Business Rx: A Rosier Outlook for the Right Start-Ups

D.C.'s Red Hook Lobster Truck

D.C.'s Red Hook Lobster Truck

By Asher Epstein | The Washington Post

Will 2011 be the year to take the plunge and start a business? I’m cautiously optimistic, though I admit entrepreneurs are hard-wired to be optimistic. I see a lot of talented people out there with good ideas. And for those entrepreneurs, there is some good news:

Angels are getting their wings back. Access to capital has improved, thanks to an angel investor community that has gained confidence in the economic rebound. The extension of the Bush tax cuts is going to be a boost to investors because it provides some short-term visibility. Investors could also get a boost with some other legislation that is being floated in Washington that would reduce capital gains taxes on angel investments held five years or longer. If that passes early this year, it would spur more investments and entrepreneurs would benefit as a result. Additionally, the White House is making strong efforts to support innovation and entrepreneurship and we should see some more progress on that front.

Bright spots — what’s hot now. In 2011, clean technology and Web 2.0 companies will continue to be hot industries. In this region, LivingSocial has captured the imagination. It’s really a West Coast-type of company, but located in Washington, D.C. Opower, focused on energy efficiency among individual consumers, just raised $50 million in investment. Consumer Internet companies have become quite low cost to launch and can scale quickly, and government services are strong in this area, but that’s a tough space to break into.

Ready to serve. The region has higher incomes and lower unemployment than the national average, so for those people who are out there in the service-providing space, there is usually a nice pocket of demand for everything from home maintenance and cleaning services to dog walking, day care — things like that. Service-based businesses are relatively easy to start because it’s one or two people providing services. In addition, those types of businesses are somewhat recession-proof in this market particularly because of the relatively high employment rates. However, budget cuts and government cutbacks could have a negative impact. A good example of a trend in the service area is the food trucks which have popped up all over Washington in the past year. If you’re successful, it’s a great way to test the market before investing in the restaurant business, which can have very high failure rates. Permitting can be an issue.

Good help isn’t hard to find. Take advantage of the loose labor market nationally. There are lots of talented people looking for work who could help you build your business. Many firms can be run virtually with good talent from all over the world.

More problems, more money. As an entrepreneur, there is no shortage of problems in the world, and every problem represents an opportunity. It’s not that entrepreneurs like to see problems, because real problems cause real pain and suffering. But problems also create opportunities for an entrepreneur to bring a better quality of living to a certain segment of the market through an efficient and well-deployed solution.

With opportunities come challenges. Though I’m optimistic about starting a business this year, there are some notes of caution:

Bubble trouble? Are we poised for another tech bubble? We’ll probably always see bubbles in some shape or form. Technology is always sexy, and what’s sexy about Internet technology is the ability to get really big really fast. When you have that capability, a bubble is probably not far behind because you’ll have too many investors chasing too few deals. So my guess is we’ll continue to see those types of opportunities happening. (Groupon’s rejection of Google’s offer is a perfect example.)

Global uncertainty. Potential pitfalls — real debt concerns in Europe, North Korea’s nuclear threat, Iran’s instability, terrorist concerns. These things can disrupt global commerce and general peace of mind quite easily, and that ripples through the whole economy. Investors can get anxious fairly quickly and that can have an impact. There are always questions about where the world is headed and as an entrepreneur you constantly have to keep your eyes open for challenges and or opportunities that are out there.

Only the strong survive. Access to capital is still a challenge. For entrepreneurs who need bank loans and credit, that continues to be a tough market. But it boils down to this: Businesses that are fundamentally sound still have opportunities for capital. What’s dried up is funding for the business ideas that have unanswered questions about how they are going to be successful and differentiate and sustain themselves. In theory, this environment is more efficient for business because it promotes more efficient lending, and the capital goes to the companies that are most deserving of it — “survival of the fittest” business ventures.

So as you’re considering whether this is the year to start your own venture, I’d say go for it — as long as you have a worthwhile idea.