Jumpstarting Jobs in America
All large companies were once small companies. In fact, many began in a garage with an idea. Throughout history, America has been the innovative leader in building branded global enterprises. However, the current U.S. recession and globalization has interfered with this natural innovation cycle, resulting in fewer jobs. According to the National Venture Capital Association, venture capital has been responsible for the creation of 12.1 million jobs. See the NVCA 5thedition Venture Impact Report:
http://www.nvca.org/index.php?option=com_docman&task=doc_download&gid=482&ItemId=93This paper discusses a new class of fund, the Catalyst Fund
, which incorporates job creation into the investment decision process. This fund is reserved for companies that are job-ready
.
Job ready defined: A job-ready company satisfies the following criteria:
- Company has a compelling business proposition
- Company is ready to start hiring U.S. employees
- Innovation (R&D) is ready to be commercialized
Additionally, their regulatory hurdles are behind them, their patents are in good standing, and the company is ready to take on an equity investor.
An extensive network of venture capital firms is already available to manage stimulus funds with complete coverage throughout America. This model is absolutely scalable and the jobs are sustainable.
BACKGROUND: THE ECONOMY'S IMPACT
Recently, major U.S. innovative firms have significantly reduced their R&D efforts (as a business expense) and are relying upon small innovative enterprises, through acquisitions and joint ventures, to provide next generation innovative products. These major changes have had a significant impact on job creation! Pure venture capital for innovative companies has nearly shut down due to lack of funds. For example, Q3 of 2009 represents the smallest number of venture funds raising money in a single quarter since 1994. Major companies that once relied on these innovative companies to provide future commercial products are also impaired. Global competitors have also taken advantage of this opportunity. Separate reports from Economist Magazine and Boston Consulting Group show that America has slipped from being the global leader in innovation
to number eight.
In the short-run, there is little we can do about our current macro-economic situation. Behind it lie large, structural issues, such as: the Sarbanes-Oxley Act, lack of IPOs, and the emergence of more intense competition spurred by globalization. Businesses are limited by how much they can raise prices when their costs increase. All these issues have had a significant impact on job creation.
The two major forces; the absence of early stage equity capital for Small and Medium sized Enterprises (SMEs), and the reduction of R&D expenses by large companies to maintain an orderly earnings report, has compounded and contributed to this jobless recovery.
SOLUTION: CATALYST FUNDS
Not only do Catalyst Funds create significant jobs; they reposition America as the global Innovative leader and provider of much needed new equity capital to underserved regions of America.
Equity capital, and not debt, is the endless challenge for innovative growth companies at all stages of development. Capital requirements can change from one milestone to the next. Examples include; commercialization of a product, lack of funds by existing financier, a regulatory blip
, a change of direction by a major customer, a lawsuit, or change in market dynamics requiring an evolutionary change to an existing product, and most importantly, capital to commercialize government funded research. All of these items are exasperated by our global recession.
Every growth company runs into high hurdles. America needs to focus on building companies for both superior financial results and job growth. Regardless of the stage of development, Catalyst Funds will only be invested to expand a team, and more importantly, create U.S. jobs.
Catalyst Funds
will integrate and pull together know-how and know-who from; venture capitalists, private equity, global advisors, Wall Street and major corporate investors in the final investment decision matrix. If there is a significant hiring need, a company is JOB-READY.
Unique to the venture capital industry is an incredible, well established capital delivery system, because they receive hundreds of thousands of business plans per year on an unsolicited basis. This is critical: deal flow provides access to opportunities.
THE IMMEDIATE STRATEGY
America needs approximately 20 Catalyst Funds in selected regions across America to facilitate job creation. Each fund must have a minimum of $250 million to have the financial clout necessary to negotiate the entry investment and protect against dilution from follow-on rounds of investment. Our goal will be to syndicate at least matching funds to this capital with other capital sources, which will double the number of jobs created. These 20 funds, $5 billion total, will create 400 companies and tens of thousands of sustainable jobs.
CONCLUSION
To summarize, America needs a proactive, hands-on regional investment strategy with professional boots
on the ground to deploy capital to innovative entrepreneurs. Catalyst Funds are the only means to do this. The venture capital industry has the available bandwidth and know-how to make this program a major success. America needs to create jobs and make small businesses the number one domestic priority. Tens of thousands of sustainable U.S. jobs will be created by funding this national program.
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