Coventry League
Vuvuzenomics 07/12/2010
 
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Many people viewed some of the games of the 2010 World Cup, including the championship in which Spain defeated the Netherlands 1-0. And, just as many people who were not at the stadium wondered what was generating the continual humming, bumble-bee sound. Well, it was the vuvuzela horn, and fans took liberty to explore the entire stadium space.

From an economics perspective, the World Cup created a noticeable trickle-down effect. As you review the accompanying infographic (click image to enlarge), you will notice the large number of horns sold, which caused a large number of - you guessed it - ear plugs to be sold.

Not all have been enthusiastic about the vuvuzela horns. Already, the horns have been banned at Yankee Stadium and throughout the Southeastern Conference (SEC) of U.S. college sports, among other worldwide venues.

Given the positive economic impact attributable to vuvuzela horns, where’s the vuvuzelove?
 
 
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Top U.S. Federal marginal income tax rates.
Given the challenging economic climate, more businesses are incurring accounting losses.  A concern for some owners is whether they are permitted to offset losses with other sources of income. 

With regard to a member of a limited liability company (LLC), the general answer is yes, according to an article published by Crain’s Cleveland Business, written by Carl Grassi, president of law firm McDonald Hopkins LLC.

The author states “as a general rule, losses incurred by a business in which the taxpayer materially participates are deductible against other sources of income.”

To determine material participation, tax regulations provide seven tests, of which at least one must be met.  One test requires that the participant devote more than 500 hours to the business in the year.  Joe Kristan at accounting firm Roth & Company, PC provides a summary of the tests in everday language.

Onward to becoming more tax efficient.
 
 
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There are two software tracking applications of the federal government stimulus package (formally known as the American Recovery and Reinvestment Act).  One is the government’s, found at recovery.gov, which is oriented towards taxpayers who want to know how their tax dollars are being allocated. 

The other is provided by Onvia (ticker: ONVI), a Seattle-based public company.  Its application, found at recovery.org, is directed at businesses interested in bidding on projects, before it’s too late to do so.  An Onvia representative stated the application is free to use, since it's a means to attract incremental customers to the company’s subscription based data.  Fair enough, in our opinion.

Read more about it on GreenBiz.com’s blog by Marc Gunther or listen to an interview with the CEO on reason.tv. 
 
 
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Entrepreneurs often are known for being self-reliant, so it was not surprising to learn that Wilson, Sonsini, Goodrich & Rosati, a Silicon Valley law firm, released a free, online term-sheet generator for venture financing. 

It is a savvy marketing effort by the law firm, and an instructive exercise for inquiring minds seeking venture funding.  By the way, if you have not heard of WSGR, it is likely you have heard of some of its current and former clients, including Dolby Laboratories, Apple, Google and YouTube.

Essentially, the tool enables a prospective entrepreneur to generate a preferred equity term sheet by answering a series of questions about the amount and tentative terms of a funding. 

As quoted on WSGR's website:

This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms.

In addition, the firm provides market data, highlighting private market financing trends for the past two years.  A sample draft term sheet can be viewed on scribd.com, too.

Several bloggers and media have presented overviews, including TechCrunch, Reuters and a related good article by Paul Johnson at StartupSD about 'Participating Preferred' term sheets.
 
 
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VentureBeat published an informative blog titled “ten lessons from a failed startup,” by Mark Goldenson.  In late 2007, he and his partner planned to start an internet TV network for games called PlayCafe.

Here are three important takeaways:

1.)  Knowing versus Doing.  “…but like a surgeon who has studied but never practiced, I think it takes a lot of hands-on experience to learn intricacies and exceptions.”

2.)  Always have Options.  In negotiating and planning, you always want to have back-up plans.  He mentions BATNA (best alternative to a negotiated agreement).
3.)  Marketing.  Set a value on your time, understand customer acquisition costs, and recognize the importance of skillful marketing, especially if you don’t have inherent one-to-many virality.

The author provides valuable links to resources and stories such as mint.com and redeye.com.