Some Notes to Congress on the Economy

http://blogmaverick.com/2010/06/09/some-notes-to-congress-on-the-economy/

by sefner • 16 years ago

28 18 16 years ago

It's nice to see the nod to Y-Combinator and the realization that many businesses can be started with much less money today. But there is also another point to realize. Have you noticed how large the barriers to entry are in some industries? Could anyone today really start a bank, an oil company, a car company, etc.?

Some markets (especially in technology) are opening with very low barriers to entry. But some markets are more closed than ever.

rmorrison• 16 years ago

Could anyone today really start a bank, an oil company, a car company, etc?

Actually, a few businessmen in my home town got together and started a bank. Tesla Motors is an example of a car company started, according to Wikipedia, by a couple of guys with personal funds (while they created the business plan). Regularly, although rarely, companies start out small, attack some market, and then grow into the multinational corporations.

some markets are more closed than ever.

I definitely don't agree with this, at least not the examples that you mentioned. Technology makes it easier in all industries. Biotechs in pharma. Five Guys Burger and Fries in restaurants. Boutique hedge funds in finance. While I don't know the oil industry, it sounds like there are a lot of areas where a small startup could focus on and eventually become a bigger company, like owning a drilling rig (and run it well and according to best practices), or underwater surveying, or something.

pinko2• 16 years ago

FWIW, Tesla Motors is out of cash and may fold or be sold: http://venturebeat.com/2010/05/27/elon-musk-personal-finance...

westbywest• 16 years ago

I'm uncertain about the ability of independent start-ups to gain much traction in the petroleum industry. Much of that has to do with owning/having access to fleets of ships that are capable of bring you and your equipment to/from the right location on time.

That said, the BP oil spill in the Gulf of Mexico has indeed shown some light on potential niche fields that could be accessible to start-ups, e.g. Kevin Costner's Ocean Therapy device.

tlb• 16 years ago

You don't need to start a "car company" to be in the car industry. As a new company, you should make components or technology for cars, oil drilling, banking, etc.

eserorg• 16 years ago

I started my own oil company. I'm 27. See: http://www.eser.org

Stats:

* There are thousands of independent oil and gas producers in the United States.

* Independent producers develop 90 percent of domestic oil and gas wells, produce 68 percent of domestic oil and produce 82 percent of domestic natural gas.

* Most independents have fewer than 20 employees.

See the "Independent Petroleum Association of America": http://www.ipaa.org

yummyfajitas• 16 years ago

There is more to job creation than building the next Twitter. Twitter doesn't work on a schedule. Sri Ganesh's Dosa House and Can't Flush We Rush Plumbers do. The economy can survive without twitter, but without flushing toilets we will quickly find ourselves living in the dark ages.

As for people who lose money to carried interest, yes, some will go back to work at a the same bank they quit from (same pay, better security). Others will just raise management fees, resulting in a net loss of investment. More importantly, there will be a major loss of diversity in investments; as Cuban notes, the guy earning $30mm/year won't be dissuaded from investment, only the guy earning $500k (who could make a similar salary at a bank). This means a smaller amount of the investment strategy search space is explored, and we have fewer Michael Burry's. Is that a good thing?

johnrob3• 16 years ago

In the interest of increasing angel investing, why not remove the legal barriers (accredited investing) and bring a whole new class of players in the game?

wmf• 16 years ago

This would likely also bring a whole new class of con men into the game, although there are so many ways to get scammed on the Internet already that maybe one more doesn't matter.

joshu• 16 years ago

the vast majority of wealth available for investment is represented primarily by institutions and entities, and secondarily by people who meet the requirements.

of the latter group, i suspect the vast majority do not invest anyway. it takes a lot of stomach to systematically invest in enough opportunities that a positive return is likely. it certainly makes me queasy from time to time.

anyway, i'm reasonably sure that there are ways to get around this for friends and family investment.

johnrob3• 16 years ago

What would happen if a startup was seed funded by 30 people at 1K each? It could be very interesting. The company would only have 30K of investment, but on the flip side there would already be 30 people who want to see it succeed. 30 evangelists ready to pump whatever the company can produce. Nobody really knows how well a model like this would work, because it's not yet legal.

Some Notes to Congress on the Economy

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