Quips and Tips: Panel Searches for Signs of Recovery
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considering an IPO. He adds, “Through this entire calamity, we’ve only lost one company.” (He did not identify the company, however.) Spiegel says Mission Ventures’ partners also have meeting with institutional investors with the intent of raising money for another venture fund. “We’d like to see more innovation in San Diego,” he says.
—One sign that the economy is recovering can be seen when credit and capital begin flowing again to small business, according to Timmermann. The UCSD economist says a good source for such data is the Fed Reserve’s Senior Loan Officer Opinion Survey on Bank Lending Practices. “We saw a sharp drop in bank lending from May to July,” Timmermann says. He explains that’s a bad sign because 52 percent of the U.S. workforce is employed in small businesses. Another sign of economic recovery, Timmermann says, will be increased investment by corporations in research and development.
—Raising capital is still extremely difficult—especially for small business. Cash is king, so the companies that had cash before the crash are in the best position, and bootstrapping is becoming much more of a necessity, according to Rick Valencia, the founder and chairman of San Diego-based Profitline. Valencia says he bootstrapped Profitline, which develops software that helps enterprise customers track their spending, for a decade before turning to venture capital. On the other hand, Valencia says, Profitline can hire a talented engineer these days for $100,000 or less. “A few years ago, we had to pay $120,000-plus for a good engineer. So that’s a good thing for the company, but maybe not such a good thing for the individual who has to carry all that debt.”
—Debt continues to weigh down the economy—and any recovery. “What is worrying me about the medium- to long-term horizon is that consumers are still in debt,” Timmermann says. Until recently, consumer spending accounted for about 17 percent of U.S. economic activity. Timmermann says debt levels are now such that consumers are spending less and saving more.