Monday, June 20, 2011

Where Do Jobs Come From?

We all know good-paying jobs are important to our economy, both locally and nationally.

Our legislative and congressional policymakers spend a good deal of time debating job creation policy. Each city in the Treasure Valley has an individual assigned to economic development. Our chambers of commerce work to improve the economy for our local companies.

But sometimes I fear all this effort, while well-intentioned, is under-informed on how jobs actually get created.

About 30 years ago, Professor David Birch of the Massachusetts Institute of Technology published groundbreaking research showing that about two-thirds of all net new jobs (jobs created minus jobs lost) between 1969 and 1976 were created by firms with 20 or fewer employees (David Birch, “Who Creates Jobs,” Public Interest, Fall 1981, pp. 3-14). This research led us to understand better the extremely important role of small business in the U.S. economy.

Now the Kauffman Foundation has published a surprising new study of job creation in the economy (Tim Kane, “The Importance of Startups in Job Creation and Job Destruction,” The Ewing Marion Kauffman Foundation, July 2010). Their research mined a new U.S. government dataset called the Business Dynamics Statistics, which includes age of company as well as employment data. Here’s what they found: “Startups aren’t everything when it comes to job growth. They’re the only thing.”

The data show that in all but seven years in the period from 1977 through 2005, existing firms on balance lost more jobs than they created.

Clearly employment didn’t drop in the other 22 years. So where did the job growth come from? It came from new companies.

How can this be? If you think about it, a startup by its very nature starts with zero jobs and with its first hire creates a job.

Over this 28-year period, startups created an average of 3 million jobs each year. But once started, some firms add jobs, others lose them. On balance, after the first year existing companies lose more jobs than they create. Of course, not all companies destroy more jobs than they create, but when summed together, existing firms stop growing, may lay off workers or even go out of business.

This has several public policy implications. Of course we should not ignore our existing businesses. Helping them grow is important. But I am intrigued about what we can do to encourage entrepreneurs to start businesses in our Valley. Here are several thoughts.


We should consider investing some of our economic development resources into support for entrepreneurs. Recruiting a company to come to the Valley may lead to good headlines, but may not lead over the long run to job growth. Some states have used tax policy, such as tax credits, for investing in new businesses to encourage capital.


Incubators, when combined with support such as that provided by the Boise State University TECenter in Nampa, can provide nurturing support for entrepreneurs.

Funding research programs in our universities produces new knowledge that can become the basis for a new business.

And joint public/private partnerships such as The Core in Meridian may provide a seed bed that will attract entrepreneurs and capital.

Kevin Learned is a counselor at the Idaho Small Business Development Committee, a member of the Boise Angel Fund and the finance committee of the Idaho Technology Council. Contact him at

Wednesday, June 1, 2011

How To Make an Effective Investment Presentation

Special to the Idaho Statesman

Published: 05/04/11

In my last article I wrote about getting the interest of investors by clearly stating the problem your product or service addresses. So if investors say they are interested in learning more, then what?

Typically the next step is an investment presentation, or pitch.

Your pitch is a sales presentation. You are selling your belief that you can execute a business plan that will make the investors money. Of the 60 entrepreneurs who made pitches to the Boise Angel Fund over the past four years, only 25 moved to the next step. More than half didn’t inspire the confidence of investors. Here’s some of what I’ve learned from listening to all 60 pitches:


I have been surprised how many entrepreneurs treat this step casually and come underprepared. They stumble through their pitches, they read their PowerPoint slides and they make a disjointed presentation.


Typically the time allocated to the pitch is short, perhaps 15 minutes or less. Funding Universe of Salt Lake (in which local VC Highway 12 Ventures invested) gives entrepreneurs only four minutes.

You’ve got to get directly to the point of the business proposition quickly. Guy Kawasaki, in his excellent book “The Art of the Start,” says, “I’ve never heard a pitch that was too short … a good one will motivate listeners to ask questions that extend it.”


One angel said, “Never have I sat in a pitch wishing the entrepreneur had told me more about his life.” Yes, of course you should be passionate about your business. But get to the point. The investors don’t need to know much about how you came up with your idea, just what it is and what problem it solves.


The point of your presentation is not to demonstrate your prowess with PowerPoint. While slides may be helpful in reinforcing your points, the investors are primarily interested in your ability to explain your proposition. If you are going to use slides, avoid distracting dissolving and flying transitions. Put a maximum of three points on a slide. Remember that slides are best used to present bullets, not long dissertations.


Investors want to know first about the problem you are solving — what it is and how big it is.

After you have convinced them that such a problem exists, you can tell them briefly how or why your product or service addresses this problem.


Once you have addressed the problem and your product, the next question will be, “How will you get a customer?” Entrepreneurs frequently believe that if they make the product, the market will somehow miraculously come.

The investors know better. You must convince the investors that you have a reasonable plan to distribute your product or service and the cost of going to the market (advertising, sales personnel, distributors, etc.) will be low enough that the business will be profitable.

The entrepreneur who makes a concise and thoughtful pitch that addresses the magnitude of the problem being solved, how his or her product solves the problem and how the product will be taken to the market, will have potential investors saying, “That’s interesting. Tell me more.”

Kevin Learned is a counselor at the Idaho Small Business Development Center, a member of the Boise Angel Fund and the finance committee of the Idaho Technology Council. You can reach him by email to