You also need to be conscious of the laws that apply to your business.  If you are a restaurant, or a drug manufacturer, or make children’s toys, or do someone’s taxes, or are a doctor, or are in virtually any other industry or profession there are laws that are designed to make sure that what you are doing is safe.  There are also patent laws that give protection to inventors, giving them enough time to recoup the risks and investment they made in creating a new product or even a new industry.  But again, generally speaking, the laws and rules you must follow aren’t designed to keep you from succeeding and reaching that “opportunity” that you are working so hard for (questionable software patent laws excluded, of course).

Unless, that is, you are thinking about becoming a mover in the state of Pennsylvania.

I’ve just read about a Pennsylvania law so absurd that it just begs to be written about.

Apparently, the Pennsylvania Public Utility Commission gets to decide where a moving company is allowed to operate.  If you have a moving company, and would like to expand where you operate – for example, expanding to move people to another county in the state – you must apply to the PUC for permission.  The PUC ensures that the moving company is financially fit to operate, which seems perfectly reasonable and beneficial to consumers given past unscrupulous operators in the industry.

But guess what else the PUC evaluates when deciding that your business can expand?  Protests from existing operators that your expansion would take away their business.

That’s right – you can be prevented from starting or expanding your moving business in Pennsylvania if competitors simply protest that your expansion would harm their business.

Talk about a law that prevents innovation in an industry.  You can guess what the head of the Pennsylvania Moving & Storage Trade Association says when asked about the law:

I think our membership would prefer to keep it the way it is, because the industry has gone through a serious economic down climb for at least the past three-to-five years, and bringing other people into the area only diminishes their business.  (Pittsburgh Business Times)

Gee, ya think?  I’m sure that the newspaper industry would have been grateful if they could have protested and stopped Craigslist from launching.

What other bizarre laws stand in the way of innovation?  Sound off in the comments about any other egregious ones you’ve experienced.

Another example of misaligned incentives has come up in the last 2 days in a story that has been widely reported in the tech press.  An Airbnb customer used the service to rent her house for a week to a visitor, and when she returned her house was destroyed and looted.

I’ve written about Airbnb several times, including The Risks of User Feedback and You’re Never Done Innovating.  If you aren’t familiar with Airbnb, it allows anyone to rent out their house, apartment, spare bedroom, or even their couch.   For most people, the idea of inviting a stranger into their house is unthinkable, and investors overwhelmingly ignored the the company in its early days  – until they continued to grow and grow, proving the skeptics wrong and recently closing a $100M investment round at a company valuation north of $1 billion.

But maybe the skeptics weren’t so wrong after all, now that a very public story has come out about the dangers of renting your stuff to strangers.  Most people think that something like this was bound to happen.  And like many other companies (start-up or otherwise), Airbnb is fumbling with their crisis management (first being overly helpful, then practically cutting off contact with the victim when the story went viral).

So where do the “misaligned incentives” come into for this story?  It was the victim that actually helped to point it out.

What did I get in exchange for my 20-something dollars? What was the advantage of using this service over Craigslist, which is free? Ironically airbnb.com’s site states “the promise of our site is that it is entirely transparent” when in reality, it is not. And therein lies the fundamental, though not immediately apparent, difference: on Craigslist, I am warned loudly and repeatedly that use of the site is at my own risk. I am encouraged to take certain precautions, and I have the ability to do so by gaining quick access to the email addresses, phone numbers, and other identifying information of the person(s) I am communicating with, all of which can be researched and at least somewhat verified by means of basic internet searches. Alternatively, airbnb.com tightly controls the communication between host and traveler, disallowing the exchange of personal contact information until the point in which a reservation is already confirmed and paid for.

Therein lies the problem.  Craigslist is a free service.  As a result, they have no incentive to keep the two parties in a transaction from contacting each other.  Airbnb on the other hand makes its money as a marketplace.  As the victim wrote, they purposely disallow exchanging personal contact information until it is basically too late.  Why? If they allowed the two parties to communicate outside of Airbnb, then people would use the system to connect with each other, but then bypass the system when the buyer pays the seller in order to save on the fees from the marketplace.

