From the press release:

On Tuesday, May 19, 2009, the Israeli High Court of Justice, in a ground-breaking case, awarded equal funding to Reform and Conservative Jewish conversion programs. The Israel Religious Action Center (IRAC), the legal advocacy arm of the Reform Movement in Israel, originally filed this petition in 2005 against the Immigration Absorption Ministry for discrimination and today the Supreme Court agreed.

Attorney Einat Hurvitz, IRAC’s Legal Department Director, responded to the Court’s ruling: “Today's verdict reaffirms the fundamental right to equality and religious freedom by ruling that the State may not discriminate between people based on their choice of Jewish stream. Today, the Court set a precedent, mandating State-funding for religious services of the Reform Movement and other non-Orthodox streams of Judaism. We hope that this clear message from the court leads to a change in government policy and puts an end to the exclusion of the Reform movement by the State."

The media is full of negative reactions related to
the announcement of Treasury Secretary Geithner’s extensive regulatory reform plan for the oversight of the capital markets. I can't imagine that an announcement of this nature wasn’t widely
expected.  On November 28^th,
2008 I posted a warning on this specific issue:

A Case
Study in the Unintended Consequences of Financial Market Regulation: The Death
of the Small Cap U.S. IPO?:

"The first 100 days of the Obama administration
are widely expected to usher in a new era of U.S. capital markets regulation
designed to restore the public’s trust in the decimated institutions that
provide much of the liquidity infrastructure for the global capitalist
system.  It is imperative that improved financial oversight be achieved
swiftly through the enactment of effective regulation so that the markets can
re-equilibrate and resume their normal function.  Without these necessary
changes, global economic growth will continue to falter.  At the
same time, we must recognize that regulations enacted in haste can have severe,
negative unintended consequences." 

Pui-Wing Tam of the Wall Street Journal interviewed me this past Friday
and asked how I felt about increased regulation of venture capitalists as part
of the Geithner plan.  Her article
is published in WSJ Blogs in the Digits Blog and is titled Views From VC-Land
on Regulation.

My quote was given in the context of whether
becoming a Registered Investment Advisor presents an undue burden for venture
capitalists, which, based on my previous professional experience as a
Registered Investment Advisor, I believe that it does not.  

More important is my first point, which
is that we have experienced a massive failure of oversight in this country. 

Both the Government and the private
sector agree that we clearly have a regulatory process problem and that it must
be resolved.  We should not forget
that convicted felons such as Bernie Madoff were not only Registered Investment
Advisors, they actually passed inspections by the Securities Exchange
Commission.  The colossal systemic
failure of this country’s regulatory oversight of the capital markets has been
exposed by the SEC’s own inspector general, David Kotz, in an extensive report on the
SEC’s failure to enforce a whole body of regulation governing the now largely
defunct investment banks.

A series of unintended consequences stemming
from over a decade of misguided federal securities regulations is also at the
root of the structural problems that currently prevent liquidity from coming
back to the public equity markets for emerging growth companies, and this has
been exposed succinctly in the white paper “Why are IPOs in the ICU”.

I think it is unrealistic for investment
managers in any sector to anticipate less regulatory oversight in the US going
forward—but it is incumbent upon Secretary Geithner, President Obama, and the
Congress to recognize the proclivity of regulation to fail to accomplish its
intended goals.  We are already
living with those consequences right now.

The study "indicates that reducing the number of immigrant students in U.S. jobs may be detrimental to the economic health of the country by accelerating the return of talented immigrant students to their home countries.

“Highly skilled foreign national students used to come to the U.S. to study and stay. They start innovative companies that employ millions or  used their engineering and science skills to benefit U.S. companies. Many now believe there are better future prospects in their own countries,” said Robert E. Litan, vice president of Research and Policy at the Kauffman Foundation. “Policymakers are misguided if they believe these talented next-generation entrepreneurs and innovators threaten U.S. jobs. They, in fact, offer the promise of more jobs by building successful, high-growth companies—either in their own businesses or those for which they work.”

