A Good Place to Be an Entrepreneur California continues improving its business environment by focusing on entrepreneurial concerns and what the state can do to help.

As a native Californian, if it weren't for my extensive travels around the country and the world, I would never appreciate how truly special the environment here is for entrepreneurs. Adding to my appreciation is the nature of my business--assisting entrepreneurs in finding the best route to their success.

I was especially impressed when I learned that the California Legislature was asking leaders in the community for their input on making the entrepreneurial environment even better. In addition to selecting me to join this august body, they also recruited senior members of several VC firms, investment banks and commercial banks, and the major pension funds, whose dollars play a part in supporting more than 300 VC firms, as well as professors from some of the leading universities promoting entrepreneurism.

The initial objectives of the group were listed as:

• Assisting communities in becoming investment ready;
• Expanding debt instruments to serve the business development needs of emerging domestic markets;
• Using public money to reduce community development risks in emerging domestic markets; and
• Innovating private equity investment products in emerging domestic markets.

Since September, the group has met once in person and had two two-hour long conference calls. Collectively, it has decided to focus on the following three priorities:

1. Enhance the financial literacy of and technical assistance available to entrepreneurs seeking debt and equity capital. In other words, focus on developing programs that help entrepreneurs better understand: how much money they might need to grow their company to the next level; and where to get that money.
2. Develop one or more models for deploying private equity funding in early stage companies, including blending public and private resources to meet risk-adjusted return requirements. Here the focus would be on: developing a method to screen entrepreneurs to determine which ones are ready for funding and which ones still need help to qualify for funding; and providing systems and incentives to combine both public and private investment funds to increase their reach and effectiveness in helping entrepreneurs.
3. Establish common definitions and criteria for use by investors in emerging domestic markets. For example, many entrepreneurs don't understand, much less appreciate, many of the terms used by the professionals that will decide their fate. These terms include: "cap table," a chart that provides an investor with detailed information about who owns or has claim to every share of stock in the company; and "equity," which refers to a form of ownership in the company where money is exchanged for stock based on a unit of value that has been pre-agreed to by both parties.

Currently, there is no one place entrepreneurs can go to get this type of information in either the quantity or quality they need.

If you'd like to know more about this ongoing effort of the Advisory Group, including a list of members, you can go to the website for the California State Assembly Committee on Jobs, Economic Development, and the Economy.

So what does this committee hope to accomplish? Since I know there is usually a general amount of skepticism about what government can do, let me emphasize some of the common concerns driving this effort:

• In the past 10 years, there has been a renewed interest by institutional investors in identifying businesses and real estate opportunities in emerging domestic markets. This growth in investor interest is driven, in part, by the recognition that changing demographics in the U.S have resulted in a significant increase in minority purchasing power and business development by minority-owned firms.
• The IRS predicts that Latinos will soon own 10 percent of businesses. Overall growth rates in the number of minority-owned businesses are three to four times higher than for white-owned businesses.
• Small businesses provide approximately 75 percent of net new jobs in the nation. In California, small businesses comprise more than 98 percent of all businesses, and businesses with less than five employees make up more than 88 percent of all businesses in the state.
• Despite their growth, emerging domestic markets' ability to grow is constrained by their access to capital. Even after accounting for a variety of factors, such as education, experience, industry and location, EDM firms receive less capital and on less advantageous terms. Latinos and blacks are turned down for business loans at 3 times the rate of whites with equivalent credit characteristics.
• In 2006, private equity venture funds raised $130 billion; approximately $25.5 billion was invested in 3,416 deals. The composition of EDM venture portfolios differs from mainstream portfolios. EDM venture portfolios are typically comprised of retailers, financial and business service entities, makers and distributors of consumer products, and computer software companies. These types of companies comprise only 10 percent of mainstream venture capital investments.
• Although women own approximately 40 percent of all businesses in the U.S., they receive less than five percent of all venture capital.
• Minority owners comprise 8 percent of all owner firms, with Hispanics owning close to 4 percent. However, minority-owned firms receive less than 2 percent of venture capital.
• Rural entrepreneurs account for 10 percent of all businesses but receive less than 2 percent of all venture capital.

Thus, the motivation lies in recognizing that the economic base of California is changing and that the financial community needs to make the appropriate adjustments. California's leadership and reputation for fostering entrepreneurism will be threatened if we don't adjust to these changes and learn how to better improve our mechanisms for finding, helping and funding the best and brightest ideas in our state--regardless of their source.

Jim Casparie is the "Raising Money" coach at Entrepreneur.com and the founder and CEO ofThe Venture Alliance, a national firm based in Irvine, California, that's dedicated to getting companies funded.