Airbnb has an incentive to keep personal contact information hidden, contrary to what its customers want.  This isn’t unique: Facebook makes it hard for me to export my social graph so that I can’t easily switch to another service.   The telecom companies get me to pay for a mobile data plan but don’t let me tether other devices to actually use the data I’ve paid for without paying an additional fee.  The cable companies don’t offer a la carte programming like I want, instead forcing me into a bundle of hundreds of channels I don’t watch.

Business interests are often not aligned with their customers – that is nothing new.  Airbnb’s problem is the misalignment has now proven to be physically dangerous.

Now before you berate me for having no business sense in buying a timeshare, let me say that it is with one of the best hotel brands in the world, we bought in a location that we intend to use every year (as opposed to buying as an investment, or to trade into other properties), we’ve been very happy with it and after six years have no regrets with our purchase.  I think they are particularly valuable for families with small kids like ours, where a kitchen and a large living space are important.

But before we get into timeshares, lets diverge for a second and talk about Ben Horowitz.  The venture capitalist recently wrote an article titled When Employees Misinterpret Managers, with an amusing tale of how in a previous company he changed his salespeople’s incentive plan to try and flatten out each quarter’s sales bookings, since everything seemed to get booked the last few days of the quarter.  Unfortunately, his fix of providing incentives for salespeople to close sales in the first 2 months of the quarter had the wrong effect – instead of getting the sales closed earlier in the quarter, the opposite happened: the last month’s sales were being held by the salespeople to close at the beginning of the next quarter!

So what does this have to do with timeshares?   One of the biggest objectives of a timeshare property is, well, to sell you a timeshare.  This objective applies whether you already own a timeshare – because there are always more weeks in the year to purchase – or whether you are a first-time guest to the property and not yet an owner.

So how do they get you to buy a timeshare, you ask?

These are smart people.  First, when you check-in they refer you to the concierge for your “welcome gift” – typically a beach bag or something similar, but nice enough that you would actually want to use it.  When you pickup your gift, the concierge tries to sign you up for a meeting, providing a financial incentive of maybe $100 (or comparable award points) to attend.  They are very, very well trained, implying a sense of urgency with limited capacity for these meetings and a suggestion just to get something on the calendar now, even if you need to change it later.  If you are an owner, they call these meetings an “owner’s update”, which is billed as a chance to hear about new properties in the system but the reality as everyone knows is that the meeting is their opportunity to try and sell you another timeshare.  But hey, they are paying you, and as an owner you are often genuinely interested in hearing about updates to their properties.  (I don’t have proof of this, but I’m willing to be that the concierge gets a bonus for each person they get to signup for a meeting.)

We have gone to a number of these meetings over the years, with our hotel company and some others, and I’ve identified a problem with their strategy: They don’t differentiate enough between their sales approach to first-time guests versus current owners.

With a first-time guest to the property, they can have a short-term view.  It may be their only chance to sell them, so you can make the sales pitch as hard as you want, always having another incentive to pull out of the bag to try and extend the meeting and close the deal.  Frankly, if the sales pitch is too strong and the guest leaves unhappy, the company hasn’t really lost anything – they weren’t an owner before, and they still aren’t now.

But with owners it’s different.  I already own a property.  I like it.  When I’m ready to buy again, I will most likely buy with the same company (in the same location or in a different location, but either is a win for the company).   You’re welcome to try and persuade me with incentives to buy today, but you can’t have me leaving the meeting disgusted with the sales tactics.   The worst tactic, which we just experienced, was where you think the meeting is over and you’re handed off to someone who you are told “wants to ask you a few final questions about your meeting to make sure you were treated appropriately”.   I guess that would be okay – if it wasn’t an outright lie and this new person’s goal was just to continue the sales process with more questions.

