When times were good, the top executives from the largest U.S. banks made a mint. Below is the total compensation in 2007 for the 9 banks that received the first batch of government aid through TARP.

http://money.cnn.com/news/specials/storysupplement/ceopay/index.html

In 2009, the job market will be full of contrasts: some industries will be eviscerated while others face shortages of workers. The good news is that despite the recession, there are still real jobs to be had. The bad news is that you may have to change fields to find one.

The trick to job hunting in 2009 will be to figure out how your skill-set can translate across industries, says Elaine Varelas, a managing partner at Boston-based outplacement firm Keystone Partners, so that you’re not confined to searching one sector of the economy. “People are frustrated because it’s taking them a while to assess the job market,” she says. “They’ll have to figure out other things they can do and want to do.” Successful job-seekers will be the ones who can figure out how to take skills learned in one kind of job and translate them into assets in others.

Here are the top eight areas where work can be found in 2009:

1) Nursing & Medical Services

Perhaps the best bet in 2009: Becoming a registered nurse or medical technician. With over 50,000 new nursing jobs to be created this year alone, med techs and nurses will have their pick of jobs and salaries, the latter averaging about $57,000 per year.

Social services jobs will see a boom too, as a swelling number of retirees check-in for medical care, says the most recent Bureau of Labor Statistics (BLS) report. But not all health care jobs will see equal growth. “The growth here will be more about the services and delivery people–nurses and technicians–than administrators,” Varelas explains. “Hourly workers interested in changing roles should get into any role that services the elderly,” she suggests.

2) Computing & Engineering

Computer-related jobs are projected to grow by more than 20 percent in the next decade, and 2009 will be no exception. Software engineering is particularly in demand, with network systems and data communications analysis also booming. These jobs also had some of the highest median salaries in 2006, according to the BLS, with computer software engineers earning a median income of $79,000 a year.

These positions are expected to grow at nearly double the rate of other types of jobs, but that won’t last forever. “As the software industry matures, and as routine work is increasingly outsourced abroad,” fewer computing jobs will be available in the next decade, the BLS notes.

But for now, technology workers are still in high demand, says Varelas. Most of the open positions will be found at smaller companies, where employers will be looking for a versatile, multi-faceted worker that can fill more than one role. “You have to be a business person who’s also a tech person,” to be an ideal candidate, Varelas explains. That could give an advantage to seasoned workers over recent grads.

3) Education

“To a great extent, education is recession proof,” says Roy Krause, President and CEO of recruiting and staffing company Spherion. In 2009, roughly 38,000 of our economy’s new jobs will be created in colleges and universities nationwide. As more students wait out the recession in college and graduate programs, the need for teachers, administrators, assistants and other staff will expand.

The demand for primary and secondary-school teachers will be booming as well. “There always seems to be a shortage there,” says Krause. Some of the most in-demand teaching roles will prepare workers for the most in-demand jobs. “There are literally not enough educational programs to generate the volume of health-care workers we’ll need,” Varelas explains. As high schools and universities expand to meet demand for nurses, computer engineers and teachers, the demand for teachers and professors will grow commensurately.

Post-secondary teachers can expect a media salary of about $56,000, according to the BLS, while kindergarten through 12th grade teachers can expect between $43,000 and $48,000.

4) Green Jobs

So-called “green” jobs haven’t been measured in BLS reports to date, but some experts have predicted they’ll shake up the list of the fastest-growing jobs before the end of the decade. “More and more companies are adding dedicated staff to focus their environmental efforts,” says Alison Doyle, About.com’s Guide to Job Searching. Green jobs are arriving in two breeds, she explains: some will be at specialized firms that reduce human environmental impact, like environmental consultancies; others will simply be jobs at environmentally-friendly companies looking to improve their eco-image by hiring specialized “green” officers to audit and improve the company’s environmental impact.

But the recession might slow the corporate world’s eco-makeover, as many companies’ transition to green-hood is delayed by financial problems. To see any growth in green job demand, we’ll also need to see some “very creative new organizations,” Varelas explains. Upstart green-services companies may be hiring, she says, but otherwise this sector will be what she describes as a “slow-growth industry: high demand but high competition.”

Companies that can afford to go green will hire staffers like Traceability Managers, who will examine global supply chains and check for suppliers that might be excessively pollutive or carbon-costly to buy from. Environmental consultancies will seek to hire engineers or architects who are LEED-accredited, understand HVAC systems and can help guide developers through the LEED approval process for their buildings.

5) Energy

“There’s a big buzz on campus about renewable energy,” says Chris Higgins, Senior Associate Director of Career Management at the University of Pennsylvania’s Wharton School. Outgoing students are particularly interested in startup companies, he says. “Biofuels seem to be the biggest area of investment.” Those venture-backed businesses should still be in good shape to hire in 2009, since they are more insulated from the broader economy.

“Obama’s talking a lot about green initiatives, so alternative fuels are going to be big,” agrees Spherion CEO Krause. But those renewable energy jobs might also see a glut of interest from workers in traditional energy, thanks in part to increasing volatility and competitiveness in the market for oil and gas jobs that has resulted from wild oil-price fluctuations. “We’re seeing a slowdown in Texas and Canada,” Varelas says of North America’s two biggest oil-producing areas. Workers in the energy industry have very specific skill-sets and knowledge that don’t translate well to other industries, she notes. She predicts that many of these workers may “be jumping at a green energy job” if they have the opportunity.

