I have written from time to time about the differing taxes plans of Senator McCain and Senator Obama which often leads to comments from the Obama faithful deriding the credibility of The Wall Street Journal and other such things. Well another interesting little table appeared in the Journal yesterday.
Interesting, because using information from an analysis by Deloitte it shows that unless you make over $400,000 your taxes are not going up under either candidates proposals. The only folks that full a lot of pain in the Obama plan are those making over a $1,000,000 annually. If you like you can download a pdf of the full Deloitte report here.
As an entrepreneurial kid of guy of more interest to me is capital gains tax treatment. A year ago I made the statement that I would not vote for anyone that wanted to raise capital gains tax. Perhaps I am not alone as Mr. Obama has changed is position of wanting to raise capital gains tax from 15% to 28%. He currently states that he would raise capital gains and dividend rates to 20% for families earning more than $250,000 ($200,000 for singles), and eliminate all capital gains taxes on start-ups and small businesses to encourage innovation. As an undecided centrist I can live with that.
More broadly, given the current state of economic turmoil I have to halfway agree with Marc Cuban. Talk of tax cuts for anyone is no longer economically viable. But increasing taxes on the uber rich is another story. Taxing the heck out of that dude from Goldman that wants a USG bailout and personally makes about $70,000,000 a year. Now thats interesting. Populist or not, taxing ordinary income above, say $10,000,000 annually, at an 80% tax rate might be a way to reel in excessive corporate executive compensation and provide the fortunate more reason to give back to society voluntarily.
Last week I posted an article highlighting consumer technology startups in Atlanta with a promise to explain why not many of them make it big. Here is that explanation.
It stems from the work of Michael Porter. Porter is the preeminent scholar of our time on the subject of business strategy and competitiveness. If you have any formal business training you know of his work. In 1990 Porter wrote The Competitive Advantage of Nations where he introduced the theoretical framework (not only software development uses frameworks) of business clusters.
A cluster is simply the geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters come in all ages, shapes, and sizes. Film production in Hollywood, technology in Silicon Valley, and thoroughbred horses in Kentucky, all are examples of clusters. Heck even the NYC diamond district which mostly comprises one block on one street is a cluster. Clusters are everywhere and one can easily surmise given the title of the book that clusters create competitive advantage. And they do.
Well if they do I want some where I live and this of course leads to the question of how clusters are formed. In a report entitled "Clusters of Innovation Initiative: Regional Foundations of U.S. Competitiveness" funded by the Council on Competitiveness and authored by Porter the following was explained as ways to enhance the development of clusters:
• Clusters can be strengthened by increasing awareness of the cluster among local firms and organizations: Not only must firms be aware of the presence of a local cluster, they must also get together and coordinate activities to improve the cluster’s business environment. Acceptance of new companies is important if the cluster is to grow quickly and reach a critical mass.
• New firm and cluster opportunities arise at the intersection of existing clusters: Economic development strategies can leverage these opportunities to diversify a regional economy.
• Anchor companies play a disproportionate role in seeding cluster development: Anchor companies support cluster development by acting as magnets for other major companies; organizing other companies in the cluster for collective action; supporting projects that improve the local quality of life; and producing numerous spin-out companies, which strengthen key elements of the cluster (emphasis mine).
• Institutions for collaboration can significantly increase the success rate of start-up companies: Cluster development depends in large part on generating new companies from within a region. Successful regions almost always have a hospitable environment for start-ups.
Another important finding of this study was the outcome of The Cluster Mapping Project. The Cluster Mapping Project identified 41 types of clusters in the U.S. economy. While any given region will have some employment in the vast majority of these clusters, regional economies are typically very strong in only a handful. So what clusters are present in the broad Atlanta regional economy?
It just so happens that Porter also wrote yet another report entitled "Clusters of Innovation Initiative: Atlanta-Columbus" which answers that question. Running 168 pages it actually answers that question, though aging a bit, in great detail. The report identifies financial services, transportation/logistics, and information technology, as strong Atlanta regional clusters. Yes technology.
The Atlanta technology cluster was the ninth largest in the United States (population appropriate if you will) and the second fastest growing in the country. The report further identifies what it calls communications services (think telco and Internet), and software development as strong within the tech cluster. And believe it or not it even mentions Web development as a well established cluster.
