Using Virtual Communities To Raise Venture Capitalism Investment in Delta County Michigan

Delta County Michigan has a lot of underutilized potential and when we engage in pro-business strategies we can draw in more investment and in turn provide more jobs to our children so they don't have to move somewhere else. While I don't believe in hard and fast rules I can say that I like to look at some of the research literature in the formation of a more formal opinion to incorporate into a theory I'm working on to increase innovative growth. Investment in existing and start-up businesses is hugely important and having an online community for Delta County Investments may be one idea that works. 

Investors, entrepreneurs, and venture capitalists rely on information. Building and designing websites that seek highlight local businesses looking for investment capital because of their growth potential is a viable strategy. The other method may be to create investment online forums where this information is not only present but investors, entrepreneurs, venture capitalists and local stakeholders may be able to interact to make investment and policy awareness. 

This is done through what is called a virtual community. It may be a discussion forum where people can post questions, ask ideas, set up plans, get information on zoning, and much more. Such an forum will help investors and venture capitalists find information on important businesses and interact with participating entrepreneurs that need access to investment and low interest loans. It also serves the secondary function of keeping local policy makers aware of what investors need and in turn investors what policy makers need. 

We can look at a study conducted on a sample of 215 members of the investment community and how online forums can help (Shang, Chen & Chen, 2013). They state, "Compared with other decisions, financial investments should be more rational, and investors need to acquire immediate and accurate information for their investments." We could provide them with that information in a way that leads to increased in active local investment.

Thus an online forum and virtual community is about information, dialogue, and development. It provides the right information at the right time for decision making purposes. They also found that members in this community had higher confidence in trading and in turn trade more frequently. More frequency means that more dollars are being spent to develop local business (i.e. could Upper Hand Brewery go national? kind of ideas).

Why do members in online investment communities trade and invest more frequently?

1. One primary reason is the availability of information and the ability to ask questions of business owners, government stakeholders and other investors. In economics investment is part of choice and based on the rational decision making when and if information is available. Thus, providing access to a Delta County investment forum community helps them gain information they need to make decisions. 

2. Putting together the business owners, city leaders (Escanaba and Gladstone) and Delta County officials in the same forum as investors increases source credibility. Investors need to perceive the information as believable, competent and trustworthy (Petty and Cacioppo, 1986). No other place to do this then to get the sources involved when investment capital is significant.

3. Third we will want to consider that highly successful investors can often create herd investing (Shang, Chen & Chen, 2013). When an venture capitalist is successful he/she will draw in other investors and they will follow that person's lead. The entire group begins to invest more and in multiple mechanisms.

So as I think through this it appears that an investment community for Delta County could be used to attract, market to and reach out to potential investors. It would also draw in local businesses that have potential growth and in turn better align government policy to the needs of the business community. I bet one could to the same for civil issues and quality of life concerns but that is a different type of venue. 

Thus far here are a few ideas that have been generated (Thinking out loud). This is theoretical play but some ideas may be good for implementation either here or other locations.

1. Redesign sites to include information that attracts investors
2. Develop a cluster system to enhance local industries (Focus on investors in those clusters).
3. Create welcome packets for entrepreneurs and reach out to other locations for to help people buy local properties.
4. Find someone to coordinate all of these activities and help businesses get through to start up
5. Hedge our natural resources to attract tourism, investment, and tourist micro manufacturing.
6. Utilize our deep port, rail, roads and central location to attract distribution. 
7. A lot more Theory of Transactional Clusters

Petty, R.E. and Cacioppo, J.T. ( 1986 ),Communication and Persuasion: Central and Peripheral Routes to Attitude Change , Springer-Verlag, New York, NY .

Shang, R., Chen, Y. & Chen, C. (2013) The social and objective value of information in virtual investment communities. Bradford, (37) 4. DOI:10.1108/OIR-06-2011-0087

Streets of Gold or Pathways to Poverty: Reviving America's Cities

Streets of gold look a little more like pathways to poverty. American cities have been on the decline for decades as investments diverted from urban areas to emerging countries that rolled out the red carpet. The infrastructure that was built when American cities were at the height of their economic might is still mostly intact waiting for visionary investors. Getting investment interest and better city governance can lead to mutual growth for business and job-hungry residents if the two can come to a mutual understanding.