6) Infrastructure

With the president-elect vowing to spend hundreds of billions of dollars on internal improvements like roads, bridges, broadband infrastructure and financial oversight, some experts are predicting niche job booms. “We work with a couple of companies that build bridges, and they’re expecting a lot more business.” says Krause.

Financiers might also find new lives as a part of the government’s new regulatory apparatus, which will need auditors, accountants and compliance officers. Obama’s energy-independence programs will also require electrical and mechanical engineers, grid managers, biofuel chemists, and civil engineers. Electrical, mechanical, chemical and civil engineers made median salaries of about between $68,000-$79,000 in 2006, according to the BLS Median salaries for power plant operators were about $55,000, or about $70,000 for operators at nuclear power facilities.

7) The New Finance

Financiers should prepare to be especially flexible in 2009. “Those people will need to take a look at reinventing themselves. They’ll have to figure out where else they can use their skills, and move into other industries,” Varelas says. For many bankers, that will mean applying their middle or back-office operations knowledge in other businesses. How long before they can move back into their former careers? “This consolidation is going to be long Ð at least three-to-five years,” Varelas says.

But don’t discount finance yet. “We’ll simply see shifts. There will be a shift from originating mortgages, for example, to collecting on them,” Krause explains. “If interest rates go down to 4.5%, you’ll also see a lot of refinancing.” This will require underwriters, actuaries, and administrators.

For financial workers switching fields, an initial pay cut may come with the transition. A financial analyst who made the median 2006 income of about $66,000 and decides to become, say, a commercial loan officer will probably net about $10,000 less in 2006 dollars. However, after three years of experience, that loan officer’s salary would jump to between $61,000 and $100,000, according to the BLS.

Self-Employment & Small Business

Replacing farmers in the self-employment demographic are growing numbers of people “who don’t want to be employees anymore,” says Katy Piotrowski, a career counselor and author of The Career Coward’s Guide to Changing Careers. “I’m seeing a lot of people buying franchises, or setting up arrangements that involve multiple online businesses,” she says.

As a career counselor who assists adults interested in mid-life career switches, Piotrowski reports growing numbers of workers “trying to escape the desk job format.” Experienced career jumpers are also wary of taking new positions that promise little job security Ð jobs Piotrowski likens to “black holes” of employment. Top prospects for small businesses will be Internet companies that can get funding while the venture market is still well capitalized, as well as green consultancies and international sales, which could benefit from the volume generated by a weak dollar.

The BLS does not calculate income estimates for self-employed workers of any kind.

9) Retirement, Reconsidered

The BLS says that over the next ten years, “the need to replace workers who leave a field permanently is expected to create more openings than growth will.” But with retirement accounts losing value, many baby boomers could postpone leaving. Could this affect turnover?

“This recession will delay retirement, but not the traditional way,” says Krause. “Retirees will come back into the workforce on contract or part-time basis, but not keep their old positions.” Because longevity means larger salaries and a lower cost-basis, companies will still pressure older workers to retire, but will also need their experience to weather a recession not equaled in decades. If retirement is your next stop, look for firms where your wisdom could be useful on retainer.

10) Telecommuting

The first quarter of the year will be rough for job-seekers. But the upside will be more employer flexibility. “Candidates will have to market themselves,” says Krause, “but more employers are open to job sharing and telecommuting as gas prices fluctuate and there is more emphasis on getting the candidate with the right suite of skills.” Which means that it’s wise to expand your geographical search, and inquire about whether working from home on a part-time basis is an option, regardless of the job you are seeking.

“What’s heartening,” Krause says of the incoming administration, “is that there’s a recognition that there’s a problem.” If the president-elect’s stimulus package works as intended, American job-seekers could see the creation and preservation of about 2.5 million jobs before 2010.

[via Fast Company] by Chris Dannen

The notorious urinal that served patrons of the famed New York rock club CBGB for 33 years now sits retired in a basement in Manhattan’s posh SoHo district.

Plucked from the graffiti-covered walls when the club closed in 2006, the urinal is among several CBGB artifacts — such as the gritty “CBGB & OMFUG” awning that hung over 315 Bowery and a phone booth covered with punk-rock band stickers — donated to the Rock and Roll Hall of Fame Annex NYC, which opened its doors last week.

The donation is just one step taken by entrepreneurial group CBGB Holdings LLC to revive the brand and transform it once more into a money-making business — without jeopardizing its counter-culture past.

Last month, the group struck a distribution deal with Bravado, a Universal Music Group company that markets rock-themed merchandise around the world, to help sell millions of CBGB T-shirts. Next summer, the Vans Warped Tour music festival will showcase an interactive CBGB exhibit.

These deals were crafted by two men who believe there’s life after death for the landmark venue: James Blueweiss, a marketer who began advising the club a year before it closed, and Robert Williams, a veteran of the retail music business who helped open HMV stores around the world. The two attracted capital from angel investors and paid $3.5 million for the rights to the CBGB brand in 2008. Their company, CBGB Holdings, owns all intellectual property, domestic and international trademarks, copyrights, video and audio libraries, ongoing apparel business, Web site and physical property of the original club.

