Banking On Outlooks: Business Startups

According to new study released by Silicon Valley Bank (SVB), U.S.-based private and venture capital-backed tech companies are more optimistic in their near-term outlooks. More than 83 percent said they will be hiring this year, which is up 10 percent from last year.

The study focuses on a survey of 375 executives (80 percent at the C-level) of U.S.-based, early-stage companies in four high technology sectors: software/Internet (206 companies), hardware (63 companies), life sciences (83 companies), and clean tech (23 companies). The survey was conducted by a third-party market research firm, Koski Research, in February.

Key Findings From The Startup Outlook 2011.

• Nearly one in four companies (23 percent) exceeded their 2010 revenue targets, up significantly from 2009 (15 percent).

• Two in three executives say that business conditions in 2010 were better than they were the previous year, and three in four expect they will get even better in the coming 12 months.

• The vast majority of surveyed companies (83 percent) plan to hire in the coming year, up from 73 percent a year ago.

• 65 percent of respondents say business expansion and new markets are a top priority for them in 2011.

• The life science sector is more cautious in its outlook, citing regulatory/political issues as its primary challenges. Across all sectors, regulatory/political issues ranked as the third biggest challenge faced by startups.

• The top two concerns are the uncertainty created by our regulatory environment and the overall negative impact this environment is having on risk taking.

While the outlook is positive, government is slowing the recovery.

In order, the biggest challenges faced by these companies included equity financing, scaling operations for growth, and regulatory/political environment. While equity financing topped the list, the cause is also tied to government.

According to survey respondents, venture capital fundraising and investment levels are hindered by a tone set by the administration. While government claims that innovation is the key to success, it has also maintained a tone that suggests an aversion to risk. Unfortunately, innovation and risk go hand in hand.

"Probably my biggest concern (after equity financing) vis-a-vis operating as a startup in the U.S. is the stifling regulatory/tax environment here," said one survey respondent. "The sheer number of regulations and tax issues that have to be dealt with are staggering and the corporate (and related) taxes are highly punitive relative to other developed countries."

According to several respondents, the environment created by the government is driving more companies to move operations overseas. Along with regulatory issues, respondents said that they tend to hire slowly, given the high cost of compensation packages and the high cost of living in the U.S., along with the scarcity of qualified tech employees.

That doesn't mean executives are not bullish on America. On the contrary, only 13 percent would recommend their peers look elsewhere to start a company. The primary reason for their sentiment, respondents said, is because of the country's entrepreneurial spirit. In order to move beyond current challenges, SVB says the U.S. needs to adopt a more entrepreneurial environment.

Innovation remains the key in helping turn the U.S. economy around.

Among the suggestions included in its policy perspective, SVB suggests that the government promote risk taking and reward successes that result from it, remain open to disruptive innovation (even if it turns older companies upside down), provide a stable, predictable legal and business environment (without the back and forth of sweeping policy changes), and avoid excessive regulation. In addition, the government needs to reform education to ensure the country remains competitive in providing a strong pipeline of talent or allowing more qualified immigrants to bring their skills to America.

Other suggestions included government-sponsored R&D, tax credits for R&D, maintaining a sound system for protecting intellectual property rights, promote the flow of adequate risk capital into startups, and remove subsidies, regulations, and other market-distorting forces that favor incumbents.

These changes are critical for tech companies to help increase the speed of economic recovery, the study suggests. Otherwise, the U.S. will continue to discourage venture money, driving more technology away to India and China. The full report can be found here. It includes insights specific to each sector.

Making Commitments: Earth Day Network

One of the most valuable lessons I've ever learned (and shared) is the power of one. I learned this lesson when one advertising great pulled out a palm-sized bed of nails and laid his hand upon it much like art that originated in India. Nothing happened.

"See," he said. "When you have too many points, nothing sticks." It was a very effective visual lesson, and his only point.

Advertising works just like this old street-festival spectacle. It's all about weight distribution. If you place equal emphasis on thousands of points, there is too much information for anyone to make an informed decision. Focus on one point; it sticks.

How To Make One Billion Acts Of Green Stick.

