I think there is a silver lining here, especially for small, minority business people who currently run businesses that are profitable, that do have earnings, that do have consistent revenue streams. Now a lot of investors that have been bloodied by misjudgments in the dot-com investment world are looking for these traditional or old-economy companies.
HB: Which business sectors do you expect to see catch fire over the next five years?
FP: I think the areas people should look to in the next five years are those products and services that cater to my generation, the baby-boom or the near-retirement baby-boom generation. That is going to be an extraordinary market, and consumer-based for certain products and services. This baby-boom generation is living longer, is more active, and continues to work, but bodies are starting to fall apart, so products in the health-care area and creative recreational enterprises that respond to this active group will be growing.
Over the next five years, technology that more efficiently uses natural resources is going to be successful. We know about fuel cells and energy-efficient appliances. But I’m also talking about new technologies that allow, for example, the electric utility sector to build more effective and robust transmission lines that require less maintenance or easier construction. This is a promising area. Another subset are those technologies that make travel in congested metropolitan areas more efficient – for example, in-vehicle navigation devices that you are beginning to see in some of the U.S. automakers’ vehicles, and hands-free communication devices.
HB: What are the most pressing challenges facing today’s entrepreneurs?
FP: Without a doubt, the ability to make quick decisions, to be nimble, to be able to refocus your business in response to new competition. If we’ve learned anything because of technology, competition, and the globalization of almost every sector of the economy, it is that you have to be fast. If you’re big and slow, you’re going to lose. If you’re small, nimble, and fast, you’re going to win. That’s the first challenge – structuring your company so you have early-warning systems that give you information about trends, competition, and new technologies, then having the ability to take that information, integrate it into your business, and respond quickly.
Second is the need to both recruit and retain talented workers. Entrepreneurs are going to have to come up with more creative incentives to keep young workers.
The third thing is the ability to compete against very large, multinational corporations. Whether it’s the auto sector, energy, telecom, banking, insurance – almost every sector of the economy is globalized.
HB: The VC market has cooled significantly in the past year. What are the implications for small and middle-market firms in need of investment capital?
FP: Entrepreneurs are going to have to be much more knowledgeable and comfortable with new kinds of financing. Going to the bank is not enough anymore. That’s why you saw the consortium of manufacturers recently change the affirmative action definition to allow for private equity investors to have a position in minority companies. The whole movement of encouraging entrepreneurs to look at new forms of financing, either venture capital or private equity financing, to grow and compete in a world where everybody else is on a global scale, is going to be a challenge for entrepreneurs.
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