The report lays out the development of Atlanta's technology cluster as such:
Atlanta’s information technology cluster draws its roots from Atlanta’s historical strengths in telecommunications and more recent strength in media companies. In the 1960s and 1970s, telecom companies like AT&T , GTE, and WorldCom expanded operations as the region grew and telecom expanded throughout the country. Turner Broadcasting, CNN, and Cox Communications were established in the 1980s to offer both cable service and new television content. These companies found Atlanta to be fertile ground because of its skilled technical workforce that remained in the area after World War II and the strong flow of new talent provided by Georgia Tech’s industrial and electrical engineering programs.
In the late 1970s and early 1980s two software companies, Management Science America and Peachtree Software, enjoyed strong growth, and when sold to larger companies, made their leadership teams wealthy. The success of these firms and their founders did not result in an immediate boom in software or info tech firms, as was the case in other smaller regions. Instead, the impact of these firms’ success was somewhat “lost” in the economy of a major metro area where big companies, major banks, and real estate developers were the primary job providers and held public “mindshare.”
It was not until 1997-98, with the success of MindSpring, one of the first large national Internet service providers, that a widely recognized anchor firm developed. MindSpring’s success and a growing national market encouraged other Internet-based entrepreneurs to expand businesses based in Atlanta including iXL, a web developer, and Internet Security Services, an Internet security firm. The business community, universities, media, and existing venture capital firms lined up to support the development of Internet firms in the wake of these successes and the growing recognition that the “new” economy was real.
And goes on to conclude:
Atlanta’s information technology cluster has thrived over the last five years. Building from regional strength in software, communications, and financial services, entrepreneurs have established Atlanta as a broad-based IT region. Through state-led investments in research, education and infrastructure, an innovative technology business incubator, and the efforts {of} multiple private sector entrepreneurs, Atlanta has developed a broad-based cluster. Seeing significant growth only over the past three years, Atlanta got a “late” start in the e-commerce and Internet area of this cluster, but is now home to a number of nationally recognized firms like WebMD, ISS, and MindSpring. The entrepreneurs who started these firms have been critical in the development of the cluster, both through the success of their firms and through the personal and corporate investments they have made in other regional firms.
Now there are some obvious factual errors in the report but really only one that bears correcting for my purpose. Unlike the folks at MSA and ISS, the entrepreneurs that started iXL, MindSpring, and WebMD have not made broad investments that produced numerous spin-outs within the Internet cluster (for a variety of reasons that are either obvious or best discussed over a beer). iXL, MindSpring, and WebMD did not act as anchors. And that is the root cause for the lack of a strong consumer Internet cluster producing large and successful companies in Atlanta.
But there is a new hope, which I will discuss next week.
Interesting article by Michael Boskin the op ed section of The Wall Street Journal yesterday (paywall). Most interesting part is the table showing the changes in marginal tax rates for those earning above $250k (which, as a current public servant for the state of Georgia I do not, and seriously question defining a duel income household with kids and such earnings as "rich").
Think the prospect of Mr. Obama winning the general election and
increasing the tax on dividends from 15% to 39.6% combined with his capital gains plan has anything to do
with the current behavior of the stock market?
Money quote. "Despite his obvious general intelligence, and uplifting and motivational eloquence, Sen. Obama reveals his startling economic illiteracy in his policy proposals and economic pronoucements....if the proposals espoused by candidate Obama ever became law, the American economy would suffer a serious setback."
One can only hope for a move to economic center between now and November.
Here.
The Commerce Department released Q1 gross domestic product numbers late last week. Up 1% for the quarter. Healthy.
Despite all that is being written about what is wrong with the United States economy, (that is obviously having an impact on consumer confidence) it is growing and is forecast to do so for the rest of the year.
"To dream big or dream small takes the same amount of energy. So why not stretch a little bit?"
Carlos Brito
The Wall Street Journal has an interesting piece today about how Cisco, one of the leading acquirers of small technology companies, is changing their takeover game plan.
Cisco's acquisition playbook is the stuff of Harvard Business school case studies. The bada bing, bada bang plan includes new business cards the day the deal is announced, new Cisco bosses, new Cisco comp plans, and sale force integration in short order.
