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Survey benchmarking Bay Area start-up environment reflects RoseRyan client experience

The Bay Area Council Economic Institute has just released the results of its survey that benchmarks the Bay Area environment for young companies and entrepreneur-led start-ups. The Council’s 300+ members are a “who’s who” of Silicon Valley; I was pleased to be selected as one of the partners who contributed to the study.

Although there has been improvement in the local economy over the previous year, the survey shows there are still challenges. This is consistent with RoseRyan’s experience in the marketplace. Our clients are still having a tough time raising capital, regulations are still difficult to navigate, and other geographic areas are competing for business, but I am still optimistic in this region’s ability to adapt and innovate at a great pace.

I’ve compared some of the key findings to RoseRyan’s experiences:

Listing regulations and requirements do not discourage companies from seeking public listings: Only 16 percent of respondents agree. This is key as clients usually are not prepared to handle all of the main components of preparing their S-1s and SOX requirements after an IPO.

The government has developed tax incentives to increase the amount of research and development. 36 percent disagree and 28 percent are neutral. Tax incentives play a smaller role here than other parts of the world. Most companies, like most of our clients, do not rely on government subsidies but are certainly aware of available grants and tax incentives.

Compliance with government regulations does not unfairly burden new and growing firms: 31% disagree, which is much lower than other parts of the world. This is consistent with many of our clients’ experience. They still have to deal with a labyrinth of regulations in California which are slowly getting less cumbersome.

Government programs provide high-quality services to new and growing firms: 12% agree. Unfortunately, there does not appear to be any faith in government programs. Many of my clients feel that government support is a bonus.

Most entrepreneurs personally know one or more private individual investors (i.e., “angels”): 43% agree. Most of RoseRyan’s clients are cognizant of the “start up” ecosystem of investors.  They understand the ebb and flow of the markets based on the overall economy.

Stock options are considered a positive source of compensation. 84 percent agree.  This is consistent with our business, and we expect stock options to be a strong motivator for attracting and retaining employees.

Benchmarking the Bay Area’s Environment for Entrepreneur-Led Start-ups provides many other interesting insights. You can learn more about the Bay Area Council on their website.

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Cleantech survey findings consistent with word on the street

RoseRyan recently completed the second annual State of Cleantech Survey with our partners KPMG, Barney & Barney and Arbor Advisors. In general, the findings are very consistent with what we are hearing from clients. Cleantech ventures are still being funded but investors are keeping a cautious eye out due to macroeconomic issues. Although there have been some high-profile flops (Solyndra) there have also been many successes (Tesla). The Valley continues to produce high-profile cleantech success stories, and I anticipate there will be some big wins in the coming year.

Some of our key findings include:

  • The overall outlook for venture funding is optimistic, with 67 percent of survey respondents saying they are extremely, very, or somewhat optimistic.
  • The outlook for cleantech growth in Northern California is strong, with fully 50 percent saying they are extremely/very optimistic.
  • The two biggest trends are an increase in M&A and the expansion of large multinationals into cleantech.
  • The greatest challenge is gaining access to capital.
  • Regarding personnel, cleantech demand is highest for engineering support.

All of my clients are highly optimistic about the future of cleantech. Most believe that if they had greater access to capital at attractive terms they would be able to expand their business rapidly. Some sectors, including solar and lighting, are growing rapidly and are being impacted by the advent of strong Chinese competitors, while others, including energy efficiency and storage, are growing at a steadier pace. Big multinationals are biding their time trying to predict who the winners and losers are going to be.

I fully expect the pace of innovation to continue as the federal stimulus–funded clients approach their second and third years post-funding. The cleantech market is showing some signs of maturity and funding infrastructures are improving. Although the frothiness of the past may be mellowing, the overall market is growing at a nice, sustainable pace.

In the coming year expect some big news in biofuels and electric vehicles spaces…it should be interesting to watch!

You can download a PDF of the 2011 Cleantech Survey report or read the news release.

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2011 economic forecasts: be alert, stay flexible

I recently attended two economic forecast presentations that gave different sets of views on how—and how much—the economy will grow this year. Both were very interesting and provided lots of information, trends and predictions, but they were also different in some areas of emphasis and their level of optimism.

At the first event, hosted by Moss-Adams and Union Bank in San Francisco, Kei Matsuda, the chief economist at Union Bank, said he thinks that the growth rate for U.S. GDP will be 2.4 percent in 2011. At the second presentation, hosted by Comerica in Santa Clara, Mario Belotti from Santa Clara University and Rich Karlgaard from Forbes both think it will be 3.5–4.0 percent.

Karlgaard said that even though this sounds aggressive, the International Monetary Fund was predicting that it would be 1.5 percent as little as three months ago. He thinks that the recovery will be uneven, with certain industries, for example the tech market, growing much faster than others. He believes the IPO market will be up and VC spending will certainly exceed last year’s levels. He also predicted that the Dow would hit 14,000 and the S&P would be at 1,500. Then he said that oil may go to $100 per barrel, so I’m wondering how this rate of growth would be possible, with a brake on growth like $100 per barrel of oil?

The Union Bank economist reasoned was that the recovery seems to be moving in the right direction, but very slowly. Matsuda had three take-away points that summarized his remarks:

  • The “new normal” is not necessarily so. What happened in 2009 and 2010 is part of an economic cycle; corporate profits are up, and job growth is starting to return, although some jobs will not return.
  • Economic growth will accelerate in 2011, although there are factors that will slow this down, such as the European debt crisis, a weakened commercial real estate market and struggling state finances.
  • The housing market will stabilize with weak building starts but historically low interest rates.

In general, it seems that there is room to be cautiously optimistic, but we all need to get used to the fact that the world as we know it will continue to change and evolve, whether we like it or not. All you can do is stay flexible, be informed and look for opportunities.

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