Financing a Startup

July 8, 2009

One of my favorite bloggers is Bill Gurley of Benchmark Capital.  He used to write a great column in Fortune Magazine which I miss.  Today he writes about how stupid it is to be funding startups with debt capital.  He is exactly right.

Anyone who has been involved in early-stage companies knows that it is hard enough to get to cash flow breakeven with no debt.  Our government has decided the normal rules don’t apply and have loaned two money-losing companies almost half a billion dollars of our money.  Could someone please explain why?


Politics – What I care about

June 29, 2009

If you are a political junkie or policy wonk, there is no shortage of issues to follow.  There are only a few I care about: healthcare, taxes/spending and climate change are at the top of my list.

I wrote about my thoughts on healthcare a while ago, here are some comments on the other two issues.

Taxes/spending – most solutions to the problem of how to raise more revenue to pay for all the spending going on right now involve taxing the most affluent.  Nothing wrong with that theory to a point but the problem is where to draw the line on who is “affluent” and how much you can reasonably raise from that group.  According to the Tax Foundation, in 2005, the top 5% of US taxpayers (those with income above $145,000) paid 60% of personal income taxes and the bottom 50% paid only 3% of personal income taxes.   How much more can the top 5% pay and how do you incent those at the bottom to vote for those who might hold down spending?

I recently read this take on what happens if you keep raising the state income tax rate on top earners.  And while it is certainly easier for the affluent to move among US states than it is to avoid US taxes by moving abroad, one wonders about the impact.  There is certainly no shortage of data that demonstrates cutting tax rates stimulates the economy.

Climate Change – One of the frustrations I have with issues like this is that no one seems to be willing to discuss trade-offs in spending.  A think tank based in Denmark called the Copenhagen Consensus that brings together economists and specialists and uses sound economic science to suggest priorities in how governments and philanthropies should spend scarce resources, prioritized 30 solutions to 10 challenges.  Spending on climate change mitigation ranked 29th and 30th on the list.  And just at the time when Congress is getting ready to pass a huge climate change bill that will raise the cost of energy for Americans and US businesses, the “consensus” on the “fact” of climate change seems to be collapsing.  Ouch.

Startups and Healthcare

June 23, 2009

For a newly minted startup, healthcare coverage for employees is quite a ways down the list of priorities.  But the long-term success of our economy depends on both entrepreneurs and restraining the runaway train that is the cost of providing healthcare to those who live in the US so I think it’s fair game here.

There are several proposals floating around in Congress, mostly from the majority.  Some have interesting ideas, some are downright scary.

Over the last few weeks, I’ve read some interesting perspectives on aspects of the issue and I thought I would share links here with some of my own thoughts.

Perhaps my biggest concern about this issue is the haste with which it is being pushed through.  In the Wall Street Journal, Daniel Henninger explains how there are many similarities to the initial passage of Medicaid back in 1965 and how that program has ballooned into something that accounts for 20% of state budgets.

Stephen Burd, CEO of Safeway Inc., has implemented coverage with features that seem to be getting some traction on the hill but it remains to be seen if those in charge will adopt any of his great ideas.  Safeway reduces insurance premiums for those that avoid unhealthy activities, an incentive-based plan that any entrepreneur would love.

And Oregon Senator Ron Wyden, a democrat, is proposing a plan that sensibly eliminates tax subsidies.

Fixing the healthcare mess, along with fixing Social Security, is one of the biggest issues Congress will face in any of our lifetimes.  Let’s hope they don’t blow it.