Pick any major city in the country and follow its historic rise and fall. You may notice that as people moved to the city, built homes, and invested their resources these collections of people grew in wealth and influence. The collective action of small and large investors created a synergy of growth that pushed profit margins to higher levels. Money, government, and people had a mutual self-interest in development.

As international competition rose, technology changed, and poor government policy stagnated these cities; they became ghost lands that are a pale comparison to their previous glory. Where opportunity flourished a few decades ago, some cities have grown dilapidated virtual prisons. The poorer a family was, the more likely they were stuck in a cycle of poverty. American men, women, and children were left behind.

Bleakness doesn’t need to be the norm. Cities that still retain their basic infrastructure are ripe for renewed development that not only produces higher returns on investment (ROI) but offers new opportunities for residents. When opportunity grows, hope also grows, and new economic life is born with it. The marriage of investors and government  into pro-growth policies can nurse new opportunities.

Consider the mass investment draws to places like Eastern Europe, India, China, and other emerging nations where red tape restrictions are little but returns are high. American cities offer many of these same opportunities as the low cost of buildings, motivated work force, and reliable infrastructure found in combinations will grow once the right capital levers are applied.

Stakeholders will need to look at the global market and existing local competencies to determine where the best investment growth potential can be realized. When capitalists engage in pack investments and create spawning clusters of business activities to capitalize on existing competencies and infrastructure, growth is not far over the horizon. Economic wastelands can become investment wonderlands with a little good old fashion spit shine.

Many proposals such as new recreation centers, additional funding, tax allocations, etc...have been tried at one time or another. They were short-lived because they were not profitable and often came with long-term commitments with difficult to measure results. Building investment hubs fixes the foundations of poverty that lead to better housing, additional tax bases, better education and more community support.

The problem isn’t so much that investors are not willing to invest in these cities but that awareness is lacking, and local government is often short-sighted in their policy development that inadvertently restricts future opportunities. Revamping the way we think about investments, government, and education/training helps to ensure that struggling cities look more like diamonds in the rough. Enlightened government starts where partisan politics ends.

San Diego Attracts Investment Capital. Could more be Done?

Investment is the lifeblood of our economy that provides nourishment for our cities. Without investment we don’t grow, business doesn’t expand and people don’t get hired. Everything comes to a standstill and in and good fortune ceases. Cities like Los Angeles, San Francisco and San Diego are attracting investments to their unique industry clusters.  Letting the world know what San Diego has to offer in terms of investment opportunities can be a catalyst to greater growth.

Nationally, the last quarter experienced $13.4 billion dollars in investments and about a third of that took place in San Francisco, Los Angeles and Orange County (as cited in Somerville, 2015).  According to the Venture Capital Association and Price WaterhousCoopers a total of 19 San Diego companies received around $270 in late stage venture capital funds (Money Tree, 2015). Not the largest share but certainly a sizable one.

Much of the money comes from large institutional investors that are looking for solid growth opportunities. Of these large investment opportunities around 36% were from hedge funds and mutual funds (As cited in Somerville, 2015).  There is still plenty of room to draw new investments from international investors that are also seeking high probably income outcomes. 

Companies invest in late stage start-ups because they can reduce their risks. Another option is to invest in a basket of companies to hedge the potential of loss on any one entity. The problem is that without knowledge of local investment opportunities investors are unlikely to fulfill to help businesses reach their full potential.  

Ensuring that emerging companies are easy to find and the proper mechanisms for investment are available will help further international investment in San Diego. Ensuring information is on public display via websites, is easily accessible from outsiders and targeted to both small and large investment entities helps to keep new industries budding and growing in a way that encourages local economic development.  