Andy Warhol, second from right, and friends stand outside CBGB in 1976. (click for full image)

Hilly Kristal opened CBGB — Country, Bluegrass, Blues — in 1973 and intended it to be New York’s premier venue dedicated to the genre. But with too few acts to occupy its stage, CBGB soon attracted young musicians eager to showcase a new sound. Mr. Kristal added to his marquee “& OMFUG” — “Other Music For Uplifting Gormandizers.” In the years to follow, the Ramones, Television, Patti Smith, B-52’s, Talking Heads, Richard Hell, Debbie Harry of Blondie, Dave Matthews Band, Green Day, Pearl Jam and many others graced the CBGB stage.

“I took Hilly to lunch and said, ‘I’m a salesman. I’m a promoter. I really love your story and I want to help you,” Mr. Blueweiss said of his 2005 pitch to Mr. Kristal. “If you’ll allow me to represent you, I think I can cut some slick deals and give you your pay day after 33 years on the Bowery.’”

Mr. Kristal agreed to work with Mr. Blueweiss, but the club’s future was soon in jeopardy. A dispute arose between CBGB and the Bowery Residents’ Committee, which said the club owed more than $75,000 in back rent. Longtime patrons came to the aid of Mr. Kristal in a fight to save the club. Steven Van Zandt, an actor and E Street Band member organized a petition and a “Save CBGB” rally, but despite the efforts, the club was forced to shut its doors.

“I said, ‘Hilly, sell it to me,’” Mr. Blueweiss said. “I’m passionate about this.”

Mr. Kristal agreed to sell the CBGB to Mr. Blueweiss on the condition that he would remain chairman of the company for three years. The men did not know at the time that complications from lung cancer would keep Mr. Kristal from seeing his club reborn. When Mr. Kristal died in August 2007, just a few months after signing an agreement to sell CBGB, Mr. Blueweiss charged forward with the plan to keep the CBGB legacy alive.

But a new era of CBGB won’t be without challenges. Ownership of CBGB is being disputed by Mr. Kristal’s former wife, Karen. In a lawsuit filed last year in Surrogate’s Court in Manhattan, Mrs. Kristal, 83, claims that she is the rightful owner due to an agreement the Kristals made before they opened CBGB in 1973.

The suit, which names Mr. Kristal’s estate and CBGB Holdings, states that because of legal complications due to a bankruptcy of a previous business, Mr. Kristal listed his wife as the owner of record in order to obtain a liquor license, even though they were already divorced.

In a statement, lawyers for the estate called Mrs. Kristal’s claims on the trademark “specious….CBGB was, and is, synonymous with Hilly Kristal.” CBGB Holdings declined to comment about the suit.

While that dispute plays out in court, CBGB Holdings will be charged with the tough task of keeping the brand relevant to a new generation.

The CBGB exhibit at the Rock and Roll Hall of Fame Annex NYC (click for full image)

“Some amazing pieces of history went down there, and this place deserves to be part of the Rock and Roll Hall of Fame, but how do you take a brand that magically formed and find a way for it to live?” said Julia Beardwood, founder of brand consulting firm Beardwood and Co. “And, is it even right to bring it back from the grave? They have a brand that’s trying to make some money using the CBGB name, but they don’t want to devalue what it stands for.”

The most immediate plans for the CBGB business is an overhaul of the Web site that will include streaming music and videos, social networking components and a forum for fans to add their stories from nights spent at the original club. The site will also promote promising new bands, much like Mr. Kristal did for the Ramones.

Blueweiss said revenue from T-shirt sales is about $6 million a year in Japan alone, but declined to provide total revenue. He said the deal with Bravado should boost overall figures.

Ultimately, CBGB Holding’s dream is to reopen a club. Mr. Williams said discussions are ongoing with properties in New York and Las Vegas, but a new venue won’t be opened for at least 18 months.

“Live music is what CBGB is all about, and ultimately it will be back there, but it has to be done the right way,” Mr. Williams said.

Last week, E Street Band’s Mr. Van Zandt, who lobbied to save the original venue, strolled through the New York Rock and Roll Hall of Fame CBGB exhibit.

“It’s good to keep the history of the club alive,” Van Zandt said. “Hopefully, what they’re doing to help the brand will help do that. We tried to get the mayor and the governor to help save the place and it didn’t work. Rock is a massive part of our identity and it’s good to see people who want to preserve it.”

[via WSJ Small Business] by Ty McMahan

There are two kinds of companies in the Valley: those that make money, and those that don’t have to. As the economy worsens, the former group behaves like firms in other sectors, making cuts and revising earnings expectations. For the latter group, living in a VC-backed candyland, it’s as good a time as any to spend half a billion dollars on something fun.

So it was this week with two contrasting companies: Adobe [ADBE [1]] and Facebook. Adobe announced Thursday that it will miss its earnings targets for its fourth quarter ending November 28th, 2008, and will implement a restructuring program that will eliminate 600 full time jobs worldwide. Facebook, meanwhile, tried to buy Twitter for $500 million, despite the fact that it doesn’t make any money, and seems to need increasingly more capital to function.

Adobe’s misfortunes are yet another indication that technology companies, usually insulated from larger economic fluctuations, cannot remain buoyant amidst the global economic crisis. The company had projected revenues of between $925 million and $955 million, but said Thursday that it would only achieve $912 to $915 million.

