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Friday, March 28, 2008

Things seem to be changing for the fairer sex in business

The New Gender Gap in Education-Becker

Until the mid 1960's, female high school graduates were less likely than male graduates to go to college, and female college students were far more likely to drop out than were male students. The direct reason for this difference was that many younger women married and then dropped out of school - mainly to start having families. Perhaps a more basic reason for this gender difference in education was that women did not participate in the labor force so much in those days, and hence many women did not believe a college education was useful.
All this has changed radically since 1970. Female high school graduates are now no less likely to enter college than are male graduates, and a much larger fraction of girls than boys finish high school. These two facts imply that considerably more women enter college than men. The fraction of college students who are female is further increased by the greater propensity of women who enter college to finish and graduate. About 57% of American college students are women, and they constitute about 60% of those who graduates. Similar trends toward making women a majority of college students apply to many European countries, and some Asian countries as well.
What explains this reversal from under representation of women in college to over representation ((see the related discussion in my blog entry for July 17, 2006)? One important cause is that marriage and child-rearing exert a much weaker pull out of school for women than in the past since women marry and start families at much later ages than 40 years ago. This increase in age at marriage is related to the decline in birth rates, and to the increased time that women want to spend working rather than caring for children and running households.
A college education is more attractive to women who spend greater time in the labor force since going to college significantly raises earnings of women as well as men. The financial attractiveness of a college education has grown sharply for both sexes since the 1970's because of the large rise in the earnings premium from a college education. The average hourly earnings of college-educated persons grew from about 40 % higher than that of high school graduates in 1980 to about 80% higher in recent years. This trend toward a much higher college education premium is also found in many other countries as well as the United States.
Although quantitative evidence on non-earnings benefits are more limited, the advantages of a college education in improving health, raising children, managing financial assets, responding to adversity, and in other areas of life have also grown along with the growth in the college earnings premium. This implies a widening advantage of a college education even to women who spend a significant portion of their time raising children and managing a household. In addition, the propensity of college-educated women to be married has increased a lot relative to the marital rates of women with less education, so that graduating college no longer significantly reduces a woman's chances of marriage.
Since these forces pushing women toward a college education have been strong during the past several decades, it is no surprise that a much larger fraction of young women now enter and complete college than a half century ago. This does not, however, fully explain why women are more likely than men to be in college since most of these forces have been just as powerful for men, and college-educated men still spend a larger fraction of their time working in the labor force than do college-educated women.
An important reason why women not only closed the education gap with men, but also changed the direction of that gap, relates, I believe, to the better performance of women in school. The average grades of women at every education level exceed the average grades of men, while the variation around the average is larger for men. Persons with low grades find school unpleasant since their teachers criticize them, and they come to believe that they are failures. Since many more boys than girls in high school have low grades because both average grades are lower and the variance in grades is greater for boys, more boys than girls find high school unpleasant and drop out before graduating. Dropouts truncate the grade distributions of graduates at the lower end, so that average grades of boys who graduate high school are closer to the average grades of girls who graduate than are the averages for all boys and girls in high school.
The same process operates at the college level. Men have much lower grades in college and find the experience less pleasant, so they drop out of college in much larger numbers than women, and are much less likely to graduate. That many more men than in the past continue on to college after high school indicates that they are aware of the rise in financial and other benefits from college. That they drop out of college in large numbers presumably indicates that they are either discouraged by their low grades, or they just do not like being students.
Why women at all ages do better in school than men is not so easily understood. It is unlikely that women do better mainly because they expect to remain in school longer- this is causation from remaining in school longer to better grades- since women had better average grades than men even when they were more likely to drop out of school. One line of explanation argues that women are more diligent students, less rebellious, and more docile students. Whatever the explanation for the remarkable shift in college attendance rates of men and women during the past 40 years, this shift is likely to have major implications for future changes in the gender gap in average earnings, the fraction of heads of business that are women, and other measures of gender differences in achievement.

