase by 43% by 2012.

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Location, Location, Location: America’s Top Entrepreneurial Cities By Dmitry Shuster Staff Writer One very important factor in entrepreneurship is location. When starting out, one has to consider which markets are more favorable than others and which location provides the most favorable business climate. It is obvious that some areas are developing faster than others and thus provide incentives and advantages to entrepreneurs. Other cities have elements (such as product or service demand, policies and laws, start-up costs), which are also attractive to entrepreneurs and allow them to generate more business and larger growth during the first few years. Taking all of this into consideration, it is very important to carefully and thoroughly consider location as a critical component of entrepreneurship. The National Policy Research Council developed the Entrepreneurial Activity Index to measure places which are best for the development and growth of new companies and businesses. The index does this by calculating the percentage of businesses (with five or more employees) that were formed from four to 14 years ago. With respect to growth, the index measures which of those businesses demonstrated rapid growth during the past four years. Therefore, a specific location must have not only a large number of new businesses, but also an ability to support the growth and development of those entrepreneurial businesses.

Top 10 Best Cities for Entrepreneurs Nationwide 10. San Antonio, Texas • Population: 1,590,000 • Hot Industries: aerospace, biosciences, information technology, telecommunications, logistics, and manufacturing • Significant Startups: 4,399 9. Norfolk, Virginia • Population: 1,570,000 • Hot Industries: military and maritime • Significant Startups: 3,860 8. Nashville, Tennessee • Population: 1,230,000 • Hot Industries: automotive manufacturing, technology distribution, warehousing, health care, call centers • Significant Startups: 4,441 7. Memphis, Tennessee • Population: 1,140,000 • Hot Industries: logistics, biomedical research, information technology, tourism, manufacturing, food processing, hospitality • Significant Startups: 3,407 6. Washington, District of Columbia • Population: 7,610,000 • Hot Industries: government contract, technical, tourism • Significant Startups: 27,464

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5. Austin, Texas • Population: 1,250,000 • Hot Industries: technology, business services • Significant Startups: 5,469 4. Las Vegas, Nevada • Population: 1,560,000 • Hot Industries: hotel and resort, tourism, gaming, construction, retail • Significant Startups: 6,853 3. Raleigh-Durham, North Carolina • Population: 1,190,000 • Hot Industries: life sciences, information technology, software development • Significant Startups: 4,899 2. Charlotte, North Carolina • Population: 1,500,000 • Hot Industries: finance, food manufacturing, textile, machinery, computers and electronics, printing, chemicals, plastics and rubber • Significant Startups: 5,686 1. Phoenix, Arizona • Population: 3,250,000 • Hot Industries: service, construction, high tech, aerospace  Significant Startups: 12,388

Rankings by Region

West 1. Phoenix-Mesa, AZ 2. Las Vegas, NV 3. Denver-Boulder-Greeley, CO 4. San Diego, CA 5. Los Angeles-Riverside-Orange County, CA

In the past, the West was a very appealing place for entrepreneurs as the favorable climate and influx of technology significantly favored startup businesses. California’s real estate was booming and as the economy grew, so did the number of startups. However, in the past five years, the trend has been a movement from the West to the South for entrepreneurs. Many entrepreneurs actually moved to Arizona (Phoenix ranks #1 in entrepreneurial cities) from California, which averaged a 1.5% growth in startups compared to Arizona’s 5%. Entrepreneurs are attracted by Arizona’s large quantities of available land and relatively inexpensive home prices. Nevertheless, California is still focused on improving the business climate and the state is home to technology heavy regions such as San Francisco and San Jose, which have been growing since the dot-com boom.

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The Midwest has several hot spots for businesses, such as Chicago, Madison, and the Kansas City area. Interstate trade during times of a booming economy increases the lucrative nature of these areas. However, at present, Detroit’s struggling motor industry has had a ripple effect throughout the region. This has influenced many cities, such as Chicago, to provide a more favorable business climate in an attempt to attract more entrepreneurs. Hoping to create more business startups and more jobs, the cities develop new institutions to support growing businesses. Furthermore, Chicago, which has a central geographic region, has low business costs relative to other major cities. All in all, the region had been gaining momentum since the beginning of the decade, although growth has slowed down in recent years.

