Whence Regulation?

By Simon Grey, on November 17th, 2011
Ever heard of Dwolla?

Dwolla was founded by 28-year-old Ben Milne; it’s an innovative online payment system that sidesteps credit cards completely.

Milne has no finance background, yet his little operation is moving between $30 and $50 million per month; it’s on track to move more than $350 million in the next year.

Unlike PayPal, Dwolla doesn’t take a percentage of the transaction. It only asks for $0.25 whether it’s moving $1 or $1,000.

Sounds like a good idea, right? What took it so long?

What did you do for the first two years when Dwolla wasn’t technically legal?

Well it was legal, we just couldn’t operate outside of Iowa. For the first two years we built out the platform. We did a sh*tload of testing on a small scale because legally we couldn’t launch Dwolla nationwide. We spent two years inside of Iowa fine-tuning Dwolla with the financial institutions, building out some of the initial models, and trying to figure out how to legally do what we do. [Emphasis added.]

How’d you find a legal loophole?

Moving money is an exceptionally regulated business. We’re in Iowa, which is sort of conservative — I don’t know if that helped us or hurt us, but in the long term I think it helped us. We figured to do this legally, we had two options: we could take in a tremendous amount of money and go out and get licenses, which is how most people do it. But we didn’t have access to that kind of capital here.

It’s easy to see why the government would, say, ban smoking: it isn’t beneficial to anyone, at least in terms of health. It’s more difficult to understand why the government would ban something like Dwolla, which doesn’t appear to have any downside. Well, except for its competitors (large banks, e.g.).

Some regulation is born out apparent concern for people. But some is born out of bribery. Specifically, big businesses support a host of anti-market legislation because it gives them a market advantage. Conservatives need to learn this, because big business is no one’s friend. As Adam Smith once observed, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” This usually means petitioning the government to set policies in place that hamper or prevent competition.

Just because the market is more trustworthy than the government doesn’t mean that businessmen are more trustworthy than politicians.



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Pittsburgh Wants Your Business

By Christopher Briem, on November 26th, 2010

CNN has us as first of 8 ‘cities’ that want your business: http://bit.ly/fwHNLK



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Smart Small Businesses Are Hiring

By Eldon Mast, on February 22nd, 2010


Savvy telecom startup Wind is hiring Canadian talent while its rivals cower.

Telecom service provider Wind Mobile slipped into Canada’s wireless scene determined to gain every strategic advantage it could over the country’s telecommunications giants.

Last year — mostly through online social networking sites – Wind spread the word that it was hiring. Within a year, the company had targeted and recruited more than 700 employees.

Many larger firms have been lax in retention programs in the past several years, betting that economic conditions would not result in unwanted employee departures. “We have hired some ninja engineers from the competitors … I know for a fact that we have got some very sharp talent from the incumbents,” said Wind Mobile chief executive officer Ken Campbell. Campbell argues that staffing a brand-new company in a field where top techies and first-rate customer service people are in high demand, becomes a much easier task in a down economy.

Wind offers competitive pay, stimulating work and professional development opportunities. Campbell’s firm has a Toronto waterfront headquarters and is the brand name under which Globalive Wireless Management Corp. is now selling its wireless services in Canada.

“The scope and flexibility we give them as a startup is just so much more interesting than what you would get at a larger company. We just have to, because we are small and we have to be agile,” says Campbell.

Many times during economic downturns, employees begin feeling stifled, under-compensated and unchallenged. It is precisely then that they become much more open to other offers — even with a riskier venture.

If large organizations fail to adequately plan for tightening labour markets, they can lose out on employees with the required skills, which dampens their future growth prospects. Those losses are usually a start-ups gain…

Wind human resources vice-president Christina Sanders, who previously worked at Magna International Inc. and Virgin Mobile Canada, said Wind’s employees come from “all sectors and hail from all parts of the world.” What they have in common, she said, is “the right attitude, flexibility, entrepreneurship and passion,” Ms. Sanders said. “For people who are in telecom, this is a very exciting time.”

You may remember last March that we said that successful entrepreneurs know that strong firms retool their businesses during lulls in business cycles and that many well known firms were born during recessionary times. Most serially successful entrepreneurs use these lulls as opportunities to borrow, invest, and grow their business model. They know that when markets return, their businesses will be the ones much better equipped to take advantage of the return to strong demand.

Some say that small businesses are not presently hiring. But Wind Telecom — and many other small start-up firms operating in stealth mode right now — know better.



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Some Young Tech Companies Are Thriving

By Eldon Mast, on September 24th, 2009

Small business is often referred to as the job-growth engine of the US. Particularly at times when the country is rebounding from recession, persistent innovators emerge as the next business cycle leaders.

An area’s laid-off workers frequently are just the catalyst for innovation, says Paul Jerde, executive director of the Deming Center for Entrepreneurship at the University of Colorado. In a recession, “A lot of that talent gets thrown into the marketplace,” he says, “the vibrancy and talent of innovators turned loose is large.”

One place this is playing out today is in the Bay Area of California where major tech firms have cut jobs, but promising young companies have accelerated their business plans in order to add positions and grow market share.

For example, Lithium Technologies which creates online communities for its clients’ customers, almost doubled its staffing levels in 2008. It further grew its workforce by 15 in Q1 of this year and plans to hire another 30 to 40 staff by year-end. Last year’s revenue, in the range of $10 million to $20 million, doubled from 2007’s gross.

Another fast-growing bay area firm is Responsys, an email marketing service from San Bruno. The employer, with 240 staff, plans to hire 45 more workers by the end of the year. “We’re looking at this market as a real opportunity to invest big.” says CEO Dan Springer.

And the Bay isn’t the only place where board rooms are planning to win in today’s market. Atlanta-based Cbeyond focuses on the voice and data network needs of small business. The firm expects 2009 revenue to grow about 20 percent. It recently invested tens of millions of dollars and added more than 600 jobs in an aggressive headquarters expansion — a extremely bullish move in the face of a big bear. “We’ll likely double the size of our business over … the next three to four [years],” says CEO James Geiger. “We’re not just surviving in this economy, we are thriving in this economy.”

Mark Lupa is a managing partner for High Country Venture, an investment firm focusing on early stage Colorado-based technology startups. “The nature of people in these startups is that they’re innovators and they persevere,” Lupa says. “If they’ve got really good technology and good people, they will eventually get funding and they will survive.”



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