By Gary Beckner and Richard Posner


Tuesday, March 25, 2008

Angel or Friends and Family investment strategies

Angel or Friends and Family investment strategies

What's the best/preferred structure of investment money pre-VC investment. We're in the beginnings of raising angel capital (~500k) and were wondering what, if any, considerations we should make regarding the investments to allow for VC later. Should we take convertible loans or issue straight preferred stock? What are the other options that are out there for investment structure? Is it too much of a hassle to handle future investments when there is an "angel group (say 5 doctors banded together)" versus a singular angel?
Assuming that you are planning on raising VC money some time in the future, there are two different typical structures for the first angel financing: (1) convertible debt and (2) preferred equity.
Convertible Debt: This is the easier approach of the two. In this case, the investment is in the form of a promissory note that converts into equity on the terms of a “qualified financing” (where qualified financing typically is defined by having a minimum amount – say $1m of total investment.) The note will either convert at a discount to the price of the qualified financing (usually in the 20% – 40% range), will have warrant coverage (usually in the 20% to 40% range), or both. This discount and/or warrant coverage gives the angel investors some additional ownership in exchange for taking the early risk. This note should be a real promissory note with the conversion and redemption characteristics clearly defined to protect both the investors and the entrepreneurs from any misunderstandings.
Preferred Equity: This is also known as a “light Series A” – it’s preferred stock that is similar to that a VC will get, but usually with lighter terms due to the relatively low valuation associated with it. For a very young company, a $500k investment can receive between 25% and 50% of the equity in the company and, as a result, many of the terms associated with a typical VC investment are overkill.
While either of these work, you’ll find some angels that strongly prefer one over the other. In addition, if you don’t believe you are going to raise additional VC money and will only be relying on additional small angel-type investments, the preferred equity approach is fairer to the investors as they’ll more clearly be participating in the upside on terms that are agreed to early in the life of the company.
Finally, I don’t think there is a difference between having “an angel group” vs. a single angel investor. However, you should try to insure that all of your investors are accredited and – if some aren’t – make sure you understand the implications of this.

By Brad Feld

Brad has been an early stage investor and entrepreneur for over 20 years. Prior to co-founding Foundry Group, he co-founded Mobius Venture Capital and, prior to that, founded Intensity Ventures, a company that helped launch and operate software companies and later became a venture affiliate of the predecessor to Mobius Venture Capital.



Thursday, March 13, 2008

Whats in the future for all us Business leaders

I always get a buzz from reading some of the futurists ideas, I have helped a few with their research in the past, this article is a snap shot of some of the thoughts from a leading thinker in this space Ray Kurzweil, a lot of it is not to far off. Enjoy the read the original article was from Future Winners International Ltd, it has a proven track record of providing senior executives with the ability to continuously re-engineer their enterprises with a supporting organisation structure and culture which is nimble and adaptable.

Adapt or Die

I seldom recommend a book in this newsletter – especially one published as far back as 2005! I however recommend unreservedly that you should get your hands onto ‘The Singularity is Near’ by Ray Kurzweil even if only to read the first two chapters.
Ray is possibly the world’s most famous serious futurist. In these two chapters he combines fifteen studies of the evolution of life from the big bang until the present. These studies were compiled by highly respected academics and organisations including The American Museum of Natural History, Encyclopedia Britannica, Scientific American, the biochemist Paul D. Boyer who won the Nobel physics prize in 1997, Carl Sagan and Phillip Tobias the world famous paleoanthropologist.
He discovered an absolute fit of the milestones in evolution in each of the studies to a single exponential curve. This is shown below:

Note that in a logarithmic plot an exponential curve appears, as above, as a straight line.
Kurzweil claims that the exponential curve has already reached the critical trigger point whereafter the development of all biological and human created technology will accelerate explosively transforming everything we do with ever increasing speed.
Just to emphasise this point, within 2 – 5 years you should be able to
· Make presentations to your clients or watch high definition TV with the image projected onto a wall with stereo sound from your cell phone
· Speak to prospective clients and work colleagues in their home language whether Cantonese, Russian or Arabic using simultaneous language translation. This also means Chinese, Russian and Arab competitors will be able to converse with your customers in English. Frightening!
· Utilise your computer to manage a myriad of gadgets around your home and office. The days of missing keys will soon be over!
· Speak directly to your computer and receive a reasoned reply.
· Get your computer to do research on the internet for you
Request your computer to undertake a great deal of the routine work that currently takes up a great deal of your time
· Attend virtual meetings without leaving your office
· Provide your clients with face to face communications when they phone in. At last we will be able to see those anonymous faces of the people at call centres. And they will be able to see just how fed up we are!
While all this happens, customer and employee expectations, aspirations and values will change so much as to be virtually unrecognisable.
What does this mean for you and your business?
Basically that Ray Kurzweil has got it right. The acceleration has set in. We have passed the ‘trigger point’ on the exponential curve .Technological knowledge, like interest on returns reinvested, increases at compound or exponential rates. Blast off is already well underway.
Whether you are a one person business or the CEO of a multi-million dollar corporation reading this Future Report, you will have to continually transform yourself and your business if you are to survive.
Executives need an entirely new tool bag now in order to develop successful strategic plans and take their employees and customers with them as unrelenting change accelerates.
Yet, the truth is that the business strategy most of us currently use is to adapt to changes as they come along. This might have served us well up to the present, but will become a recipe for disaster in the near term simply for two reasons.
Firstly, most of our organisations were designed to be winners in the Industrial age and, despite some tinkering, are still what they were designed to be. Your clients and employees, especially the millennium generation, have very different aspirations and expectations both of employers and as customers. The risk of conducting a business alien to clients and employees is self evident.
Secondly, we all know that if you don’t plan to be the market leader, you can plan to be a successful follower.
In the past the follower was often able to copy innovative products and produce them cheaper or with more appealing features than the innovator. The difference in future will be that the innovator will have moved on to new cheaper and/or more advanced products and services even before the follower catches up.
The future winners will have a flexible corporate strategy which is capable of fast, innovative movement and a supporting organisation structure and culture which is nimble and adaptable.
The remorseless and ever accelerating speed of change will compel CEOs to abandon redundant strategic planning techniques and leadership models designed for the industrial age. They will have develop new strategies and methods to plan for the future, companies like FWI can help there.