However, Cisco's strategy started to change when they bought Linksys. It made little sense to kill the consumer brand and the sales force called mostly on retailers. Cisco rightly left the Linksys brand alone (it has more brand equity with consumers then Cisco). The Scientific Atlanta acquisition also led to a change as most of SA's more than six thousand employees remain in Georgia (and a target rich environment for startup technical talent) and not integrated within Cisco. It then left WebEx alone when it bought that company. Featured in the article is how the acquisition of IronPort unfolded.
The leave the smart people that know these businesses alone, and let the brand stand strategy seems to be working. All of the above mentioned companies in my mind continue to grow and innovate within Cisco. Unlike the borg type strategy that Google is using on companies such as Urchin that kill innovation (compare the Urchin site to the IronPort site), Cisco's new model seems to be working pretty darn well. Cisco is adapting with the times and seems to be a strong suitor for a wide range of startup companies. Startup entrepreneurs would be wise to follow their activities.
If you have an interest in
reading the entire Journal article you can find it here.
As a personal aside, I got to know
Scott Weiss the CEO of IronPort a bit when he was running business development at HotMail. Our
paths crossed again when IronPort competed with CipherTrust and its IronMail product. Nice to see him get some ink.
It's recession. And this article by Henry Blodget sent me over the top. It begins:
"Morgan Stanley economist (and perennial bear) Stephen Roach says the current US recession..."
Like anyone that has ever successfully prevented themselves from completely glassing over during macroeconomics I can tell you that a recession is defined as a decline in the country's gross domestic product (GDP) for two or more successive quarters of a year. BTW, GDP is simply the value of all the goods and services produced by a country.
In Q3 of 2007 GDP grew at a very robust 4.9%.
I am no economist but I can tell you that is a huge number. While the
Q4 figures will not be released until January 30, the estimates that I
have seen are in the 1.5% range. While we may be heading toward one, currently we are not in a
recession. It's not technically possible.
When doing a little research for this article I came across a story by Brian Wesbury in today's Journal. According to Brian, "models based on recent monetary and tax policy suggest real GDP will
grow at a 3% to 3.5% rate in 2008, while the probability of recession
this year is 10%."
Is there a housing crisis? Yes, but deep rate cuts should fix that. Are we in a bear market? Darn close. Are we in a recession? No.
And until we are people need to be a little more responsible when they are tossing that word around.
A few weeks ago I wrote an article pointing to Guy's post on Redfin's financial performance vs. the financial model that they had built. Guy has a follow up article with the actual Excel file that Glenn Kelman has been using to run Redfin.
Not sure that using someone else's model as a template to build your own is a good idea, but I do think the file demonstrates the level of detail that you need to create a good working financial model. I just finished working on a detailed revenue model for a consulting client that is over 30 sheets with some of the sheets running as deep as 400 rows.
Creating a solid financial model and using it to run your business is one of the fundamental actions required to build to a successful business. Not because you have a great model. Because it helps you to understand the key drivers of the business. Understanding the key drivers focuses management attention on the things that matter.
Its pretty simple and straightforward, but not enough entrepreneurs put enough thought into it.
The expected announcement of layoffs happened at EarthLink yesterday. My estimate on the cuts turned out to be a little conservative. I have relationships with the lots of folks over there and they constitute a good share of readers of FoG. With that in mind, here are ten tips about life after EarthLink.
1. There is a vibrant technology community in Atlanta.
EarthLinkers don't get out much into the larger technology community. When you wake up and start doing so you will find a vibrant technology community. There are actually two technology subcultures in Atlanta. There is the more mature community (from both a company and people perspective) that you can learn about by subscribing to the TechLINKS community announcement email list. There is also a newer hip and now subculture that is you can best immerse yourself in by subscribing to some of the blogs in the "Atlanta Tech" blog roll on FoG.
On October 2 ATDC is going to be hosting a presentation on the Atlanta entrepreneur ecosystem that you won't want to miss if you are interested in the startup scene. And to get it out there, part of that conversation is that you do not need to move to Cali to be part of the web services action.
2. Odds are you are not going to bring home as much cash.
EarthLink pays very well. Go ahead, admit it. That is part of the reason you were there. Chances are your take home pay is not going to be as much. But that's OK, there are other ways to make money.
3. Seek more equity upside.
Keeping it real, Rolla huffed into town because since EarthLink, Inc. was created the stock has at best moved sideways. The week I walked out the door over five years ago the stock was at $7.02. It opened yesterday at $6.69. Unless you got a big stock grant in late 2002 or early 2003, you currently have no equity upside. That is not the case for most mid-size tech companies and certainly not the case for the returns that others have seen at companies such as Cbeyond. Talk with people that have gone before you. There is money to be made via equity upside.