The problem lies in the disconnection between the company’s long-term objectives, and the short-term compensation model for their sales people. The sales people get no credit unless they close the deal today, and therefore they view it as their only chance and don’t care if I leave unhappy – they’ll never see me again.  The company though wants me to be a lifelong owner, so they should have a compensation model for the salespeople that aligns their longer-term objectives and keeps me a happy owner – which I am currently not, based on my last meeting.

Conclusion

I had a colleague once who ran an office with a bonus plan calculated off of gross revenues.  It should be no surprise that the company’s margins were suffering – the compensation plan rewarded growing revenues, regardless of what the cost of goods sold was.  Management kept pressuring for margin improvements, but across the company they weren’t changing.  His response to me was simple: “Margins will improve when the company ties them to our bonus plan.”

If you want to get the results you hope for, whether you selling timeshares, software, or anything else, make sure you are aligning your compensation plans accordingly.

Photo from Flicr user moogs

Google launched its most ambitious social initiative yet with Google+. It is getting very good reviews from GigaOM, TechCrunch, Mashable and others.  Due to “insane demand“, Google had to shut down invites to manage a slower rollout.   (Even further proof that the world is upside: one of the original Apple Macintosh designers was the lead designer for Google+).

Beyond the smart design though was also a smart strategy.  First, Google is unifying its services and pushing Google+ with a consistent toolbar across all of its properties.  Second, Google is providing seamless syncing of photos taken from an Android phone to your Google+ cloud storage, where the photos can then be easily shared with family and friends.   It is a smart strategy for getting user adoption – ReadWriteWeb calls it their “killer feature“.   It actually takes a page from Apple’s iCloud book, where the cloud storage and the advantages it provides in accessing data from multiple devices is done almost “automagically” without changing user behavior.

Even China thinks that Google+ will be a hit: they’ve already blocked it.

Apple’s release of an upgraded version of Final Cut Pro X had a different result. Apple rewrote its media editing tool from the ground up, removing several features in the process. The backlash from reviewers and users was severe.  It spawned a funny mocking video from Conan.  Apple reportedly had to provide refunds to unhappy customers.  An online petition has over 6,000 signatures asking Apple to “declassify” it as a product for professional use.   In a not-so-surprising coincidence, all the written reviews on the Mac App Store were removed for a period of time (most of which were negative).  Then Apple was forced to publish a follow-up FAQ promising that a next release will come with “fixes”, including restoring some removed features.

Here are the takeaways from Google’s and Apple’s experiences:

• No company is perfect; even the best make mistakes.
• As I’ve written about before, you can never underestimate the cost of changing user behavior.
• Don’t ever count out innovative companies that have had the courage to try new things and are not afraid to fail.

It is too early to tell whether Google+ will be a success, but they’re making all the right steps so far, while Apple is backpedaling with one of its applications.

Photo by Flickr user jedbaxter

Years ago I was bemoaning to a friend about how I had missed the opportunity to invest in BlackBerry maker Research in Motion (RIM).  They were on top of the world.  Now app developers are leaving them, and everyone believes they are dead.

This shouldn’t be shocking, especially to those people that study and specialize in innovation and disruption.  It happens all the time, in every industry.  And yet… it still is a little shocking.  Even for disciples of books like How the Might Fall and Innovator’s Dilemma that show scientifically why it happens,  we’re always at least a little surprised by the failures of established companies.  Think about what is happening to some big names and big industries:

