November 05, 13
Back in February 2011, I stated that the Double Dip had arrived. That was a somewhat bold statement in February. However in June 2011, that assessment would appear to be indisputable. These 2 charts tell the story of life in uncharted territory.
The Macro Story in just 2 charts
There are many economic charts — housing starts, average home prices, food stamp consumption, etc. They are all symptoms of the larger structural problem, and that is the rapidly increasing percentage of the population that is unemployed or underemployed, and likely to remain that way for a long time to come.
Over the last 20 years, a vast Human Resources infrastructure was created in order for companies to become great at hiring and retaining the dwindling supply of non-retired talent in the “Baby Bust” when the Boomers started to retire. It turns out that we did not need all that labor after all. Much of those jobs simply went away.
On the one hand, long-term/permanent unemployment is soaring stratospherically. On the other hand, loss-making GroupOn is on track for a valuation of $20+ billion in their IPO while hedge Fund manager David Tepper bulldozed his $44 million house in the Hamptons.
So, what to do about it?
Entrepreneurs create Capital
Capital is winning. You can win too. If you start a company, you own 100% of the capital. You can assign a fair value on that capital, and sell some or all of that capital to investors who expect that investment to deliver a higher risk-adjusted return than they are earning on their bank deposits. Does that sound hard? It really isn’t.
Despite all of America’s enormous challenges, this is what makes America great: Entrepreneurs who create something from nothing. As a serial entrepreneur and past full-time angel investor, I have a lot of opportunities to interact with entrepreneurs. Here are just a couple of recent examples:
- GiftBasketsPlus.com: Last week, I had a chance to catch up with Rome Dhanani of zqStores, an eCommerce startup. Rome now has a network of 15 eCommerce sites including his flagship site, GiftBasketsPlus.com which he founded last August. Rome is using open-source eCommerce software from Magento for which he paid nothing. For payment clearing, he uses PayPal Pro which costs him $30 for an unlimited number of stores. His traffic comes entirely from organic search. He dropships product and clears an awesome margin. With no full-time employees, GiftBasketsPlus is doing multiple six figures in annualized revenues even before the seasonal busy season which starts in October.
- EZRoam.com: Over the Memorial Day weekend, I was visiting beautiful San Diego. While there, I had a meeting with startup telecom company EZRoam. Founder Connan Twomey has bootstrapped a global mobile roaming company that sells you a cell phone which works in 170 countries. The calling rate per minute is far lower than you will pay your regular mobile carrier. The solution is popular with exchange students and leisure travelers. After less than a year, he has a proven product and is just about breaking even. He has no debt, and his total investment was $15,000, most of which is in the form of physical inventory.
- Candida.com: Kathy Kalaf depleted much of her life savings battling candida — a medical condition that often goes undiagnosed. After a successful recovery from debilitating illness, Kathy made a bold investment in the domain name Candida.com. Although Kathy did not have enough capital to launch the business, she approached Epik about turning her dream into a reality through a development partnership that gave both Epik and Kathy a shared interest in future success. Epik launched her new site 2 weeks ago.
The Bottom Line
Without question, these are challenging times. However, individuals can still maintain control of their own destiny by creating compelling businesses. And for the foreseeable future, I can’t think of a better platform for doing that than on the Internet.