The gap in revenue Adobe attributes to weak sales of its new Creative Suite 4 software, which was released in October. To make up the difference, the company will eliminate 600 full-time positions, which an Adobe spokesperson says will affect “Everyone across the board, all regions, and all business areas.” The cuts should should save Adobe tens of millions of dollars, much of which can be recorded in the fourth quarter of 2008. The spokesperson declined to say whether Adobe will re-hire any of those positions should the economy show signs of recovery.

Facebook’s profligacy seems irrational by comparison. The company is predicted to earn revenues of only about $300 million this year, which is about the same as the overhead it takes to keep the office running, according to Michael Arrington [2]. But that hasn’t stopped the social network from reportedly trying to buy Twitter with a combination of cash and stock options. Twitter’s CEO, Evan Williams, declined the offer.

Twitter doesn’t make any money either; its revenues are close to zero. Both companies are well capitalized, but reports of Facebook’s CFO flying around the world talking to sovereign wealth funds suggest that Facebook is growing too fast for its own good, and reaching a hunger for capital that US firms simply can’t — or won’t — surfeit. Twitter too is reportedly [3] putting revenue at the top of its list of things to do, in anticipation of a weakening fundraising landscape. The company had previously said it would wait until 2010 to worry about making money.

While I don’t doubt that juggernaut Facebook has its telescopes pointed in the right direction, it’s hard not to second guess the company’s prospects. If it is to ever become profitable, it will need to learn how to monetize a tool that gleans 3 out of 4 of its users from overseas, and sells famously ineffectual advertising space. Owning and managing another unprofitable Web entity would only exacerbate the problem. Had the buyout succeeded, 2009 might have been the year that Facebook was forced to come back down to earth.

[via Fast Company] by Chris Dannen

As venture capital funds face a cash crunch driven by the financial downturn, they are taking extreme measures to ensure they can fund their investments.

Some venture capitalists are selling their equity stakes in start-up companies at fire-sale valuations so they don’t have to keep funding those businesses, allowing them to husband their remaining cash for other investments.

Others are considering so-called annex funds, which are side funds that can provide an extra pool of money. And some are scaling back on new investments to increase the cash reserves in their funds.

“It’s all about cash flow right now,” says Terry Opdendyk, a general partner at venture-capital firm Onset Ventures in Menlo Park, Calif. “If you don’t have cash, companies die and we can’t resurrect them for our investors.”

Venture capitalists typically raise money from institutional investors to form a 10-year fund, using it to invest in private companies with the hopes of profiting later when the start-ups go public or are sold. The funds collect the capital their investors have promised over time, providing a steady stream of cash to nurture start-up companies.

In normal times, the funds can stop spending on the start-up when it has an initial public offering or is sold, allowing them to put remaining cash toward other investments.

Now, few venture capitalists can sell their companies or take them public amid frozen deal markets. Many older venture funds that have collected most of their capital now have to continue spending on multiple companies, spreading their cash thin.

Funds that haven’t gathered all their capital also face cash difficulties, since some cash-strapped institutions are reluctant to honor their commitments. It is also difficult for venture investors to borrow money, as many banks are currently disinclined to lend.

At Onset Ventures, Mr. Opdendyk says his firm’s $280 million fund raised in 2000 has collected most of its commitments from institutional investors and doesn’t have much cash left. At the same time, the fund has to keep spending to nurture numerous companies because there have been so few IPOs and sales. “We’re squeezing every dime” and may consider selling some company stakes, he says.

Onset’s $200 million venture fund that was raised in 2005 and a new fund raised this year are in better shape because they haven’t invested all their capital and still have money in hand. Mr. Opdendyk says those funds are getting an offer a week from other cash-strapped venture investors who want to sell out of their companies at a discount, often “for 10 cents to 60 cents on the dollar.” He says Onset is considering purchasing one or two such stakes.

Tom Crotty, a venture capitalist at Battery Ventures in Waltham, Mass., says the situation is reminiscent of the technology bust earlier this decade, when many venture funds faced a similar cash crunch. With few sales and IPOs at the time, venture investors were left spending money on too many companies. Ultimately, venture capitalists had to cut many start-ups loose.

This time, Mr. Crotty says, Battery is closely monitoring its $850 million fund that was raised in 2000 and which already has collected on all the capital pledged by institutional investors. If Battery uses the fund’s remaining cash too quickly, “we could end up having a shortage in the fund in mid- to late-2009,” he says. To prevent a crunch, he says the firm is now pruning the fund’s portfolio, a process that will leave more cash for the start-ups that make the cut.

For some venture investors, the cash crunch is an opportunity to buy into start-ups at a big discount. Bryan Roberts, a managing general partner at venture-capital firm Venrock in Palo Alto, Calif., says he recently purchased a stake in a health-care-related start-up for just 40 cents on the dollar, based on the company’s last round of financing, from a cash-strapped investor he declined to name.

“The dislocations in the markets have created such losses and constraints in liquidity that investors lacking sufficient cash are being forced into uneconomic decisions to satisfy short-term problems,” Mr. Roberts says.

Other venture investors are considering raising annex funds, which also happened during the tech bust. Bryon Sheets, a general partner in the San Francisco office of private-equity firm Paul Capital, says several venture capitalists have recently approached him about providing capital to establish such funds.

