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(Adrian Wyld)
(Adrian Wyld)

Small Business Briefing

Increase in startups leads to cash crunch Add to ...

The latest news and information for entrepreneurs from across the web universe, brought to you by the Report on Small Business team. Follow us on Twitter @GlobeSmallBiz

More businesses, not enough money

Start-ups often fail to make it past their initial rounds of financing.

But the situation is particularly bad this year in the United States, entrepreneurs and their potential backers have told Reuters, because there are so many more young companies. And next year it's expected to get worse for hundreds of fledgling businesses that most people have never heard of.

"This is more about the long tail," meaning companies that aren't dominating, said venture capitalist Bill Gurley, whose investment picks include real-estate service Zillow Inc and restaurant-reservation service OpenTable Inc.

About 859 U.S. companies have collectively raised an initial round of funding of $3.9 billion (U.S.), according to data from the National Venture Capital Association and ThomsonReuters. That compares with 777 companies raising $3.5 billion this time last year, and 523 companies and $2.3 billion in the first nine months of 2009.

The main reason for the increase in the number of firms, Sarah McBride writes, is the comparatively low cost of bringing new technology products to market in an age of cheap software and data storage, and social marketing behemoths such as Facebook. A growing legion of wealthy angel investors are also partly responsible.

Despite those factors, it can still be very expense to grow a small business into maturity, and the post-concept phase is where start-ups are running into trouble. There's simply not enough venture capital to go around.

While that's bad news for businesses, there's a bright side for venture-capital firms: More companies to choose from theoretically means better chances to score good deals.

Young entrepreneurs are the answer

The G20 Research Group has released The G20 Cannes Summit 2011: A New Way Forward, which includes an article from Vivian Prokop, founder of the G20 Young Entrepreneur Summit, urging governments to make youth entrepreneurship a priority for stalled economies. "As the G20 leaders grapple with the continuing aftershocks of the 2008 financial crisis, entrepreneurship has proven to be vital for building a stronger economy globally, rather than simply a topic for theoretical reflection," she writes. "Issues of youth unemployment and entrepreneurship are destined to grow urgent on the global economic agenda. Even in good times, young people face relatively high unemployment and are the first and worst to be hit during any downturn. Those without jobs or prospects represent more than a loss of economic potential. They remain trapped in poor value-adding jobs, become easy targets for recruitment into criminal activity and the underground economy, and see no hope or reason to believe in society. Job creation strategies aimed at younger generations should be central to any economic recovery strategy." To read the full article, click here, and here's the link to the full report.

Silicon Valley has a commitment issue

Facebook founder and CEO Mark Zuckerberg was on stage at Stanford University this weekend for a one-on-one discussion with Jessica Livingston of Y Combinator, a program for budding digital entrepreneurs. "'Zuck' revealed a number of fascinating things about entrepreneurship, founding Facebook, and product development," according to a roundup on TechCrunch, "but one of the more interesting (and surprising points) came at the end of the interview when Livingston asked him what he would do different if he could go back in time. Zuck replied: 'If I were starting now I would do things very differently. I didn’t know anything. In Silicon Valley, you get this feeling that you have to be out here. But it’s not the only place to be. If I were starting now, I would have stayed in Boston. [Silicon Valley]is a little short-term focused and that bothers me.'" He went on to explain that there's a lack of commitment ingrained in the culture of Silicon Valley, and a lack of focus on the long term.

EVENTS AND KEY DATES

Vote for inspiring Quebec entrepreneurs

The third edition of the Get-Entrepreneurial Rally begins Monday, with a chance to vote for the Quebec entrepreneur you consider most inspiring. Organized by the Réseau des carrefours jeunesse-emploi du Quebec (RCJEQ), the online contest helps promote new businesses run by owners under 35, from across the country. Up to Nov.16 at 5 p.m., click here to see latest crop, sorted by region. After selecting the area of your choice, consult the profiles, then vote. The winning entrepreneur will earn a cash prize of $1,000. Prizes will also be drawn among participants. Erica Diamond, an award-winning entrepreneur, author and speaker, will act as spokesperson for the event, along with tech journalist François Charron for the francophone side.

Become a more effective leader

At the core of an effective leader is the insight of knowing who you are — your passions, values, purpose, and vision. If you see yourself as an emerging, high-potential or mid-level leader from any private, public, or not-for-profit organization, and you want to understand and enhance your personal leadership style, check out the Building Personal Leadership program at Alberta's Banff Centre. Participants will gain a deeper understanding of "the natural strengths that contribute to your personal leadership style, and examine how you lead others." There are several sessions, with the first one Nov. 20 to Nov. 26.

EDITOR'S PICKS FROM REPORT ON SMALL BUSINESS

Frightfully good stuff

To celebrate Halloween, we put together a photo gallery featuring scenes from the haunted houses run by Toronto-based Screemers Inc. Scroll through this gallery of frightful pictures to learn more about the company's business model. If you dare ...

FROM THE ROSB ARCHIVES

Halloween pays off at the office

Toward the end of 2010, Will Andrew wrote about his company's culture as his team was working its way through its peak sales period. "I am very encouraged by our progress," he said, "most notably our achievements within the six strategic initiatives from the management offsite in June, which ignited our focus on corporate culture." One of the areas he pointed out was improvement in the HR department, including programs to improve staff wellness, the completion of an annual employee survey, and team events such as a Halloween costume and pumpkin-carving contest, along with a Biggest Loser competition.

Got a tip on news, events or other timely information related to the small-business community? E-mail us at yourbusiness@globeandmail.com

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