Thursday, December 13, 2007

A New Market Crash

I don't pretend to be a financial wizard, or someone who follows the market on a daily basis. I rarely watch C-Span and occasionally login to my Ameritrade account.

However, I do have a point to make about markets and how it relates to the small (new) business of entrepreneurs.

About six years ago, when the technology market crashed, it was a tough time for a lot of entrepreneurs, and in looking back a lot of good things came out of the boom that changed the world (Google, eBay, etc), but a lot of entrepreneurs sufferred tremendously and many lost everything.
Now we are looking at the same type of impact on the economy with the recent Real Estate crash, but for some reason it feels different to me.

When innovative (small) businesses die - the best an entrepreneur / Investor can hope for is a write-off on their taxes. When the real-estate values drop the entire government mobilizes and tries to find ways to reduce the burden on banks and the overall market by lowering interest rates, writing off loans and shifting policies. It seems a little odd, that our "innovation" economy doesn't get the same type of attention when markets dip?

I know what you are thinking "Its different... because starting a new business is part of capitalism and there is assumed risk - the government should not be there to bail you out"

I agree - starting a new business is risky, and the governement shouldn't bail out the entrerpreneur - but in the same breath - realize most of the real estate crash is due to "investors buying over-valued real estate". How is this different? It is still buying stock in an asset, and trying to profit from the sale. Sounds like a business to me.

Don't get me wrong, I am not asking the government to bail failing businesses out - but what I am asking is for entrepreneurs and early-stage investors to be given the same level of relief that we are seeing in the Real Estate aftermath.
What about finding ways to encourage more early-stage investment in companies and ways to offer "relief" through taxes for entrepreneurs who risked their money and lost it in a new venture.

What about lowering the tax burdens of entrepreneurs who provide a sole income to their family, or invest in new companies to grow the economy?

I am not claiming to have all the answers - but I find it a little odd that when the real estate market crashes the President and Congress get out of bed the next day and scramble to find a way to lessen the burden on Corporate America - but when the Innovation Market crashes - they let the entrepreneur and small business owner take the hit.


maureen said...

You Go Boy! I love your take on things.

I think you have some good points - the overall business and entrepreneural community would welcome some more incentives for more people to take the leep into entrepreneuralism. The big E is the last surviving enterprise for the future of the US. The existing industrial sectors will need to continue to reinvent themselves to survive and it is likely only the entrepreneurs will be able to provide the creativity to make that truly happen.

As aside to your discussion about the current real estate situation - most recently I have continued to ask myself what is the advantage of this current situation, what is the gift from the crisis? How can I make this an advantage for my small business?

It came to me the other day on my morning walk - the opportunity for my company and many other small businesses out there - the time to buy is now - instead of having lease payments in our business plan we will now include funding to purchase buildings in the locations where we want to have a physical presence.

Thus, the gift is that we will be able to purchase locations in a down real estate market - in ten years from now our investors will have a nice real estate portfolio to fall back on if the brand (we are a clothing company) is not as successful as planned. The layer of real estate will add a layer of protection for the investor. I like it!

I am excited about the real estate market now - yes, we need to raise about $25M more than we originally planned to raise - but that is part of the fun!

enjoying the ride and hope you do too!
Maureen Quinlan

Anonymous said...

The reason that the government does not step up to the plate to help entrepreneurs is that they are not big "BIG" business and therefore not able to contribute to the war chests of the politicians.