 

Freeman, M. (April 17th, 2015). San Diego start-ups net more venture capital. UT San Diego. http://www.utsandiego.com/news/2015/apr/17/MoneyTree-Dow-Jones-VentureSource-ATyr-pharma/

Somerville, H. (2013). Tech companies continue to land mega VC deals. San Jose Mercury News. Retrieved http://www.mercurynews.com/business/ci_27932457/tech-companies-continue-land-mega-vc-deals

The Money Tree. Retrieved April 18th, 2015 from https://www.pwcmoneytree.com/

Biotech Firm Shows San Diego How New Products Draw Investment

San Diego’s has added another successful business to its budding biotech hub. Start-up firm aTyr Pharma, Inc. drew over $76 million investment capital from Sofinnova Ventures and another undisclosed entity to develop its drug called Resolaris that helps treat muscular dystrophy (Fikes, 2015). Biotech firms like aTyr help encourage greater investment and employment in the San Diego economy.

Every investment opportunity comes with risk and rewards. Venture capitalists diligently assess whether the risks and rewards are worth investing their hard earned capital.  Risk tolerant investors are more likely to get involved in highly innovative startups (Tian & Wang, 2014). In this case, a single patentable and profitable drug can make or break the firm’s long-term future.  

The ability to have exclusive rights to manufacture an important drug can be worth hundreds of millions of dollars. Approval of Resolaris for use and testing in the E.U., U.S. and other markets will add significantly to its value. The risks are lower and potential profit higher for companies that already have approvals.

Cities like San Diego have growing biotech hubs that produce more pharmaceutical start-ups than cities with less developed networks. The knowledge needed to invent and produce new drugs come from clusters of like-minded individuals who work within the local pharmaceutical industry. As they act and interact they innovate new drugs, models, and products.

When new start-ups develop they will draw more investors to the area seeking better opportunities to expand their investment portfolios. Successful start ups rely on existing local knowledge learned from communities that encourage an entrepreneurial spirit. As start ups make their way out of the incubation periods and product tangible products investors flock in maximize profits both helping local businesses as well as expanding employment opportunities.

Fickes, B. (April 1^st, 2015). San Diego biotech raises $76 million. UT San Diego. Retrieved http://www.utsandiego.com/news/2015/apr/01/atyr-76-million-financing/

Tian, X. & Wang, T. (2014). Tolerance for failure and corporate innovation. Review of Financial Studies, 27 (1).

Experts Predict Economic Expansion for 2015 and 2016

Experts predict a few more strong laps around this race track we call our economy. Fifty forecasting experts with the National Association of Business Economics (NABE) believe the U.S. economy will grow at a rapid pace over the next two years. They suspect Gross Domestic Product (GDP) will increase on average 3.1% in 2015 and 2.9% in 2016.  

Few can complain about the potential win-win situation brewing that will reward businesses with higher sales and better employment opportunities for job seekers. Experts believe the economy will improve to a point where unemployment dips under 5% by the end of 2016.

The advantages of polling experts can help gauge the overall likelihood of success for the nation. These economic gurus have become successful in their fields and have opinions on economic growth and development. Funneling their opinions into useful metrics helps see that the average opinion is positive.

Each expert sifts the questionnaire information through their personal experiences, judgments and opinions to come to a conclusion about each question. These conclusions are averaged to get the statistics seen above. The more people involved in the forecast the greater the validity of the results.

Positive news and accurate information often draws investment from interested stakeholders that desire to improve their profit margins.  For example, if you own a business that is likely to benefit from a growing economy and are holding onto cash the positive news may prompt additional investment. This can in turn generate more employment; 250,000 per month worth.

Growing economies, lower unemployment, higher investment, and sustainable spending are positive news for any government that seeks to place in the finals of racing nations.  That doesn’t mean any of this will come to pass but that industry experts believe it is possible and perhaps even likely. If you are a business investor or a person seeking to gain from employment opportunities these numbers should be refreshing.

http://nabe.com/NABE_Outlook_March_2015