The study, conducted by Duke professor and Harvard researcher Vivek Wadhwa and titled “Losing the world’s best and brightest: America’s New Immigrant Entrepreneurs, Part V,” surveyed 1,224 foreign nationals currently studying in institutions of higher learning in the United States or who had graduated by the end of the 2008 academic school year. The survey was comprised of responses from 229 students from China (and Hong Kong), 117 students from Western Europe and 878 students from India.

“What many people do not realize is that these foreign nationals are making a job, not taking a job,” said Wadhwa. “According to research by the National Science Foundation, foreign students received more than 60 percent of all engineering doctorates and more than half of all science and mathematics doctorates awarded in the United States. That’s a lot of talent to lose to other countries.”

According to the findings, many respondents do not wish to live in the United States permanently, with 55 percent of Indian, 40 percent of Chinese and 30 percent of European students reporting that they want to return home within five years. This shows a stark reversal from past retention rates. In the past, greater than 75 percent of Indian and Chinese students who received science and engineering advanced degrees in the United States remained in the country for extended periods or permanently.

Among the study’s findings:

•    A key impetus behind students’ intentions to depart is the fear that they will not be able to find a job in the United States upon graduation and their growing belief that the U.S. economy will lag global growth rates in the near future. 

•    Chinese students, in particular, strongly feel the best job opportunities lie in their home country—52 percent said their home country has the best job opportunities versus 32 percent of Indian respondents and 26 percent of Europeans respondents. This contrasts starkly with the beliefs of most skilled immigrants in the 1980s and 1990s that the best opportunities were in the United States.

•    The vast majority of foreign students—85 percent of Indians and Chinese and 72 percent of European—are concerned about obtaining work visas; 74 percent of Indians, 76 percent of Chinese and 58 percent of Europeans are also worried about obtaining jobs in their fields.

•    A large percentage of respondents have entrepreneurial hopes; 64 percent of Indian, 66 percent of European and 68 percent of Chinese students indicated they want to start a business within the next decade. For Indian and Chinese students, the majority (53 percent and 55 percent respectively) hope to start businesses in their home countries. Only 35 percent of European students wish to open a business in their home country.

•    All nationalities hold the U.S. educational system in high regard. Indians and Chinese, in particular, found that the United States educational offerings are better than their home countries’, including preparing foreign graduates for entry into their home country’s workforce.

•    Respondents from India and China both expect that the next generation of innovative products and services in their home countries will increase during the next quarter century at a much faster pace than in the United States.

The students’ desires to return to their native country echoes a sentiment expressed by highly skilled Chinese and Indian immigrant entrepreneurs who were surveyed in the recent Kauffman Foundation study, “America’s Loss is the World’s Gain.” In this study, 47.8 percent of Chinese and 46 percent of Indians who had returned to their native country said that they were unlikely to return to the U.S. Additionally, 60.7 percent of Chinese and 53.5 percent of Indian respondents said that opportunities to start their own businesses are better in their home country than in the United States, and 50.2 percent and 56.6 percent respectively considered it likely that they would do so within five years. This study is fifth in a series of reports Wadhwa has conducted on immigrant entrepreneurship for the Kauffman Foundation.

Immigrants historically have contributed to some of America’s most successful businesses and innovations. Between 1990 and 2007, the proportion of immigrants in the U.S. labor force increased from 9.3 percent to 15.7 percent, and a large and growing proportion of immigrants bring high levels of education and skill to the United States. Immigrants have contributed disproportionately in the most dynamic part of the U.S. economy—the high-tech sector—co-founding firms such as Google, Intel, eBay and Yahoo. In addition, immigrant inventors contributed to more than a quarter of U.S. global patent applications. Immigrant-founded U.S.-based companies employed 450,000 workers and generated $52 billion in revenue in 2006.

“Better job prospects, a loosening of visa restrictions and an economic rebound in the United States could prove powerful magnets to recapture would-be entrepreneurs holding newly minted sheepskins,” Wadhwa said. “Incentive programs to encourage foreign immigrant entrepreneurship—perhaps pairing fast-track residency status with launching of companies—also could help ensure that those who want to stay and start companies can do so.”

I am a first-generation American, born in Puerto Rico.  Both of my parents were naturalized Americans.  I'd like to think that America will recognize that the rich diversity of our nation's cultural tapestry must be reinvigorated before we lose the next generation of entrepreneurs to greener pastures. 