As important as Earth Day can be, it has lost some of its impact as it became more commercialized. Nowadays, some of the biggest supporters are organizations that may or may not even be all that kind to the environment. It's hard to say so let's focus on something that works.

One idea that I really appreciated this year comes from the Earth Day Network. It is asking people to make one pledge, written and posted, that will ultimately help our planet.

Over 100 million people had already participated last week. People are sharing pledges to take small and large actions this year — not just for one day, but for a lifetime. And what I like so much about this idea is that those people who pledge the smallest contributions — one thing — are much more likely to stick with it.

A few highlights: One person pledged to turn off the tap when they brush their teeth and another person pledged to purchase more local food. Another person pledged to plant a garden at school and yet another pledged to change their lightbulbs for more energy conservation. One person pledged to turn off the shower when they shampoo and another pledged to install dual toilet flows.

Sure, there are bigger pledges. But I like the small ones because they are one-time reachable goals that are much more likely to stick. And, even if it doesn't seem like a lot, one billon of those actions (even 100 million) add up to a significant impact.

The Earth Day Network also goes a long way in making suggestions, broken down into categories that include green schools and education, advocacy, energy, transportation, sustainable development, conservation and biodiversity, recycling and waste, and water. People can also join pledges that other people have already created.

It's the power of one point. It's the power of one personal action. And it's magnified by the number of people who participate.

Advertising Dud: Why Great Creative Fails

I have nothing against Eastpack. They started in the 1960s to make duffel bags and knapsacks for the armed forces. Twenty years later, the founder's son noticed that students were using military daypacks as book bags. So they started a new line for students.

They are a tough bag. They even come with a 30-year warranty (except those with item-specific warranties), which is how they came up with the tagline "Built To Resist." That's your background.

Imagine being a copywriter assigned to the account. You have a lot going for you. Military tie-in. Check. Retro cool. Check. Modern designs. Check. Unique selling point. Check. There is no question. If James Dean needed a backpack, this would be it.

So what do you do? Throw all that out the window and rip off an unrelated 1980s video game, changing out the bricks for students who hurl themselves off buildings. They don't even bother to land on the backpacks that are among the toughest in the industry. It's kind of sad.



Sure, there is some pixel art appeal lurking somewhere behind the scenes, but I seriously doubt people are contemplating the unseen connection. Instead, the newest ad campaign from Eastpack is a great example of how more and more advertisers think they need to draw attention to themselves instead of the products they peddle.

Will anyone even remember the brand? The copywriter might remember. But for the company, this is par for the course. They have produced dozens of advertisements where the creative is the hero and the product just an extra.

"Successful advertising sells the product without drawing attention to itself, it rivets the consumer's attention on the product." — David Ogilvy

Look, there is no doubt that the ads approved by Eastpack are an exercise in great creative. But great creative is more art than advertising. The difference is in what happens afterward. Art is designed to elicit an emotional response. Advertising is designed to make you want to purchase (or least know more about) a particular product.

A couple of years ago, Retin Art asked How do you feel about advertising? And in response, penned a post that captures how most people feel. We love it. And we hate it.

Too many advertising professionals are getting too smart for their own good. They want our attention but then never do anything with it once they get it. And that's why great creative doesn't really belong in advertising. It fails so badly that more people would rather read a product review. (Hat tip: copyranter.)

Rethinking Education: Immersion, Part 3 of 3

There are probably several hundred issues that could be pulled out of the recent protests in Wisconsin. But out of them all, the most important one remains largely neglected. The education system is broken. And we collectively broke it.

The reason I say we collectively broke it is that the entire issue is more complex than most people know. For all of the debate in Wisconsin — bankrupting government vs. workers' rights — few people dug deeper than the symptoms to identify the problem.

If they did, some people might have raised an eyebrow to learn that the largest teachers' union in that state also owns the health insurance company that public schools contract. They will learn about it soon enough. I see a bigger problem.

The education system is overwhelmingly complex and inefficient.

The debate ought to have never been about teachers and their salaries. The formula is too complex. It's not like other salaries.

