Saturday, July 25, 2009

Open Letter to Mr. Obama. An idea to create jobs




Mr Obama, please read this post!

This is applicable for Silicon Valley within 200 miles radius, later to be extended in the rest of the country

Two of more engineers, consultants, students, new graduates get together. They are all excellent professionals most probably laid off, or worried how to get a job in the high-tech today. They come from top notch companies like Ebay, HP, Google (yes, the mighty Google laid off 10,000 in 2008), Sun, SGI and so on. The students come from U.C. Berkeley or Stanford University, until now considered a sure passport to get a job, and now trying to get into the work market

They present a slide show and a brief summary for their ideas. Then they receive from the federal government program at least $ 250,000 to make their early start idea suitable for investment by the famous and now relatively inactive early stage venture capital industry of Silicon Valley. The rate of the award should be 50%, it means from two applicant teams, one gets approved. The goal is to have a prototype, a customer trial and to show interest from about 20 companies. Then, early stage Silicon Valley VC community will become alive and the most important portion of the risk has been removed by a Government program

The idea comes from Israel, where a similar program has generated 100 Israeli companies listed on NASDAQ and 75% of Israel's $70 Billions in exports to come from high tech products.

With hundreds of thousands of technical experts laid off by larger companies, such a law will capture the brain and create jobs.

Let's assume 20,000 requests are handled by this early stage federal government program. 10,000 starts receive the $250K funding. This is $2.5 Billion plus 10% administration costs, this is $2.8B. This amount is peanuts (0.3%) compared to $1 Trillion for health care reform.

What this can pay off? Assume only 10% of the companies funded are successful. That is 1,000 new companies are created. Let's assume 9% (900 companies) will have an average of 200 employees each and 1% (100) will have an average 1,000 employees each.

The total number these companies will employ in high quality, well paid jobs (not farm workers, not bricklayers, not shopping mall cleaners) is 280,000. This is larger than number of people laid off. Thousands of ideas stagnant in a large bureaucracy like Silicon Valley giants, will come to life and make money magically , from ideas, from apparently nothing but brain.

The brains are here. We need to money to make it happen. Other countries have oil, we have the educated brain, here on Silicon Valley.

The valuation of the 1,000 operational start-ups, let's assume can be $50M. Some companies may reach 5 Billion in value, some almost nothing. This means the value created in stocks is $50B, If the Government keeps 15% equity in each of those start up, the total value owned by feds is 7.5B.

This will nearly triple the $2.8B initial investment.

Mr Obama, please read this post!

Miha

PS: If you support the idea - I hope you do - please as a minimum leave a comment saying "YES". Surely, you add your opinions as well. The more YES we have, the more chances we have to be heard.




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