On Friday,
January 23rd, I joined Rob More of Frazier HealthCare
Ventures to participate in a national press briefing on behalf of the National
Venture Capital Association (NVCA), in conjunction with the release of the 2008 Fourth Quarter PricewaterhouseCoopers/National Venture
Capital Association MoneyTree™Report.  Joining us on the
call were Maryanne Coughlin,
Director, Technology Sector Analyst, PricewaterhouseCoopers; Tracy T. Lefteroff
, Global Managing Partner,
Private Equity & Venture Capital and Life
Sciences Industry Services; and
John S. Taylor, Vice
President of Research, National
Venture Capital Association.

The data itself clearly shows a pronounced
decline decline in Q4 ’08 venture activity across both Life Sciences and
Information Technology.

Responding to reporters’ questions, I
expressed my strong view that we should expect no quick fixes to the structural
liquidity problems in the US public equity markets for sub $1 billion equity
capitalization emerging growth companies. 
For privately held VC-backed companies, I explained that one of the
biggest current challenges for many venture capitalists is maintaining economic
alignment with co-investors in venture syndicates for both new and existing
investments. I also identified the Lehman bankruptcy as a factor which gave
pause to all investors in Q4 and as an important signpost in the global credit
crisis because of the counterparty risk issue.

Most importantly, I asserted that the current
period of turmoil is an exceptionally good time to put new VC money to
work.  After 28 years in business
and over 12 years in VC, I do have some perspective about investing cycles,
having lived through several financial market crashes and resurrections. Looking
back at our 12 year investing record at Levensohn Venture Partners, our best investments were made in
companies that we identified as differentiated leaders in their sectors at the
bottom of the last VC cycle—in late 2001 and 2002.  At that time a different set of circumstances made many
investors stay on the sidelines, creating precisely the opportunities that
everyone seeks on sunnier days. We are seeing those exceptional opportunities again
in 2009.  It’s a buyer’s market in
VC.

In his new book, The Post-American World, Council on Foreign Relations member Fareed Zakaria reflects on many of the challenges that we face as a country in the 21st century. He also reflects on the strengths that make America unique.

When I describe what makes the Silicon Valley eco-system for entrepreneurs unique and, in my view, exceedingly difficult to duplicate, my description mirrors what Zakaria describes as America’s core strength:

” Per capita, it turns out, the United States trains more engineers than either of the Asian giants. … America’s hidden secret is that most of these engineers are immigrants. Foreign students and immigrants account for almost 50 percent of all science researchers in the country. . . . Half of all Silicon Valley start-ups have one founder who is an immigrant or first generation American. The potential for a new burst of American productivity depends not on our education system or R&D spending, but on our immigration policies. If these people are allowed and encouraged to stay, then innovation will happen here. If they leave, they’ll take it with them. More broadly, this is America’s great– and potentially insurmountable– strength. It remains the most open, flexible society in the world, able to absorb other people, cultures, ideas, goods, and services. The country thrives on the hunger and energy of poor immigrants.”

I am a first generation American who, by the good fortune of being born and raised and Puerto Rico, was an American citizen before my immigrant parents were naturalized. But for the ultimate sacrifices made by American soldiers against the Nazis in World War II, I would not be here.

This Memorial Day, let’s also not forget that the lifeblood of innovation and entrepreneurship comes from many places, but it has found a uniquely fertile soil in an America that embraces and celebrates diversity.

With raindrops battering the airplane windows as we approached the gate, we learned that a massive storm system had forced the cancellation of many United flights into in out of Chicago, including our connection to Rochester.

We entered the terminal and saw a line of at least five hundred people trying to re-book their connecting flights—the wait for the “rapid, self-service kiosks” made us wish for unconsciousness. A large dose of good luck and membership in the Red Carpet Club succeeded in getting us re-booked onto a flight to Buffalo which left in 45 minutes, and both of us were upgraded to First Class… As we waited to board, an announcement was made that the First Class cabin had checked in full and that the ten other passengers waiting to upgrade would have to fly coach. We were lucky, indeed.

But that’s not the punch line to this story.