Roughly speaking, average teacher salaries are $45-55k for 180 days of work* (as opposed to 240 days in the private sector) with disproportionate benefits of about $30k and tremendous job security (very difficult to let poor performers go) but this is also offset by paltry starting salaries (some as low as $25k), greater education requirements, shrinking autonomy, and personal investments that many teachers make for their classrooms.

What strikes me as more interesting is that teacher salaries and benefits only account for 30-35 percent of the entire education budget whereas the professional-private sector invests closer to 40-45 percent of its revenue in payroll and benefits. Health care is even higher, with 50 to 55 percent of its revenue in payroll and benefits. (Some sectors are lower too; quick service can be as low as 20 percent.)

In Nevada, I know that the Clark County School District reports that 65 percent of its funding goes to salaries and 21 percent to benefits (which seems to indicate that less than half of the salary allotments go to teachers), which leaves 12 percent for services and supplies. Yet, if only about 30-35 percent of the entire budget goes to teachers, then they only account for about 35 percent (or less) of the entire salary budget. The question to ask is who else receives salaries.

In many cases, administrators make two to three times the amount that teachers do. In other words, the bulk of the salary spending doesn't go to teachers, but rather the people who administer the teachers. The irony is that any time there are cuts to the budget, the people most likely to face cuts are the teachers themselves.

*As someone who teaches, I can attest to the fact that good teachers work unpaid on most weekends. And it is not uncommon to continue researching education materials during the summer for the following year.

The agenda needs to be less on adults and more on kids.

When I helped open a private school in Las Vegas, the philosophy was to place an emphasis on the child's education. While I do not know if it has held up since then, I do know that it was the answer to every question related to the school. From which textbooks to purchase (with teacher-driven input) to how many microscopes they needed in the science lab, it always came back to "everything thing we do is dictated by the educational needs of the children. Period."

Most decisions made by the public school system are not based on this. They are based on school board directives, including which books are useful. They are based on how much union dues can be collected. They are based on a disconnect between teachers and the public over what constitutes fair salaries (and fair benefits). They are based on seniority over performance in all but six states.

At the same time, test scores are ridiculously poor. The dropout rates are unacceptable. And the students, from most surveys, are bored and disengaged with their overall studies (only one country ranks higher in terms of bored students than the U.S.). I even raise an eyebrow when my son shares how his education is invested — rallies featuring McDonald's, rule refreshers as to why students aren't allowed to shake hands, career quizzes pointing to jobs that may be gone in ten years, etc.

A student-first ideology makes sense because it removes all the burdens from the education system. It also increases teacher support because teachers are the biggest student assets. Great teachers will have an impact regardless of any other tools (whether tech or textbooks).

However, in order to move forward, school districts will need to consider modular tools, including smart boards and tablets for students — even if that means a certain percentage of parents have to purchase them much like parents are asked to purchase school supplies or uniforms or any number of other items kids need for school (with sponsor opportunities for certain income brackets). Tablets would reduce some of the costs associated with other materials and make books more accessible to the students.

But I would hold off on too many tech investments. School districts have a tendency to put tech ahead of the students. If the overall education system isn't working, then it doesn't matter what tools you have at your disposal. And, the overall plan isn't working.

Three considerations for an overall plan.

From what I've been told, school districts tend to remove autonomy from teachers in the classroom. (In my personal experience, the best teachers complained about administrative directives whereas the worst teachers supported it. Weird, I know.) To be effective, school districts could be changed with mapping out expectations (what the kids need to learn by the end of the year) but the teachers need to develop plans that are designed to get the students there and then beyond the mark.

Teacher Autonomy. Teachers need autonomy — even from some textbooks — because many of the books are wrong. (Last summer, we invested in a tutor who promptly untaught our son inferior methods in math.) This places a greater burden on the teacher, but if more funding could be allocated for performance-based raises, they might be more willing to invest.

Transitional Teaching. Another shortfall in education is the lack of transitional planning. The administrative function of assigning kids to their teachers in the following year needs to take place before the conclusion of the school year. This would provide the new teacher or teachers the opportunity to assign material for students to prepare with over the summer.