The venture capitalists didn’t set aside enough money to keep funding their start-ups and now need new capital to do follow-on financings for their companies, Mr. Sheets says. He adds that his firm hasn’t yet decided whether to participate in any annex funds.

John Steuart, a venture capitalist at Claremont Creek Ventures in Oakland, Calif., says his firm is trying to avoid a cash crunch by increasing cash reserves for existing investments. In its $130 million fund that was raised in 2005, Claremont Creek originally planned to invest in about 20 start-ups, meaning the firm would have about $6 million to put into each company over time.

But, since the downturn hit, Mr. Steuart says Claremont Creek has decided to make just 16 to 17 investments, leaving more cash to put toward each company. “Our portfolio will be smaller and more concentrated,” he says. “It’s all about cash economics.”

[via SmartMoney SmallBiz] by Pui-Wing Tam

When Amy Loera was looking for a loan to expand her family’s Mexican-restaurant business earlier this year, she applied at nine different banks. They all turned her down.

Many of the banks accepted her initial application but simply didn’t take things any further, she says. Some raised concerns about the nationwide downturn in the restaurant industry in refusing her request. And some told her that if she had applied a year ago, she would have had no problem.

So Ms. Loera turned to a local lender, Arrowhead Credit Union in San Bernardino, Calif., after a business acquaintance told her the credit union had given loans to other businesses in the community. She was approved for a $643,000 loan this summer.

Ms. Loera, who runs the restaurant chain, Tio’s Mexican, with her husband and brother-in-law, believes that since Arrowhead was based in the region, it was easier for her to make a stronger case about the health of her business.

“They were local,” she says. So “they were able to see that because we are a family-owned restaurant and because we had a very good formula to keep our overhead [costs] low and prices reasonable, we are picking up the slack from [fancier restaurants] around us and are not feeling a big hit from the current economic situation.”

Small businesses have been having increasing trouble getting loans as the credit markets have seized up. But some, such as Tio’s Mexican, are finding that smaller community banks and credit unions are more open to offering financing. For one thing, many smaller lenders are in relatively strong financial shape because they didn’t make the types of investments that got many of their larger brethren in trouble.

In addition, private local lenders may be more familiar with a region’s business climate, so they are better able to look beyond national trends to base their decisions on the more immediate factors affecting an individual business.

“Often times,” says Sandy Baruah, acting administrator of the Small Business Administration, “the larger institutions will rely more heavily on the credit score, whereas sometimes community banks will take a much closer look at the business plan. And especially if they are based in the region or the community, they will make a decision based on their overall comfort with the business plan and presentation.”

” But still, credit ratings matter,” Mr. Baruah says.

When applying for loans, Ms. Loera says she highlighted the fact that her restaurants are based in so-called bedroom communities like Rancho Cucamonga, Calif. — where people commute some distance to work, are strapped for time, and look for a place where they can eat an affordable family meal at the end of the day.

She presented a three-inch-thick binder filled with financial statements showing the historical results of the company’s existing restaurants as well as the fact that they were debt-free. The Loeras had credit ratings in the 750 range, she says.

She also gave a projection of how much money the new restaurant would bring in over the first 12 months, and a business plan that included details such as the number of employees the new location would have and the intended menu.

Ms. Loera says all that data didn’t affect the decision of the banks — but it did Arrowhead’s.

Jon Parks, a vice president at Arrowhead, says the credit union approved Ms. Loera’s application because the family showed they already had experience managing restaurants and were able to prove that their existing locations were financially successful.

The fact that the new eating place is being planned as an affordable family restaurant makes it more likely to succeed in the current economic environment, he says.

“We are not score-driven in the business-lending side, and choose to look behind the scenes,” Mr. Parks says.

He says a strong credit score — one above 700 — can be helpful. But the one metric that often trumps all others is cash flow. Since it indicates the amount of cash generated and used by a business over a certain time frame, it can be a key indicator of a borrower’s ability to pay back the loan.

Lenders also try to gauge how a small business will do going forward. Heath Chapman, vice president, commercial banking at Morrill & Janes Bank in Merriam, Kan., which is still lending to small businesses, says companies increase their chances of getting a loan if they give financial forecasts that look realistic.

He suggests that owners include a best- and worst-case scenario for their revenue projects and for forecasts on how they will repay the loan.

For a banker, “having all those questions already answered helps,” he says.

Certain industries that have been particularly hard hit by the weakening economy may face added pressure to prove that their earnings are strong enough to withstand the downturn. But institutions that are still lending to small businesses tend to take each application on a case by case basis.

“Those industries that have been hit the worst — construction, auto dealerships — we are going to look at with a logical eye and understand what we are up against the next 12 to 18 months,” in terms of the outlook for the overall industry, says Mr. Parks.

“It doesn’t mean we are not going to lend to them if the numbers dictate and everything makes sense,” Mr. Parks says.

He believes there could be pockets or individual businesses that continue to do well even within such sectors because they have some kind of a niche offering.

Some community lenders aren’t completely dismissing even those businesses that face some financial hiccups. Mr. Chapman says he is asking small-business clients to come to him as soon as possible with financial problems or difficulty funding losses.

He says he is willing to consider lending to small businesses that face some difficulties if they have a history of overcoming problems in the past.

[via WSJ Small Business] By Anjali Cordeiro

Silicon Valley technology startups are adopting a new business plan: deferral.