We were the first two passengers to board the 737 and, to our surprise, five of the eight first class seats were already occupied—by United employees. They had even completely filled the overhead bins with their bags, and I had to politely ask for one of the dead-heading flight attendants to move her bag into coach so that I could keep my own bag with me. I even offered to carry her bag to do it!

The flight was 100% full. At least 1,000 paying customers of United Airlines were massively inconvenienced due to cancelled flights throughout UAL’s Chicago hub. There is no doubt that other passengers on Flight 1142 to Buffalo had been re-routed onto this flight. Did United have an opportunity to build goodwill with five more of their loyal customers by moving the extremely unhappy paying passengers up front and having the employees fly coach to Buffalo? Yes.

But that would be another airline in another world and another time. And this blog is about the real world, where airlines, companies that used to be in the customer satisfaction business around circa 1975, no longer consider the lasting impact on every passenger who will not forget the image of five employees hogging 63% of the First Class cabin on Mother’s Day during a massive disruption of service to paying customers.

And I’m one of the lucky minority who got to ride up front…

But there is such a thing as being over-connected on the web.  A symptom:  the gnawing sense of obligation that you might feel to keep your content fresh– especially the little things, like changing your blog and Facebook pictures, or endlessly thinking of something pithy to say on your Facebook status bar (or on Twitter).

I usually post more actively when I am on vacation, but this past week, I unplugged totally for the first time in too long. 

No email, no phone, no blogs, no keyboards, no laptop–  but I did have my digital camera.

Being in Fiji was a key ingredient to the mix, as were several good books and plenty of great conversations with fellow travellers.  One of the more unusual recurring themes on this trip was meeting a number of people from all over the world who had quit their jobs and were in various stages of taking a year off from the working world– having visited many countries and experienced life from a completely different perspective.  Most of these people were between 22 and 32 years old, and many had IT backgrounds.  Fiji can be very attractive if you are on a limited budget; maybe this concentration of checked-out global travelers was a function of the attractive and cost effective environment, but it still surprised me.

My week of electronic abstinence evolved into a mini-course in restoring perspective, in slowing down response time, and in generally re-charging my batteries for 2008.  I recommend periodic disconnection from the web for everyone.

Speaking of connectivity, I’m looking forward to CES!

Happy New Year!

Now ruined by a toxic oil spill on the water–

One of the great pleasures of living in San Francisco is the ability to enjoy the natural beauty and unique features of the San Francisco Bay.  When I first moved to San Francisco in 1990 I would windsurf regularly under the Golden Gate Bridge, launching from Crissy Field.  In 1993, I joined the South End Rowing Club (one of two local Polar Bear swimming clubs) and would actually swim in the Bay three to five times a week, immersing myself in the exhilarating waters of Aquatic Park for as long as thirty three minutes… 

More recently, I’ve been riding my bike down to the Golden Gate Bridge through the Presidio and taking advantage of the new cycling paths next to the superb wetlands restoration project at Crissy Field.  I often cross the Golden Gate on my bicycle and ride up into the Marin Headlands. But cyclists are depressed, windurfers are grounded, and nobody is swimming in the Bay after the collision of the Cosco Busan cargo ship into the Bay Bridge on Wednesday November 8th at 8:30 AM released 58,000 gallons of oil into the Bay. Click here for Sacramento Bee story.

Crissy Field is desolate and adorned only by oil spill cleanup booms; virtually all of our San Francisco Bay beaches are closed due to the disastrous oil spill that has befouled our Bay– and the spill now stretches out to sea 10 miles, threatening sensitive bird breeding grounds in the Farallon Islands.

click on image to enlarge

We, the cyclists, swimmers, sailors, beach-loving families, and, most of all, the defenseless wildlife that are our national treasure, are going to be paying the price for this negligence for years.  It appears that emergency crews did not act in a timely manner to stem the damage– and the sad fact is that in 30 minutes, the bulk of the damage was done. 

The earth is already in trouble from climate change, and avoidable tragedies such as this one should only punctuate the need to plan ahead for the low probability, high loss events that can impact our lives and destroy the natural habitat that makes the Bay Area special.  It is a sad day for all of us.