close this bookVolume 6: No. 82
View the documentIndustry and Comdex news
View the documentMicrosoft news
View the documentSafe computing
View the documentResearch software (in our CRS 6.42 digest this week)
View the documentEntrepreneurialism

Entrepreneurial wealth in Silicon Valley is going up by 50%-100%/year, with the personal wealth of SV employees, shareholders and founders increasing by about $75B-$100B over the past 7 years. Yet little of that goes to charity, despite tax incentives that allow a donation of appreciated stock for as little as 1/5 its value. (Someone in the top tax bracket would have to pay $35 in capital gains tax to cash in $100 in founder's stock, plus $45 in state and federal taxes on the income. Such charges are avoided if the stock is given to charity.) Other alternatives include starting a charitable gift fund, remainder trust, or foundation. Each gives an immediate tax deduction for funds that are committed to eventual charitable use. Entrepreneurs haven't been using these vehicles because they are young, frugal, busy, nervous about "paper profits," and worried that selling stock would show lack of faith in their companies. [James J. Mitchell, SJM, 11/17/96.]

Venture capital investments in Silicon Valley and nationwide are slowing in the 3rd quarter -- as they usually do -- but it's going to be a record year. VCs claim there just aren't enough good opportunities to invest in. Competition is hot, especially competition for experienced high-tech executives. (Sometimes they'll even put a freelance executive on payroll -- as an "entrepreneur in residence" -- while he/she figures out what kind of business to start.) SV investment dropped from $761M in the 2nd quarter to $459M in the 3rd. Almost 40% of that is for software-related companies, the only sector which did not slack off. For a complete list of nationwide investments, see . The venture industry is both growing and consolidating, with 51% of the capital now managed by the largest 10% of venture firms. The US has 700 VC firms, up from 550 in 1993. 125 are based in the Bay Area. About half of US venture capital comes from SV and Boston, but other areas -- especially San Diego, and also Asia -- are seeing increases. Many VC firms are specializing, such as Hummer Winblad Venture Partners (Emeryville, CA) and Sippl Macdonald Ventures (Menlo Park) in software or Kleiner Perkins Caufield & Beyers (Menlo Park) with their Java Fund. Individual investors ("business angels") are more active now, and many corporations are setting up venture capital divisions. Ann Winblad estimates that five times as many software businesses are being funded as the market can support -- or as can be staffed with quality employees -- which may lead to another recession in venture funding. [Ricardo Sandoval and Steve Kaufman, SJM, 11/18/96, 1E.]

(Way Ting, 47, left SGI this year to start Pictra Inc., a company helping people post family pictures on their websites. He's gotten $2.2M in VC funding, employs 14, and expects to turn a profit next year and to go public with a $20M business in 1998. He was approached by VCs even before he knew he wanted to be an entrepreneur.)

Temp agencies say that average pay rate is up because more high-tech people are choosing to temp. An industrial worker may get $7/hour, while technical jobs may pay $22/hour. [Dow Jones. SJM, 11/9/96, 1C.]

The typical US millionaire -- of which there are about 3.5M -- is a 57-year-old man, married, with three kids. He's self-employed in a "dull-normal" business such as welding, plumbing, paving, or pest control, and works 45-55 hours/week. His household net worth is $3.7M, including a $320K house, and he invests 20% after taxes from an annual income of $247K. His charge cards are MasterCard, Visa, and Sears, and he wears inexpensive suits and drives a Ford. (Six out of seven luxury car buyers are not millionaires -- just high-income, low-net-worth people.) His adult children, in all probability, will not be so frugal. "The more you give them, the more they spend." It's often best for the kids not to tell them that you've got money. So says author Thomas J. Stanley, who has himself become a millionaire by following his subjects' examples. ["The Millionaire Next Door." SJM, 11/20/96, 1C.] (I don't know if that 3.5M includes the wives. 'Sorry about the sexism.)

Need to know just how much Bill Gates' Microsoft stock is worth? Check the Bill Gates Personal Wealth Clock at . The display also gives Bill Gates' wealth divided by the current US population, showing "your personal contribution" to be about $77. An international version of the clock is under development. [Philip Greenspun. Bill Park , 11/13/96.] (Don't think of Gates as grabbing your share of the pie, but as enlarging the pie for everyone. That's what entrepreneurialism is about.)

-- Ken