• Microsoft dominated the personal computer years of the 90′s, began to struggle with the emergence of the Internet and is now fighting to be the third wheel of the mobile explosion.  Apple on the other hand was left in a ditch and is now the most valuable technology company in the world.
• Google was once considered unbeatable, but their stock is down 22% this year, they are facing an antitrust investigation, there is increased competition in their core search market, and alternatives to full-web search (like Do@) are gaining user interest.
• MySpace was once the biggest social network but they’ve become an also-ran to Facebook, and News Corp can barely give MySpace away.
• Blockbuster followed the growth of DVD-by-mail provider Netflix.  They even decided to give Netflix a run for their money in 2004 – after Netflix had hit $500 million in annual revenues.  Too little too late.
• 8-year-old blogging powerhouse WordPress, a dominant household name in self-publishing, was just passed by 4-year-old upstart Tumblr, which now hosts more blogs than the incumbent.
• Any list like this is required to mention the newspaper industry, who once controlled local news delivery and paid for it by controlling local print advertising and classifieds.  Now it controls nothing.

So with history as our guide, can we make the correct predictions for two newer disruptive startups: Airbnb and Getaround?  Airbnb allows anyone to rent out their home, or apartment, or vacation home, or spare bedroom, or even an air mattress (hence the name).  Similarly, Getaround lets anyone rent out their car.  Most people would say that these two businesses pose no threat to the incumbent hotels, or vacation rental booking companies, or car rental companies.  Why?  Because they are just too different from how today’s businesses work.  We go to a Marriott, or rent a car from Alamo.   We don’t stay in a stranger’s extra room, or rent a 2002 Honda from some guy named Phil.  Investors had the same reaction, outright dismissing Airbnb a few years ago when it was starting out, only to now come back hat in hand trying to invest at their new $1 billion valuation.

The point here is that it’s called “disruption” for a reason – it is different from what we’re used to, and because almost everyone resists change they are predisposed to just dismiss these ideas.  Today these businesses don’t seem a threat.  (Then ten years from now, with the benefit of hindsight we’ll surely be saying “I always knew they’d be successful!”)

It is hard for us to try and imagine a future that we can’t experience today.  As humans we look for short-term satisfaction – trying to picture what 10 years from now will be like is hard for us to do because we won’t know if we’re right for 10 more years, which isn’t very satisfying to us today.  But you need to spend at least part of your day thinking about what the big picture is for your industry, and what the future will bring.   It won’t guarantee that you’ll lead your company past the disruptors, but it will at least make you more open to ideas that everyone else is dismissing today.

Basically Groupon aggregates local email addresses – they are an intermediary.  In a world where every industry is constantly being disintermediated, why are we heaping praise on a new intermediary?

I could care less about the witty writing – I never read it.  I guess it makes for some nice free press though.

How about competition?  Everyone and their brother is launching group buying deals.  Facebook, Google, Living Social, as well as hundreds of startups.  There are few barriers to entry.  There is no user lockin at all.

Their business model is ridiculous – is it any surprise that customers like it?  Rocky Agrawal said it best on TechCrunch:

We love daily deals for a simple reason: the deals have been outstanding. If revenue growth in the first Internet bubble was about selling a dollar for 50 cents, growth in the daily deals business has been about getting other people to sell their dollars for 50 cents and charging them 25 cents for the privilege.

I’m not bothered that investors already took out $930 million from the company on the $1.08 billion the company raised.  I mean, for a company losing hundreds of millions, AND with net current liabilities of over $200 million, I agree with Minyanville that you’d think investors would want the company to keep a little more than $150 million of the $1 billion they raised.  But hey, that is the private investor’s problem.  It only becomes a broader problem when Groupon goes public (which is soon).

I’m more bothered that they are spending so much on customer acquisition costs. According to Yipit, they pay $30 to acquire a new customer.  I’m convinced that number is wrong – I can’t fathom how it would cost $30 to get a user to signup for a daily email, from a company in the news practically every day, in order to possibly save money on great deals from local merchants.  It should cost next to nothing for me to signup for it.   And quite literally nothing to get me to use it after I’ve signed up, since the entire premise is to send me daily emails encouraging me to buy!

Yipit and others have also noted that Groupon’s Boston market, one of its oldest, seems to be deteriorating in both revenues per customer and number of deals sold.