Student Expectations. The expectation for every student ought to be college, with the higher marks set for college entrance as opposed to a high school criteria. Learning vocations instead of pursuing college entrance ought not be a consideration until the eleventh grade. The reason is simple enough. Many trades are not looking for secondary education; even the greatest percentage of manufacturing jobs in America are classified as highly skilled.

I've mentioned the need for immersive education in the first part of this series. I use the technique too. While I consider every class custom, some structural elements are the same — an introduction that ties in a current event, coverage of common errors from the last assignment, theory related to the subject, case studies related to the subject, execution tips related to the subject, and then an assignment and optional reading based on the subject. Students also rewrite whatever assignment is returned to them.

Applied to math, after covering common errors from the last assignment, I might include the history of an equation, examples of why an equation is used, basic instruction on how to use it, in-class practice and corrections, and then some inventive homework to ensure they can master it. They might also receive an additional assignment based on what they missed with the first. Having not taught math, math teachers are probably best equipped to decide if it would work for them.

I suspect they would need more time than the allotted 50 minutes. But then again, in Nevada, some students have seven 40-minute classes, effectively reducing the teaching time to 30 minutes or less, not counting roll. That needs to change. Education requires more than snack-sized offerings. Expecting students to benefit from seven classes in one day is just a symptom of a struggling system.

Filling Voids: A Company Content Takeover?

Shel Holtz, ABC, principal of Holtz Communication + Technology, wrote a post that touches on a topic area that I wanted to see more companies embrace several years ago. The Internet makes it possible to become your own media company — providing honest, credible, and valuable feature content around your products.

His post, Business-produced content could fill the sharable-content gap created by paywalls takes a slightly different spin that he sees it as a solution to the growing trend among news publishers to put up pay walls. I agree with the concept in part, but then there is the other side of the coin. Companies are not enough to supplant true news coverage.

The Future Media Crisis Will Be A Mile Deep.

Last week, my Writing For Public Relations class was treated to an hour with Bruce Spotleson, group publisher for Greenspun Media. Spotleson has been kind enough to grace the class ever since I started teaching it. He even remarked that he could use it to mark the passage of time.

And this year, he shed some light on the state of news media. Specifically, what news media is shedding cannot be easily replaced. We're losing dedicated investigative reporters and senior writers who tackle the most complex issues, those who aren't so easily replaced by special interest citizen journalists and snack-sized entertainment features. (Investigative reporting is the most expensive proposition for any newspaper or news magazine, paying senior writers to spend weeks on one story.)

Looking at some of the reporting on the more complex issues in recent years, I'd go one step further and say we've all but lost most of them. And even the few who remain tend to do little more than report on two polarized talking heads or slant stories toward whatever politicized position their audience has embraced. The truth doesn't bubble up to the surface so much.

Even the most recent economic crisis is just now being understood. CNBC recently reported the findings of a two-year bipartisan probe that concluded conflicts of interest, excessive risk-taking, and failures of government oversight triggered the financial crisis (hat tip: Lewis Green). Both Republicans and Democrats agreed, citing problems that existed well before 2003.

The Story That The Media Largely Missed.

In fact, in 2003, the Bush administration tried to take some steps to correct such problems as they pertained to Fannie Mae and Freddie Mac. But any progress being made to stop the problems was stalled then by Chris Dodd, chairman of the Senate banking committee. Dodd had allegedly been one of several dozen politicians who received special loans. He wasn't alone either. If you read Fact Check, everyone was to blame.

But this post isn't meant to explore the political wrangling that led to the financial crisis. It's an example of how times were already changing. The news media, by in large, was already out to lunch and asleep at the wheel. Instead of critical and objective reporting, the shrinking percentage of people reading newspapers were spoon-fed sensationalism — things that attract eyeballs.

In 2003, for example, the invasion of Iraq captured headlines. So did the shuttle disaster. So did the Laci Peterson story. So did SARS. So did a lot of stories with all of them important but with the emphasis on immediacy. What wasn't covered were our long-term simmering stories — the economy, housing market, or education. All of which would have required objective interests poring over research for weeks and months.

If they weren't being covered almost ten years ago, it seems highly unlikely they will be covered in the future. Or, for a more local example, Spotleson mentioned how local newspapers used to be the watchdogs over all sectors within the community like police departments and other government bodies. And when no one covers them, bad things usually happen.