South 1. Charlotte-Gastonia-Rock Hill, NC 2. Raleigh-Durham-Chapel Hill, NC 3. Austin-San Marcos, TX 4. Memphis, TN 5. Nashville, TN

Midwest 1. Kansas City, MO 2. Chicago-Gary-Kenosha, IL 3. Columbus, OH 4. Cincinnati-Hamilton, OH 5. Indianapolis, IN

Low housing prices and cheap labor are two of the many attractions of the South. However, it is important to note that the region as a whole is only attracting entrepreneurs to certain “hot spots,” and is not as diversified as some would hope. Charlotte, for instance, has had an influx of young educated workers. Coupled with a business-friendly banking industry, the city is sure to attract many new entrepreneurs. The region as a whole has seen output grow at a rate slower than the national rate of 12.2%. Some exceptions are Virginia and Tennessee, which experienced output growth of 24.9% and 35.3% faster than the national average, respectively.

New Jersey is the highest-ranked northeast state, although it dropped in ranking from second to fourth place. The region’s strength is access to the large number of consumers in the New York, Philadelphia, and Washington, D.C. areas. Major airports, seaports, and high levels of economic activity are also certainly contributing factors. One downside of the area is that manufacturing plants are moving toward the southern region or even overseas. Furthermore, New England’s employment rate was still 2% below its peak in 2006, a number which has certainly decreased due to the economic crisis as of late. The region also has much less affordable and available land, especially in comparison to the other regions. Despite these downsides, the area is host to a number of startups that were attracted by densely populated areas and large startup potential.

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Northeast 1. Washington, DC-Baltimore, MD 2. Boston-Worcester-Lawrence, MA 3. New York City-New Jersey-Long Island, NY 4. Providence-Fall River, Warwick, RI 5. Rochester, NY

Top 10 Entrepreneurial States

1. 2. 3. 4. 5. 6. 7. 8. 9.

Arizona Virginia Alabama New Jersey South Carolina Delaware North Carolina Tennessee Maryland 10. Nevada

Top 10 Mid-Size Entrepreneurial Cities

1. Mobile, Alabama 2. Charleston, South Carolina 3. Birmingham, Alabama 4. El Paso, Texas 5. Tucson, Arizona 6. Madison, Wisconsin 7. Mission, Texas 8. Columbia, South Carolina 9. Knoxville, Tennessee 10. Omaha, Nebraska

Top 10 Small Entrepreneurial Cities

1. Auburn, Alabama 2. Greenbay, Wisconsin 3. Yuma, Arizona 4. Laredo, Texas 5. Hunstville, Alabama 6. Casper, Wyoming 7. Las Cruces, New Mexico 8. Missoula, Montana 9. Dothan, Alabama 10. Lincoln, Nebraska

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Qualities of an Entrepreneur

By Sunny Wong Staff Writer Starting a business may seem like a daunting endeavor considering the large amounts of risk and work involved. However, for some, the potential reward is high. The prospect of being able to earn large sums of money along with the independence of being one’s own boss never ceases to attract people down the entrepreneur path. But there is also a great probability of failure, with 90% of startups failing within just five years. Before jumping into entrepreneurship, one must understand that there are certain personal qualities that are absolutely necessary for an entrepreneur to become successful. Some of these qualities are inherent and some are developed over the course one’s life. Knowing these qualities, identifying your weaknesses and working on strengthening them will help you become a more successful entrepreneur. Here are some qualities and attributes that successful entrepreneurs have in common.

Knowledge of Business and Industry Without adequate knowledge in this area, the other qualities become rather inconsequential. It is often easier to create a business with prior knowledge of the field you would like to pursue. For instance, approximately half of the start-ups based from home are started by people who decide to utilize their prior knowledge of a specialized niche or industry. Philip Green, a billionaire specializing in rag trade, claims that his success can be attributed to his deep knowledge about garments. By merely rubbing a fabric between his fingers, he can automatically determine its price. Aside from specialized knowledge, you must be proficient in various areas of your business, from marketing and administration to accounting and production. Accounting, for instance, is especially important because it details the numerous transactions the business makes. Although you do not necessarily need to be an absolute expert in these fields, it would give you an upper hand if you do.

Leadership and Management Skills A successful entrepreneur must be a strong leader in order to provide guidance and inspiration to his or her team. Using a variety of motivational, planning, and coaching strategies, they are able to effectively manage their team to produce favorable results. A successful entrepreneur is highly energetic, motivational, and charismatic, someone who is able to rally his team even during downturns. Some people are fortunate enough to be born with this quality, but for many, they must work hard to acquire it. If you belong to the latter, the best way to build up these skills right now at UCLA is to participate in various organizations around campus and try to become more involved.

Hard-Work and Perseverance Entrepreneurs are almost always hard workers. A common misconception is that getting started is the most difficult part of the process when, in reality, implementing the business plan is the most arduous. Even after this,

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entrepreneurs still face the difficult task of managing the entire scale of the business, from the grunt work to the broader administrative tasks. This takes enormous amounts of time and energy, but the sense of accomplishment after achieving one’s own goals matches no other. There will also be numerous downturns and setbacks during the course of the operation. Successful entrepreneurs are tenacious and persevere during these rough times. They do not allow failure to hold them back, thus allowing them to stay the course and achieve success.