I would be very leery if I was a business owner in retail, or restaurant, or personal services about running a Groupon.  In an industry like software where the incremental cost is virtually zero, you can make money on 25% of list price.  Those other industries… not so much.  And the two main benefits the business is supposed to get – (1) attracting new customers, and (2) getting customers to spend more than the value of the Groupon – are only theoretical benefits until it’s actually proven for your business.   Businesses don’t even get access to the customer’s contact information (heaven forbid that Groupon would provide that, considering that it might lower the number of people willing to signup for Groupon).  I’m willing to bet that a lot of the small business owners getting these Groupon sales calls are being wowed on the phone by slick salespeople with promises of a windfall of new customers and jumping in without really thinking it through.

The BBQ Rib Man begs to differ, noting his positive experience  with his restaurant.  But the negative stories outweigh the positive ones, and you would think that merchants would be eager to tell a positive story if they had one in order to get in Groupon’s good graces.

Business Insider gets a queasy feeling when it looks at the company.  MG Seigler from TechCrunch isn’t too bothered by their spending and founders cashing out, but he admits that he’s never actually bought a Groupon with his account.  A few notable entrepreneurs debated Groupon’s future on Twitter.  With the S-1 filing for their IPO, it seems everyone is writing about Groupon – and most of it is negative.

I think that Groupon is the first salvo in the evolution of online-to-offline commerce and customer acquisition strategies, and I think that evolution is going to take a lot of time and change direction many times, incorporating geolocation and social network recommendations to ultimately connect me with a business.  The Groupon Now service is interesting idea and has potential, but it won’t be the only game in town.

Groupon has my email address, but absolutely no loyalty from me.  And they have thousands of sales people calling millions of local merchants, but the relationships won’t be worth anything if they don’t make them money.   I’m just not ready to back the Groupon horse in this race when there are others like Google that can leverage their search and email services, or Amazon that has proven it  understands retail.

(photo from Flickr user antwerpenR)

According to a report, LinkedIn is expected to announce their “Apply with LinkedIn” button (via GigaOM).  It enables companies to place a button on their websites and online job postings so that applicants can apply by submitting just their LinkedIn profile, instead of needing to fill out a separate application.  This is a great idea, and I’d be shocked if there wasn’t significant adoption of this feature, especially among professional services businesses.   In one action, LinkedIn (1) increases the volume of applications for the employer (since it is so much easier to apply) and (2) aggregates all their data (skills, positions, education) into a reportable database for easy sorting and tracking – especially important for handling that increased volume.

However, there is a bigger transformation here than just making job applications more efficient: creating an infrastructure to support the “casual job seeker”.

College football coaching is built on the “casual job seeker” model.  Many coaches have a dream job that they don’t have now, but would love to have in the future.  In an extremely small industry like that, and with the use of agents, communicating the message “if my phone rang I’d certainly answer the call” isn’t a problem.  But how about for the rest of us?

Almost everyone employed today not actively looking for a new job would still consider changing jobs if a great opportunity presented itself.  These individuals aren’t searching job boards, submitting online resumes, or filling out job applications.  But what if they could go to Apple’s website, or Facebook’s, or McKinsey’s, or Nike’s, and with one click they could effectively say “I like your company, I’m not actively looking, but if you think I’m a fit I would certainly take your call”?

That’s what LinkedIn’s button can do: create a new type of company-to-casual job seeker relationship that could alter how recruiting is done.

If this sounds familiar, the exact same feature exists today – on the the real estate site Zillow.  Their “Make me Move” feature allows people that aren’t actively selling their house to put a price on it anyway, presumably a price high enough that if someone offered it, it would be an “offer he can’t refuse”.  Zillow expands their usefulness by supporting both the active seller and the casual seller – and LinkedIn is positioned to do the same.

(image via spreadshirt)

Of course, I’m not talking about getting user feedback after you launch your product – you’d be crazy not to listen to what your users are telling you then.  I’m talking about getting user feedback on your idea before you build it.