MerchantCircle Inc., a Los Altos, Calif., Internet startup, typifies the trend. Last month, company founder Ben Smith was in New York talking to media companies about raising $50 million, with which he planned to make acquisitions to fuel MerchantCircle’s growth. But as the financial markets tumbled this month, Mr. Smith canceled two trips to New York and a roadshow to Europe to raise the capital. For now, the fundraising is on the backburner.

“When we started the year we were pushing really hard for growth,” says Mr. Smith, who in 2005 founded MerchantCircle, which provides online advertising services for small businesses. “That’s just not as important anymore. Now it’s all about cash flow.”

The shift is being echoed across Silicon Valley, where executives at startups—which form the foundation of the tech economy—are now deferring expansion projects, taking voluntary pay cuts, delaying hiring plans and slashing expenses. The shift is a turnabout for the region’s young companies, which have traditionally focused on go-go growth by grabbing customers early and being first to market with new technologies.

The change is being spurred by the souring economy and market gyrations, which have hit startups’ main source of funding: venture capital. Prominent Silicon Valley venture capital firms Sequoia Capital and Benchmark Capital recently sounded the alarm, saying a downturn would be protracted. Venture capitalists are now slowing their investments, doing just 583 deals totaling $7.37 billion in the third quarter, down from 673 deals totaling $7.94 billion a year ago, according to research firm VentureSource. VentureSource is owned by News Corp., which also publishes The Wall Street Journal.

The pullback recalls the tech slump earlier this decade, when venture capital also froze up and numerous startups flopped. That downturn, which started in 2000 and lasted till 2004, helped weed out weak companies and taught surviving firms better fiscal discipline.

But it also led to the disappearance of one in five jobs in Silicon Valley. And it crimped innovation, as companies put off new projects. In several quarters in 2000 and 2001 as the tech bust took hold, there was a dip in economic productivity, according to Forrester Research.

The coming shake-out will “weed out the weak” but there are risks that some innovation will be stifled, says Eric O’Brien, a venture capitalist at Lightspeed Venture Partners. Earlier this decade, the tech bust made telecom firms wary of buying unproven communications technology, forcing an end to even promising tech start-ups, he notes. “My fear is that some of these companies may die when they shouldn’t,” Mr. O’Brien says.

Many startups are already suspending development projects this time, which could affect innovation. Ruckus Wireless Inc., a Sunnyvale, Calif., startup that makes wireless equipment, this month shut down research and development around potential new wireless products. While those projects were “nice,” they weren’t “material,” says Selina Lo, Ruckus’s chief executive, who adds that killing the projects would save the company $150,000.

Ruckus is partly funded by Sequoia Capital, which held a presentation for entrepreneurs earlier this month warning of the dire economy. Ms. Lo says the event “freaked people out,” leading to her decision to eliminate new development. In addition, Ruckus’s executives took a voluntary 10% pay cut mid-month “to demonstrate that everyone must share the pain for a more secure future,” she says.

Such moves have implications for Silicon Valley’s economy, which until recently was holding up. Silicon Valley’s unemployment rate in September was 6.5%, for instance, far below California’s overall unemployment rate of 7.5%, according to the state’s Employment Development Department. Companies had continued to fight to recruit strong technical talent, over whom price wars had regularly broken out.

Now such employment-package inflation is likely over. Bill Nguyen, founder of music Web site Lala.com, says he had planned to grow his Palo Alto, Calif., company to 70 employees from 35 in September. But this month, he put hiring on hold. He now expects Lala to top out at about 40 employees by the end of the year.

“We have internal arguments daily about hiring,” says Mr. Nguyen, who is trimming Lala’s burn rate—Silicon Valley lingo for how much cash a young company with little revenues and no profits goes through each month—to $500,000 a month from more than $650,000 a month. “It’s a choice between accelerating growth or taking a more conservative approach and lasting another three years.”

Silicon Valley commercial real estate, which had been in the doldrums for much of this decade because of the tech slump, is also likely to take a fresh hit. Lala’s Mr. Nguyen says he this month deferred taking on a new office lease that Lala had signed earlier this year. Meanwhile, Ruckus CEO Ms. Lo says that she has postponed adding 5,000 to 10,000 square feet in new construction to the company’s offices.

Not all tech startups are deferring their plans. Internet chat startup Meebo Inc. raised $25 million in April, before the funding environment soured. Seth Sternberg, CEO of the Mountain View, Calif., company, says he remains on track to develop new services to grow revenue. The 45-person company is also still hiring and plans to get to 55 staffers by the end of the year.

But he is still making some cutbacks. Meebo was aiming to open a new datacenter—a facility that houses back-office computers and networking gear—this year, but has now decided to wait six to 12 months. “Just because we’re already operating lean doesn’t mean we’re operating as lean as we could possibly be,” Mr. Sternberg says.

[via WSJ Small Business] by Pui-Wing Tam and Bobby White

I’VE TALKED TO a lot of people who have found a promising market by coming up with a product or service that would solve a problem. But they’re paralyzed about taking the next step. What if they put in the time and effort — and possibly money — and it flops?

There’s one process they’re missing. Validating your market after you’ve come up with a niche business idea is a crucial step you can’t afford to skip.

Of course, there’s no way to guarantee success, but ask yourself the four questions below. If you can check off every one, you’ll know — as much as possible — that you’re onto a winner.