4. You need to decide what you want to be.
At its core, a job search is a sales and marketing exercise. To be successful you need to focus and target. If you tell me you want a job I can't help you. If you tell me exactly what you want to do, why you want to do it, and why are are good at it I can put you in touch with people that know somebody that might be hiring. Your most important tool is not a resume, it is a networking profile. If no one along the way shows you one of these so you can make your own email me and I will send you mine to use as a template.
5. Its going to take a while.
The general rule is 1 month for every $10k of salary. Plan for that and you will sleep well and not appear desperate.
6. Transitioning is a full-time job.
Work it like one. Have a weekly plan. Monday mornings review online job postings, respond, and setup your networking meetings for the week. Tuesday through Friday work the street. Set goals and track your progress.
7. Networking works.
Over 80% of people find their next gig via networking. This is what you need to spend most of your time doing. You need to network with a purpose. The purpose of being connected to people that are in companies that you are interested in so that you can learn about them and any opportunities that might be there. My dear friend Michelle Tullier (buy her book in the sidebar) is going to cringe, but networking is sales and sales is a numbers game. Generally speaking its going to take 10 networking meetings to find one job opportunity and of the opportunities that you find one will be a fit and a job offer (that you may or may not accept). Do the math for your specific situation.
8. LinkedIn does not.
Do not use the LinkedIn as a connection mechanism. It does not work. Kinda like an early release v.92 modem the connection just seems to drop. LinkedIn is good for two things.
One is researching people in your network that can connect you to targets in your search. You then email or the phone to reach them (I have found that email works best in the tech industry).
Two is as a general online resume that you can point people to when they search for you. Sending resumes via email is old school. You need to fully complete your LinkedIn profile so that you use it as a proxy for emailing a resume. You also need to format your LinkedIn public profile to look like this http://www.linkedin.com/in/lanceweatherby . It shows up in search results. Instructions for doing so as well as other methods to promote your public profile are here.
9. You are going to be googled.
WIRED claims that google is an online reputation management system. It is. Over 70% of employers do an online background check. What do they see when they search your name and obvious key word phrases including your name? Close down your social networking profiles to friends only and clean up your twitter stream. Do the LinkedIn work above. If you want to get really serious set up a personal site or a blog.
10. Indeed is your friend.
Indeed is a search engine for jobs. In one search, you get free access to millions of employment opportunities from most the major job boards, newspapers, associations and company career pages. For the 10% of your search time that you spend on online resources, spend most of it reading the saved searches that receive you from Indeed via an email alert. Do this every Monday first thing and you have it covered.
This list is pretty much focused on going out and getting a real job. There may be some of you that are thinking about starting something on your own. It's a great time to be doing that and this may be the once in a lifetime chance to use your package to create the runway you need to get started. The ATDC gathering on October 2 is a good start down that path.
When I departed EarthLink my direct reports gave me a book and they all signed it. The book was Oh, the Places You'll Go! I will end with its opening.
"Congratulations!
Today is your day.
You're off to Great Places!
You off and away!"
It's time for the next chapter in the adventure we call life.
Blake Purdue and Guy Tessler made a few comments on my Seeing Leadership post that deserve further discussion.
The New Media Exchange was one of the more energetic pitch events that I have recently been to with a good pace, plenty of breaks, and hordes of interested potential strategic investors. AOL, Cox, Microsoft, and Turner all had an obvious presence.
The emerging companies that presented generally fell into the category of web app or nextgen cotnent delivery network. The quality of the companies (complete list) was strong with Arootz, Asankya, Gumiyo, PLYmedia, and SimplyGen all standouts for me. I was a little disappointed that only two companies were from the Southeast. The vast majority were Israeli based.
But it is easy to understand why. Why Turner certainly deserves the props I gave them previously, the real driver behind this event is the American-Israel Chamber of Commerce. Like Turner, I commend them on their ongoing efforts.
And save the weather, the "Gala Reception" on the rooftop of the Atlanta Chamber of Commerce was a good ol Internet party event with A lister Jeff Pulver attending and blogging about his experience.
I am looking forward to being part of future events.
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