There is a common saying: “build what people want”.   You can’t really argue with that.  The hard part is figuring out what people want.  It seems like a sound strategy to talk with potential customers about your product before you build it, but you must be careful how you use their feedback.  Just because someone says “that’s a good idea” and “I would use that” doesn’t mean that they actually will when the time comes.  Likewise, if people don’t think your idea is good, it doesn’t mean that it won’t become a huge success.

Consider Twitter.   Imagine Twitter was your idea years ago, and you were going around to potential users asking them if they’d use a 140-character messaging tool, going even so far as to suggest it as a replacement for both email communication and news discovery.   Most people would probably have dismissed the idea.  But even if everyone said they loved it, that data wouldn’t have been any more accurate – it would only seem so now with 20/20 hindsight.  The truth is that with a product like Twitter, you weren’t going to know if it was a hit until people started to use it.

An even better example is Airbnb.   Their service allows people to rent out their couch or spare bedroom to travelers – mostly strangers! – as an alternative to hotels.  Sound like a dumb idea?  Pretty much every investor they talked to in 2008 said the idea was terrible.   If they’d listened to the feedback of these investors – some of the most successful investors ever mind you – they’d never have built a business that today is raising a $100 million funding round at a $ $1 billion valuation.  (TechCrunch)

Venerable investor Fred Wilson wrote in a post titled “Marketing” that:

Early in a startup, product decisions should be hunch driven. Later on, product decisions should be data driven.

and,

Marketing is for companies who have sucky products. If you build something that is amazing (think Flipboard or Instagram or Instapaper) people will adopt it because it is amazing.

As innovators we’d like to have more certainty as to whether our ideas will be successful or not, but the truth is it’s as much about trusting your gut as anything.  Sometimes everyone says your idea is great and it fails; other times people hate it, and it’s a huge success.   Your gut is the only scientific instrument you have to measure and make sense of your early feedback.  Reminds me of this phrase: “If it was easy, everyone would be doing it”.

Google and Amazon both recently announced online music “lockers” that allow consumers to upload music – that they have legally purchased – for backup purposes and to stream via a web browser or mobile app.   But the music labels think they should be paid to allow this type of service.   As a result, the consumer experience is sacrificed as the services require you to physically upload your copy of the song to your locker (and uploading a lot of songs can take hours).  Even if you purchased the song from Amazon, so they know you legally own it, you still need to upload it to your Amazon Cloud Drive.  Even with those provisions, the music companies still want to fight the legality of the service.

Of course consumers are irate – how could you not be?   I bought the song – paid for it with my own cash – so why are you Mr. Music Company now trying to regulate how and where I can play that song?   The music industry will say that it’s all about piracy, and protecting against file sharing, but the reality is it’s just old-fashioned greed.   Instead of making consumers happy, they see the convenience of new devices and services as another potential revenue source, and therefore want to change the simple concept of “I bought it and I own it” to “I bought it but I can’t do A, B, or C with it”.

And they’re not alone.  Here are some other companies/industries that have invented their own definition of “ownership”.

1. Movies: I pay $20 or more for a movie DVD, but its encrypted and illegal for me to make a copy of it, even if it’s for my own backup purposes (because DVDs can easily get ruined) or because I want to store the movies I purchased on my home network to stream to my various TVs and computers.   Why should I not be allowed to do this?
2. iPhone: I bought an iPhone for $400, yet I’m not allowed to install anything I want to it – I would need to “jailbreak” it in order to have complete control, and that voids the warranty and risks future operability.   Apple even goes so far as to change the screws on the phone to ones that make it harder for me to open!   I bought the phone – why should I not be allowed to do whatever I want with it?
3. Magazines: I subscribe to print versions of magazines, yet if I want the iPad version of those magazines I need to pay again?  (This is changing, albeit slowly).
4. Mobile Internet: I pay $30/month for a 2GB mobile dataplan for my phone, yet I’m not allowed to tether it to my computer to use as a modem.  I’m paying for up to 2GB per month – why is that restricted to just mobile browsing?
5. eBooks: I recently bought several Kindle books including “Influence”.   I can read all the other books on the Kindle iPhone app, but not Influence – it’s “not available on Kindle for iPhone”.   I paid for the ebook – why is the Publisher trying to restrict where I can and can’t read it?
6. Cable TV: Time Warner’s iPad app is designed to allow you to stream your cable channels to your iPad while you are on your home wi-fi network.  The content producers including Viacom have sent cease-and-desist letters to prevent their channels from streaming to the app.  I’m paying $100/month for a set of channels delivered to my TV – why can’t I also watch those on my iPad in the same room?