Nonconformity Successful entrepreneurs are self-reliant, confident, and “thick-skinned.” Once they envision their goal, they will go all out to achieve it, brushing aside outside criticism. They also like to take full responsibility for their own actions and are not afraid to go the extra mile to complete the task. Perhaps the most profound example of this is the typical entrepreneur who drops out of college. Bill Gates, among many others, for instance, dropped out of Harvard to build his computer software empire.

Passion This is almost a required quality that any entrepreneur should have. Because successful entrepreneurs love what they do, you see the results from their work. It doesn’t necessarily mean you have to create your business revolving around something you love but you must have a strong desire to succeed and grow the business. For instance, Howard Schultz, the CEO of Starbucks, is more passionate about treating his employees well than his coffee. This is because he grew up seeing his father being treated poorly at work..

Organization and Time Management Because most entrepreneurs work alone or in small teams, being organized is essential. Successful entrepreneurs reach their full potential by maximizing time and resources. One of the most effective and simple strategies entrepreneurs use to be organized is by making lists. By doing so, they can prioritize their tasks, helping them maximize their time and energy. Another strategy successful entrepreneurs use to save time is to simply make use of their little bits of time here and there. For instance, while waiting in line for coffee, some entrepreneurs may pull out their mobile phones and reply to some pertinent emails.

Creativity A successful entrepreneur comes up with creative problemsolving techniques to counter various challenges that may arise during the startup phase. Such creativity is needed in all areas of the business, from creating more cost-efficient procedures to spotting new opportunities in the market. Sometimes, it takes only one great idea to drastically increase company revenues. For instance, Apple’s iPod not only greatly increased company profits and visibility, but also created a lasting cultural impact around the world.

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Pitfalls to Avoid for Potential Entrepreneurs By Joanne Hou Senior Staff Writer Being an entrepreneur can be an extremely exciting venture for many able individuals. It allows you to be your own boss and run a business the way you would like to, not the way someone else has dictated. You get to develop your own products and services and take full ownership of your ingenuity and creativity. However, like anything with a tremendous upside, being an entrepreneur also has its risks and pitfalls that has led to the failure of an overwhelming number of entrepreneurial projects. While each of these pitfalls do not guarantee failure and may even lead to successful, thinking about these issues ahead of time may save Summary of Things to Think About you from going down dead ends when you start your business.

Before Starting:

Product Is Everything While the basis of a new business is usually a great product or idea, having that alone is not a sure sign of success. That is the core of why you are in business, but that product needs to be surrounded with a well-run company of talented people and/ or system to truly take off. Having innovation in your mind or in a model gives you a reason to start business, but not all good ideas translate to something marketable and profitable. It may be great to create a home-use robot to help with everyday chores, but it does not mean that you will create a robot empire on this idea alone. Building such robots in large quantities takes great capital, human resource, production system, and a customer base large enough and wealthy enough to keep demand up for a long period of time. You may not get enough people who are able to afford this product, and thus your business fails. Without lots of capital and a great team, this home-use robot, however great an idea, may never end up as the basis of a successful business.

Why am I in business? What’s my main goal? Start from scratch or buy a undervalued company? How to delegate my time as entrepreneur on a daily basis? How to get the best people so I can build the best and most sustainable company?

Doing It for Making Money Alone Starting a business does not generally lead to quick money or large profits. There is a period of perhaps a few years when the business may be slow or barely survive, and may even have negative net income. For those who are thinking of becoming entrepreneurs simply as a way to make money, entrepreneurship is probably not the way to go. Most new businesses face enormous uncertainty and a majority end up failing. Thus, it is important to be in business to follow a passion or an idea instead of money. Pursuing some innovation and using a start up company to realize that advancement is a much better motivation than simply finding a way to take in profits. In fact, your cash flow can easily run in the other direction and thus defeat the whole purpose of being in business. So, you would be happier and more fulfilled if you pursued entrepreneurship to realize a passion or idea, rather than make creating profits as your main reason for being in business.