1. Is there a demand for your product or service?
You need to make sure there are enough potential customers out there to keep you in business.

Are people trying to solve this problem on the internet and not finding a suitable solution? If you’ve done keyword research to find a niche market, you should already have a good idea about this.

Don’t overestimate the numbers. Just because you think every cat owner in America needs to buy your revolutionary cat bed doesn’t mean everyone will. A good number to use is 2 percent. If 2 percent of the visitors to your website become customers, you’ll be doing well.

2. Is there any competition already supplying the market?
Search for your top keywords and look at the rival sites that come up. What do they sell and how do they make money?

Most sites you find won’t be actual competition — they may just have some related content or be luring traffic for the sake of advertising revenue.

When you find real competitors offering something similar to what you want to sell, dig deeper into their businesses.

What can you do better than they do? Build a more professional, easier-to-use website? Write better pay-per-click ads for the same keywords? Put more keywords in your copy and code to attract the search engines?

These answers will put you ahead of the game and give your potential customers a reason to choose you over your rivals.

3. Will you get high-quality traffic?
Are people looking for something free, or will they actually buy from you?

Search for the terms (free) + (your keyword). Is there a free product competing with your product? If so, people won’t pay for your version.

It’s also a good idea to search Amazon and eBay for previously sold items to see whether people are willing to buy products similar to yours.

4. Does your internet business have a high lifetime value?
Lifetime value means the total value of each customer to your business as they buy from you again and again.

Can you turn one-time buyers into repeat customers? Are there add-on products or services you could offer to develop lasting, valuable relationships with them?

If you have a single product or service, try to come up with more things your niche market would buy — because it’s much easier to sell to repeat customers than it is to develop new customers.

Once you’ve thoroughly — and honestly — assessed your niche business idea by answering these four questions, you should feel much more confident about making it a reality.

[via SMSmallBiz] by Derek Gehl

Venture capitalists are reining in spending amid the financial downturn, a shift that has implications for entrepreneurial activity.

According to two sets of data pegged for release Saturday, venture capitalists did fewer new financing of companies and spent less money in the third quarter than they did a year earlier. Venture capitalists typically put money into young companies, with the aim of profiting later when those start-ups go public or are acquired.

Venture capitalists arranged 571 financings totaling $7.2 billion for the third quarter, down from 651 deals totaling $7.8 billion a year earlier, according to research firm VentureSource. VentureSource is owned by News Corp., which also publishes The Wall Street Journal.

The National Venture Capital Association, a trade group, and PricewaterhouseCoopers found a similar trend, noting that venture investors put $7.1 billion into companies in the third quarter, down from $7.8 billion a year earlier.

The amount invested was the lowest quarterly number since late 2006.

The slowdown has repercussions for entrepreneurs in sectors such as technology and life sciences, many of whom rely on venture funding to kick off and grow their companies.

“Entrepreneurs are seeing lots of their traditional avenues of finance getting whittled away,” says Mark Heesen, president of the National Venture Capital Association. He adds that he has a “high level of concern” for the overall health of the venture industry.

The pullback comes as venture capitalists have been hurt by a gyrating stock market, which has put a crimp in the market for initial public offerings, which the industry depends on to generate returns.

Merger-and-acquisition activity — another route to returns — has also tanked. And many venture capitalists are also facing difficulty raising funds as their investors grapple with hard-hit portfolios.

The information-technology sector took a particular hit in the quarter. According to VentureSource, 270 financings totaling $2.7 billion took place, down from 342 deals totaling $3.4 billion a year earlier.

Other sectors, such as health care, were relatively stable.

[via WSJ Small Business] by Pui-Wing Tam

Chris Sacca is one of Google’s Principals for New Business Development. Here he blogs about how to get noticed, if you are interested in working with Google, Inc.

I am on the front line of inbound business proposals. I would gather I see 40-50 per day. The launch of Google Talk has probably added another 15-20 per day.

So, as I sit with trepidation considering how many emails I have flagged for follow-up in my inbox on this Sunday afternoon, I thought I would take a minute to type out some hints that will make it easier on both of us and increase the likelihood that your company and mine will get some business done. These are in random order and I might expand the list as time goes on. As always, your comments are welcome. Anything I missed? (Keep in mind, this is my personal blog and nothing herein is approved by my employer.)

Email Rules – Phones are very yesterday. Voicemail is so broken. Until someone can really make it easy for me to extract a number from a voicemail, file the message away for later, label it, quickly find it again, search over it, forward it, reply at my convenience, etc etc, I am going to stick to email. Email is awesome (especially Gmail). It allows me to ensure that I get back to you. It also helps me bring in all the folks within the company whose input would matter on your topic. So, please, please, please – email. If you insist upon calling, you will hear a message saying that I won’t check your voicemail anyway. So, before you think me rude, I implore you to please send email.

Thesis Statements – Lead with what you want. Please, put it in the first sentence or two. Just tell me how we can work together. You can expand on it later, but please don’t make me go too far. This is particularly tough when I have to forward your message to a lot of other execs who are also looking for a thesis statement.