In every one of these cases I’ve paid for something – a movie, a phone, a magazine, a dataplan, an ebook, a cable service – and the providers are purposely restricting my ability to use it.  You could try to cut the providers a break and say that they just aren’t able to keep up with the fast pace of technical changes and are trying to protect themselves, but the reality is that they are all trying to redefine “ownership” by reducing our rights wherever possible, in order to determine how they might be able to make even more money from us.

I’d appreciate going to back to the old definition – I bought it, now I own it.

In the last month the SEC has said that it will consider changes to certain capital markets regulations, including:

1. Raising the 500 shareholder threshold that triggers a public disclosure of financial results (and usually results in a public stock offering);
2. Adjusting the ban on general solicitations that prohibit or restrict publicizing share offerings; and
3. Allowing some form of crowdsourcing to raise smaller amounts of capital from a larger group of investors.  (via Mashable and VentureBeat)

Changing these and other rules are long, long overdue.  Our capital markets operate under some regulations that are decades old – pre-Internet, pre-mobile phone, pre-lots and lots of other advances.

Here are 7 reasons why the markets and regulations need a dose of innovation.

1. The current regulations let the rich get richer. Not to get all Robin Hood-y, but most start-ups only raise money from “accredited investors” (at least $1 million net worth) because of the cost and administrative burden imposed if you raise money from individuals who are not accredited.  As a result, you need to be rich in order to buy those start-up shares that might make you richer.  I know a lot of smart people that aren’t worth $1 million.
2. The current regulations haven’t exactly protected us. Enron, Worldcom, and Madoff all happened while these types regulations were in place.   They are supposed to protect us from fraud… but I’d just assume protect myself if you don’t mind.
3. The world is interconnected and communication is much more open. I can do more due diligence on a start-up I want to invest in, or at least on the founders of that start-up, than I could even 10 years ago.
4. Making it easier to access capital will lead to more innovation. Everyone talks about wanting to encourage innovation in this country.  It’s been a theme of President Obama’s State of the Union, and presidents before him.   It’s time to stop talking and make some changes that most people agree are overdue, including perhaps the most respected venture capitalist today.
5. $1 today is worth a lot more than it was a decade ago. That sounds wrong if you understand inflation, until you consider that start-up costs for many businesses have decreased dramatically over that time.  While software and Internet are obvious examples where some have estimated a 10x decline in cost-to-launch, other innovations like social networking channels have decreased marketing costs across all industries.
6. Crowdsourcing works. In the last 2 years, the crowd-funding platform Kickstarter has helped over 7,000 projects raise a total of $40 million.
7. Secondary markets are already disrupting the norm. Aptly-named SecondMarket is a registered broker-dealer that facilitates private share sales between the shareholders of high-flying private technology companies (often employees or former employees), and eager investors.  This booming secondary market is allowing companies to delay their IPOs even longer by providing current employees with a mechanism to cash out some of their shares (and therefore reduce the pressure to go public).  But – like #1 above – the buyers of these coveted shares in companies like Facebook and Twitter must be (drumroll) accredited investors.

The time has come to modernize our capital regulations.  Making it easier to access capital will help give more innovative ideas a chance to launch.

(Image by Flickr user bala)