Spending Too Much Time Running the Business When you start your own business, there is a tremendous sense of ownership in the startup you have just created. You have a tendency of wanting to do the daily operations to make sure everything goes according to plan. This day to day operation management can easily take your entire working day and even weekends, but this is not the

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work that you, the entrepreneur, should be doing. Instead, you should be working on developing your business such as planning out growth strategies, improving the efficiency of your current operating process, or recruiting highly talented individuals to join your cause. It is important to be able to delegate the day to day running of the company to your employees while you spend more of your time looking at the big picture, the long term picture. What you are good at, as evidenced by your ability to create your own business, is having great ideas that actually work. Thus, you are better served by focusing on your area of strength, which is innovating, strategizing, and creating new value. Leave the day to day work to others.

Starting the Company from Scratch Many entrepreneurs may have in their minds that being an entrepreneur means starting your own business. While that is probably the most common idea associated with the word entrepreneur, that is not actually the case. Entrepreneurship also involves buying an undervalued company to either guide it to greater heights as it currently stands or by modifying the company to get it to where you envision it to be. Now, buying an existing company comes with its definite benefits. Companies that exist already have some capital, human resources, funding, and systems of operations. Having these crucial elements already in place to some degree, even if you plan to modify it, can still save you money, energy, and perhaps most importantly, time. Starting from scratch takes a lot of resources because everything needs to be built from scratch. Buying a company can eliminate some of the work that a company starting from scratch cannot avoid.

Cutting Costs Where You Should Not: Salaries Because cash is often scarce when you start a business, there may be a tendency to underpay your staff until your business grows bigger. Bad idea. Again, ideas and products alone do not make a business, even if they are great ones. However, having a great group of employees will make the chances of your business succeeding much greater than if you just have a great idea. People ultimately bring value to your company, so having highly skilled managers, financial officers, marketing officers, etc. increase the chances that your company is going to make good decisions that will lead to growth down the line. This means that in order for good people to work for you, they most likely would demand decent compensation for their toils. Do not underpay them or you will not get the best people possible for your company. There are some costs that just should not be saved: reasonable salaries for employees.

Some More Pitfalls: Do a business you do not know well Wait until everything is ready before you start selling your product Focus solely on the price of the product Not doing enough testing and research of your product, strategy, and market

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Profiles of Successful and Unsuccessful Entrepreneurs By Shannon Kung Senior Staff Writer Running a new start-up takes nerves of steel, especially with the circulating rumor that nine out of 10 startups fail in their first year. However, both companies profiled here, Webvan and Google, Inc., made it past their first year. They started around the same time near the end of the dot com era; however, their two paths diverged dramatically as one collapsed within a few years and the other is now one of the most powerful institutions in the world.

Unsuccessful Entrepreneur: Webvan (1999-2001) Webvan was an online grocery service that was labeled by CNET as the greatest dot com disaster in history. Customers would place an online order and the company would deliver their groceries in their trademark trucks. Initially Webvan started out strong and it received over $400 million in funding from investors that included giants such as Goldman Sachs and CBS. However, its initial success, culminating to a value of $1.2 billion at its peak, also led to its subsequent collapse. Webvan’s problem never had anything to do with the quality of its service, as it was a leader in the online grocery industry, even ranking number one in a survey done by Gomez Advisors in 2000 of internet grocery stores. Instead, it was the lack of customers needed to support its business. Heady with its promising start, the company expanded quickly to eight other major U.S. cities and put in orders for astronomical purchases, including one billion going to new warehouses. Webvan even had plans to increase its influence to 26 cities. It was too optimistic about the public’s willingness to forgo conventional grocery stores for its new, online services. Webvan was a classic case of not having enough monetary revenue to support its spending habits; it tried to become too big, too fast. It was never able to attract enough customers to justify such an aggressive expansionary plan, and Webvan closed operations in 2001, filing for Chapter 11 bankruptcy, and subsequently put around 2,000 people out of work.

Successful Entrepreneur: Google (1998- Present) Google, on the other hand, has continued to enjoy great success, even becoming a cultural icon. People no longer search for things on the web, they “Google” it. Founded by two Stanford students, now billionaires Larry Page and Sergey Brin, the Google search engine was able to show a better ranking of sites due to advanced algorithms and in a quick and efficient manner. Aside from its innovative technology that revolutionized the industry at the time, Google also benefited from having an original business model. Although it originally was funded by angel investors and venture capitalist firms, Google was already able to make a profit within a few years of its founding. It has continued to grow by mastering the art of targeted ads with Google AdSense and Google AdWords, which have become Google’s main revenue generators. The company also puts a lot of emphasis on the users, making sure that the services it provides make the user experience simple and effective. It has continued to be innovative and expand not only its influence globally, but also to different ventures such as Gmail, an online e-mail system, and Google Earth, which provides virtual maps of the earth with surprising clarity. Its corporate culture is famously relaxed and stimulating, and Google’s slogan is “Don’t be evil.” The Google headquarters, a 26-acre behemoth located in Mountain View, California, boasts amenities such as a gym, two swimming pools, and eleven cafeterias for its employees. Google has developed a loyal following and continues to grow, as seen by its founders, who are now tied as the fifth richest men in America.