Wednesday, March 12, 2008

When pride get's in the way, yahoo,google,microsoft

It is easy as a founder of a company to get too emotionally involved in your start up, have a read at this article about Jerry Yang and his fierce rival, Microsoft. I found this article in the http://www.growthbusiness.co.uk/ news letter and it was by Michael Jackson who is the chairman of Elderstreet Investments, a leading technology venture capitalist which he founded in 1990. He was formerly chairman of Sage, the FTSE-100 accounting software group with which he was closely involved for over 20 years, since its unquoted days.

When pride gets in the way
When Yahoo founder Jerry Yang received a call saying that his fierce rival, Microsoft, wanted to buy the company, his initial reactions were outrage and rejection, writes Michael Jackson. Yet Yahoo has underperformed in terms of share price and trading performance, and the offer by Microsoft was generous, being significantly higher than the previous day’s share price.
The bid prompted Google to start talks with Yahoo. While it’s obvious that any deal here would be vetoed as anti-competitive, one suspects that prejudice against Microsoft has gained the upper hand.
Now I am not saying that Yang is wrong to reject the bid, but I bet you anything that emotion or – dare I say it – prejudice played a large part in the decision. Nor can you necessarily blame Yang; after all, Microsoft has been a massively aggressive competitor for all software and internet-based companies for over two decades.
Understanding Yang’s reaction is one thing, but that doesn’t necessarily make it right. Yahoo is a public company and the board has a duty to consider any offer for the company with as much detachment as possible.
When I was young and impetuous, I was a non-executive director of a small listed property company. The business had performed well, but some two years after its IPO it was still hovering around its float price. Then along came an offer from a private hotel group that wanted a listing and some additional cash, which they could generate from selling some of our properties.
The rest of the board were for the deal. I was against because I was not being offered a board seat on the combined entity, and I felt that some dirty tricks had gone on behind my back as I was the last to know about the deal. So what did I do? I tried my best to scupper it and (for once) succeeded.
But I was completely wrong. It was a good deal for us and, had we accepted, we would have probably got a good 25 per cent uplift. Instead, we limped along for another 12 months and sold out adequately, but certainly not well.
Like Yang, I was acting in my own interest rather than in the interest of all shareholders. I’m sure I’m not alone – human nature being what it is. But there are lessons to be learnt for the businessmen who really want to succeed:
• When taking over a small public company, always make sure that you have got all the target company’s directors, including non-executives, on board. At the moment there are a lot of interesting small Plcs around on AIM at very good prices, so this could be an interesting area for potential acquirers.
• When hiring, people are often prejudiced by age, sex and colour. Now I am not a human rights agitator but confess to finding it difficult to accept that really bright individuals in their early 30s have the experience to deliver big results. However, I know I am wrong because this is exactly the age you want for an executive at many early-stage technology businesses. Interestingly enough, there is also a prejudice against hiring people from other business sectors or business disciplines.
• Don’t constantly focus on competitors. Some businesspeople spend all their time reacting to the competition and not enough time developing their own initiatives. In general, a lot of businesspeople are prejudiced against their competition, not really analysing what is good about them and adopting their best attributes.
• Don’t stick to old technology or business models just because they have always worked in the past. Not charging for something that has always been free because ‘we never have done’ is not good enough in today’s competitive environment.
• Sourcing products or services from overseas is another area in which some companies left it almost too late. Many didn’t realise that if they did not go to low-cost overseas production while their competitors did, it was only a matter of time before the competition won out.
Misplaced prejudice is as bad in business as it is everywhere else in society