Community Financing Breathes Life into a New U.S. Manufacturing Firm

[Renew Deal]

Even in this contentious election year, all sides agree on one issue: The loss of American manufacturing jobs over the past decade has been a disaster for the U.S. economy.

It would be unrealistic to imagine a return to low-value-add, low-skill, low-wage production in the commodity industries that employed millions of Americans a century ago. But it is realistic to envision the growth of high-value-add, high-skill, high-wage manufacturing industries like the microprocessor and computer-networking businesses that Intel and Cisco launched in the 1980s.
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But don't blame private equity for underinvesting in seed-stage manufacturing companies and thus failing to prepare the ground for the next Apple, Cisco, or Intel. Investors' aversion to physical-product start-ups is understandable — the two recent asset-bubble-induced recessions proved that these companies' need for materials, supply chains, distribution networks, and labor hampers them from responding quickly to sudden declines in sales. Very logically, investors are a lot more excited by social-networking and daily-deal web sites, whose small payrolls and nonexistent warehouses enable them to quickly reduce costs and ride out a recession.

The real issue is whether anything can be done about this investment trend. The answer is yes.

The way to increase seed- and early-stage financing for physical-product start-ups is to reduce individual investors' risk by improving the quality of due diligence and spreading risk across a larger number of investors. Consider, for example, TruTouch Technologies and the $3 million in funding that was financed by the SEC-accredited, paid subscriber community of my web-based economics and finance-services company, iTulip.
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http://blogs.hbr.org/cs/2012/02/community_financing_breathes_life_in.html

[Vincardog]

1. What would help US manufacturing MOST is TARIFFS like we had form 1776 till 1970. Like China has now