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Summer Entrepreneurship Institute By Sonia Bhasin Staff Writer For undergraduate students looking to get exposure to the field of entrepreneurship, look no further. UCLA’s Anderson School of Management offers a Summer Entrepreneurship Institute, which is an intensive, month long program open to undergraduate students from any college or university and to anybody holding an undergraduate degree. No business background is required for the program.

The institute’s main focus is on providing students with a multi-disciplinary approach regarding the development and management of new business ventures. Topics covered in the course include venture: initiation; law, management, and ethics; real estate investment and finance; accounting principles; marketing design and strategy; business communications; and business negotiations. This program supplements a vigorous classroom environment with outside learning experiences. These include field trips and guest speakers. This past summer, the institute included field trips to places such as Staples Center and speakers such as Michael Morhaime, president and CEO of Blizzard Entertainment, the company that produces the highly popular game World of Warcraft. The guest speaker program helps students interact with and hear first-hand real world accounts from entrepreneurs. In addition, students participate in many interactive classroom projects and group work throughout the program, creating a stimulating and hands-on learning environment.

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Instructors for the program include award winning faculty from the Anderson School of Management, each of whom serves as an expert in their respective fields. The faculty includes Professors George Abe, Gonzalo Freixes, Eric Sussman, and David Ravetch, to name a few. In fact, the Harold Price Center for Entrepreneurial Studies at the Anderson school is ranked number one in the world in the field of entrepreneurship. The institute also gives undergraduate students a taste of the MBA program at UCLA, which is much more social and interactive than most undergraduate classes would be. Participation, discussions, and group projects and presentations are very important. Students from all over the world participate in this program, and it serves as a great networking opportunity. Participants in the program receive credit for the course in the form of eight units and receive grades for two upper division management classes. These include MGMT 180 and MGMT 128. These courses count toward the Business Economics major at UCLA. The institute meets Monday through Friday from 9AM to 4PM for 4 weeks. The 2009 institute runs from July 7th to August 1st. Students can apply for the Entrepreneurship Institute online. Participants are selected on a first-come, first-serve basis; once the allotted amount of slots is full, the program is closed and additional applicants will be placed on the waiting list. The cost of the program ranges from $3995 for UCLA undergraduates to $4495 for UCLA graduate students and visiting students, but financial aid is available for those who qualify. Don’t miss out on this incredible opportunity! For more information on the 2009 Summer Entrepreneurship Institute and to apply, please visit: http://www.summer.ucla.edu/institutes/Entrepreneurship/overview.htm

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Management Development for Entrepreneurs By Gloria Ho Senior Staff Writer If you are interested in learning the skills and strategic planning needed to become a successful entrepreneur or executive after three or more years of experience out in the field, UCLA’s Anderson School of Management offers an executive training program aimed at developing and improving just those skills. The Management Development for Entrepreneurs (MDE) is a ten-day program over the course of three months offered every fall quarter on the UCLA campus. Students meet once every month from Friday to Sunday with lectures extending throughout the day. With a cost of $4,225, the program targets professionals with a minimum of three to five years of experience in organizations with roughly $1,000,000 in annual revenues.

Applicants to the program are people with an entrepreneurial vision seeking to develop the skills necessary to turn their vision into reality. The MDE strives to impart these skills to its students by offering different programs for students to choose from. These programs are aimed at developing entrepreneurs’ management skills and strengthening their ability to form and direct effective and profitable businesses. The program’s curriculum, taught by award-winning faculty and researchers from the academic as well as the business community, is conducted in the form of lectures, case studies, workshops, and business improvement consultations. Topics students can choose include: strategy, growth & valuation, opportunity recognition, supply chain management, and the fundamentals of marketing and customer service, just to name a few. A special focus of the MDE program is the Business Improvement Project (BIP). As a requisite for graduation, each participant is required to complete and submit a strategic initiative plan formulated to improve and add value to the student’s enterprise under the direction of a MBA fellow. A MBA fellow is a MBA or Fully-Employed MBA student (FEMBA) from Anderson who leads a group of four to five program participants in designing their plan from the skills they have learned and developed throughout the three months. The plan, constructed in a BIP workbook during BIP workshops, is submitted in the weeks after the end of the program. Students then graduate in January of the following year. Classes range from 20-30 students. So if the idea of starting your own business ever comes up, keep in mind this opportunity at Anderson. For more information, email [email protected] or contact (310) 206-4169.

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