What problem are you solving? – Hand in hand with the thesis statement is identifying the problem you are solving. Many times I have conversations with folks who can’t answer that question. We are obsessive about solving problems that enhance our end-user experience. We are lucky in that the company doesn’t even ask us to make money with each enhancement. We are instead rewarded for the impact we have on users. So, please tell me what about their experience is broken now, and how we can fix it together. (By the way, we are very humble about this and realize there are myriad ways to improve the experience. Just help us by being specific.) Also, please keep in mind that we try to solve big problems. Huge problems. Problems that affect millions and millions of users everyday. In that light, some of your niche proposals may be cool, but it often comes down to a matter of prioritization for us.

Differentiate – Tell me right away why you guys are different and what comparative advantage you have on the market. Why are you the best to help us? 90% of the time we realize that we would like help in a space, but we need help finding who is best positioned to be our partner. Kick that off right away and accelerate the process.

Follow-up – Following up by repeat email is perfectly fine with me and may often help if I have fallen behind. When doing so, please propose a concrete next step. That said, what doesn’t help is when you go over our heads to other execs. At the end of the day, those random emails to the big guys come right back to me and just leave me a little less excited to collaborate. So, don’t be afraid to ping me by email if need be.

Google is Bottom-up – That last point reminds me that Google buying/partnering decisions are made bottom-up. Meaning, product managers and engineers are your ultimate clients. Sure the deals may be signed by VPs, but they are just endorsing the recommendations and leadership taken by the PMs. Our executive team truly empowers folks here to get done the deals needed in their spaces. You want to partner with Google Talk? Our CEO is not going to drive that. The Product Manager for Google Talk will be your guy. So, my advice is to avoid shooting for a meeting with a bigwig and instead, know your audience. I assure you that your deal will get done faster.

Meetings aren’t always necessary – Often, vendors are in a rush to meet in person. They want to bring a big team in to press the flesh. I went along with this for a long time and soon saw my schedule descend into gridlock. Truth is, meetings can be inefficient. Let’s start with email. Send us a deck. Maybe next we can do  a brief call. There is no need to hold a meeting with me to build a relationship. I swear I have done business over instant messaging networks.

NDAs aren’t a helpful start – As an IP company, NDAs can be frightening. Asking us to sign one before we are really getting into the nitty-gritty of a partnership will likely grind things down. I will ask you to just not share anything with us that is confidential. I think NDAs have just become automatic in the Valley. However, when people stop to consider them and the pitfalls, they realize they can be superfluous in many instances.

Lead with engineering – I would rather have a meeting with technical people in the room than just business people any day. (Note: This is a statement against self-interest as I am only a wannabe geek and am not an engineer by background.) At the root of 99% percent of our partnering decisions is evaluation by an engineer(s). We like to dive into the nuts and bolts of what is currently broken, how we will fix it together, and what that collaboration will look like, all with specificity. A deep technical understanding on both sides is a precursor to starting any conversation about who pays whom, etc. So, thanks in advance for bringing your smart people into the loop with our smart people.

PR is a distraction – As a matter of principle we tend not to do PR with our partners. Truth is, I think PR is just a distraction. I know what it feels like to be a start-up and craving some public awareness. I have definitely been there and can sympathize. However, PR can be  very empty and doesn’t add much concrete value to anyone. Focusing on building something cool that users will really dig is the best path for both of us to succeed. Believe me, when that happens, your company and mine will get all the exposure we could want, and more. So, let’s avoid the PR discussion for now and just concentrate on making cool stuff work. If it rocks, the world will know soon enough.

Threats don’t work – A surprising number of people write to me saying “If you do not act in 5 days I am taking this to Microsoft  . . . ” or “This note will be forwarded to Terry Semel . . . ” I am very inclined to let those proposals go. To me, partnerships are as much about the partner as they are about the technology. I am not psyched about working with people who want to coerce me into action. Microsoft and Yahoo are both awesome companies, with solid engineers. They are both tackling big problems and having a lot of success with many pieces. I think each of us has our strengths, and, in the end, it might just be possible that one of them might make a better partner for you. While I wouldn’t seek your exclusivity upfront, please give me a break on the threats. I would rather you spend that energy on explaining why Google is uniquely positioned to make a great partner for you. Thanks.

Don’t assume we have thought about X already – One of the most entertaining things for me to do is read the blogs and see how much credit folks give us for our alleged next moves in a particular area. They presume we have a big honking master plan document somewhere and have the next few years set forth step by step.  Truth is, we are constantly learning. We tend to launch early and launch often. However, this doesn’t mean we have it all figured out. You have a killer idea for us? Are we missing the big picture? Can you help us? Fire away. For instance, you guys who have been thinking about VoIP for years and years, what would you do if you were Google, and how can you work with us to get that done?

Consider working for us – If all of the above comes instinctively to you and you have got lots of fabulous ideas, experience getting things done/built, and are looking for a fun environment in which you can shape/make decisions affecting millions of Internet users, then I strongly urge you to come work for us. Check out our jobs page and shoot me an email if you find anything interesting.

Bottom line is that I/we want to work with you and your company! Partnerships are an essential part of our strategy and have been the impetus for massive value creation at Google. We humbly admit we can’t begin to accomplish a fraction of what we would like to without teaming with others. That said, as you can imagine, we are beyond busy, so I beg your forgiveness if sometimes I am not able to get back to you on a timely basis. Hopefully keeping all of the above in mind, we will get more done together.  So, send those proposals and let’s do some cool deals! Thanks.

[via WhatIsLeft.org] by Chris Sacca