Businesses Are Good At Reporting Wants; News Media At Reporting Needs.

Holtz is right that businesses can step up their own media outreach efforts and become publishers around their special interest areas, especially if they are sensitive to what consumers want and are reasonably objective in their presentation without filling the Internet with big brochures that get updated daily. Consumer-centric content is more valuable. Instead of talking about how great the company is, better content tells people how to get more greatness out of a product.

At the same time, communicators might want to remain steadfast in convincing news media outlets that there is a void that needs to be filled. Investigative information is too valuable to find behind a pay wall (because we generally don't want to hear it).

To take care of this niche, what we really need is for news media outlets to elevate their advertising rates to pay for objective reporting. And if the reporting is not objective, then at least they can ask the tough questions. All they need to do to recapture some of their old ad rates is deliver content that draws an audience because it is valuable (and not cheap entertainment). In contrast, putting up pay walls for content that doesn't measure up (The Daily doesn't measure up) only drives the audience away.

Targeting Influencers: Dear PR Pro, There Is No Spoon

One of the hardest lessons for many public relations professionals to grasp comes right out of the Matrix. There is no spoon. There is no campaign.

"It is not the spoon that bends, it is only yourself." — Potential

It took reading Kary Delaria's PR’s Biggest Mistake When Working With Influencers to fully appreciate it. She rightly suggests too many public relations practitioners approach influencer outreach like media relations instead of community relations.

She's moving in the right direction. And yet, I cannot apply it to anything I've ever worked on in social media, even if they are clearly better than what most public relations professionals want to do in social media. Let's step back.

Specifically, some public relations professionals want people, especially influencers, to push their content to a mass of people who will hopefully visit the destination and perform an action — like a page, subscribe to a reader, purchase a product, or whatever. Most public relations professionals think that by reaching out to influencers, they can increase the mass.

But social media doesn't really work that way, which is the gist of what Delaria was trying to point out. However, overlaying a community relations approach might be scoffed at too, even if it is only because the public relations practitioner abuses it.

"It is not the influencer that bends, it is only yourself."

1. Define goal, content and context. Not exactly. A worthwhile social media approach does consider goals, content, and context as Delaria suggests. But the goals, content, and context should never be bent to the influencers.

It needs to stay true to the community or audience you want to reach. If you can prove yourself worthwhile to a community or attract your own, influencers will be attracted to what you are doing anyway. In fact, they are just as interested in your community as you are (if you have one) — because if they ignore things within their sphere, they won't be influencers for long.

2. Test the theory and the outcome. According to Delaria, panelist David Binkowski suggested that if you had a running influencer campaign, you might run a test on the pool of influencers and then thin the list. But I might suggest that if you are running an influencer test, you're already losing mutual leverage.

As soon as you start testing them, then you've already put yourself outside the sphere where the so-called influencers are and outside any community filled with the people you want to reach. That doesn't make sense at all. You might as well brand "agenda" on your forehead.

3. Manage the community? I'm all for online community managers managing a community from a functional perspective. Someone has to run the advertisements, remove the spam, and provide very loose guidelines for the community to follow (very loose).

But I've grown very weary of community managers who try to manage the people who visit. For very much the same reason above, anytime you take planned actions to "influence" people within a sphere, you've cast yourself as someone outside it.

"It is not people who bend, it is only yourself."

Think of it this way instead. Hopefully if you are representing a company online, you have more than a passing interest or paycheck in the balance. It's probably best for you to like, even better if you love, whatever you are representing online.

If you are passionate about the subject, you already have a common interest with the people you might connect with online, whether or not they are influencers. Thus, they are not people to "target" as much as they are people you get to know.

As for campaigns in general, don't think of them in the traditional sense. They are simply part of whatever you bring to the table. If you have the insider information, unique perspective on a topic, clever idea for entertainment, or some other worthwhile contribution, you are just as much of an influencer as anybody.

The only difference between you and them is that they've probably been at it longer, got lucky one day, or never bothered to implement tactics that position you outside the community that interests you. In other words, there is no spoon.