San Diego Attracts Investment Capital. Could more be Done?

Investment is the lifeblood of our economy that provides nourishment for our cities. Without investment we don’t grow, business doesn’t expand and people don’t get hired. Everything comes to a standstill and in and good fortune ceases. Cities like Los Angeles, San Francisco and San Diego are attracting investments to their unique industry clusters.  Letting the world know what San Diego has to offer in terms of investment opportunities can be a catalyst to greater growth.

Nationally, the last quarter experienced $13.4 billion dollars in investments and about a third of that took place in San Francisco, Los Angeles and Orange County (as cited in Somerville, 2015).  According to the Venture Capital Association and Price WaterhousCoopers a total of 19 San Diego companies received around $270 in late stage venture capital funds (Money Tree, 2015). Not the largest share but certainly a sizable one.

Much of the money comes from large institutional investors that are looking for solid growth opportunities. Of these large investment opportunities around 36% were from hedge funds and mutual funds (As cited in Somerville, 2015).  There is still plenty of room to draw new investments from international investors that are also seeking high probably income outcomes. 

Companies invest in late stage start-ups because they can reduce their risks. Another option is to invest in a basket of companies to hedge the potential of loss on any one entity. The problem is that without knowledge of local investment opportunities investors are unlikely to fulfill to help businesses reach their full potential.  

Ensuring that emerging companies are easy to find and the proper mechanisms for investment are available will help further international investment in San Diego. Ensuring information is on public display via websites, is easily accessible from outsiders and targeted to both small and large investment entities helps to keep new industries budding and growing in a way that encourages local economic development.  

 

Freeman, M. (April 17th, 2015). San Diego start-ups net more venture capital. UT San Diego. http://www.utsandiego.com/news/2015/apr/17/MoneyTree-Dow-Jones-VentureSource-ATyr-pharma/

Somerville, H. (2013). Tech companies continue to land mega VC deals. San Jose Mercury News. Retrieved http://www.mercurynews.com/business/ci_27932457/tech-companies-continue-land-mega-vc-deals

The Money Tree. Retrieved April 18th, 2015 from https://www.pwcmoneytree.com/

Small Business Owners Optimistic but Still in Need of Financial Resources

Small business development is an important contributor to national growth. Recent polls by the Fargo/Gallop Small Business Index and the HR services company TriNet show that small businesses are more optimistic than at nearly any time since the recession started. At present the trend appears to be growing and small businesses will need additional access to credit, investment, and other financial services to ensure their businesses continue to grow.

A Fargo/Gallop Small Business Index of 600 small business owners conducted on March 31^st, 2014 indicates that small business owners are more optimistic now and for the next 12 months than at any other time since 2008. The numbers help support the idea that small business owners feel their chances of growth are improving and may be willing to invest more of themselves into their businesses to further their opportunities. 

The numbers have been generally rising since 2010 but are now at a level that indicates optimism is growing at a significant rate. This positive momentum is still about half what was experienced during the pre-recession times of 2004-2007 but do highlight the idea that there is still plenty of room for economic growth. You may obtain more information HERE. 

Another recent metric called the Small Business Confidence Survey conducted for TriNet by Harris Poll found that 74% of small business owners feel that their business will grow in 2014 (2).  Of the 206 small participating businesses who have10-49 employees 50% indicated they plan on hiring more employees in the next year. They were generally concerned with obtaining new business, controlling expenses, and ensuring steady cash flow. 

Why foster small business? Small business has a huge impact on economic growth in society. According to the Small Business Administration 66% of all new jobs since the 1970’s and 8 million jobs (big business eliminated 4 million jobs) since the 1990s were generated from small business (3).  Small business has the mobility to adjust to the market even though they often lack the financial resources found in investment capital and credit. 

Research by Lahm, et. al (2011) shows that a lack of capital for small businesses during the recession has forced many small entrepreneurs to rely heavily on credit cards. Changes within the cash equivalent market have impacted their ability to maintain that credit which further hampered their growth. Finding methods of improving small business credit scoring and access to capital helps in furthering the economic recovery.

The optimism within the small business market and difficulties in securing credit to expand their businesses help emphasize the problem that small investors and larger pool investors may benefit by being connected to small business entrepreneurs. Risk can be hedged over many small businesses in multiple sectors while new technology makes it possible to pool many small investors that seek to grow their portfolios.  New technology is changing the way investment and business is conducted. When proper tools are available and well known it very well may have an impact on the economy.

Lahm, J. (2011). Small business and credit cards: new rules for plastic in an economic recession. Journal of Marketing Development & Competitiveness, 5 (5).