If you’re avid reader of blogs like this one, chances are you can’t go a day without hearing of a new startup that is seeking to revolutionize an industry, that just raised a round of funding, or that was acquired by a major company.
The global economic outlook may be uncertain, but startups are thriving. Or at least so it appears.
According to the Ewing Marion Kauffman Foundation, however, the startup may be on the decline. In looking at data from the US Census Bureau, it found that in 2010, startups — those businesses formed within the past five years — accounted for just 8% of all companies, the lowest figure since statistics on this started being kept. Contrast that to the 1980s, itself home an economic crisis or two or three, when startups accounted for approximately 12% of all companies.
Obviously, the technology startup ecosystem that we have today didn’t exist in the 1980s, and if you’re looking to start a business that can go from nothing to $ 1bn in a short period of time, you’d be hard-pressed to find a better path than to start a technology company (and perhaps enroll at Stanford University beforehand).
But the Kauffman Foundation’s report provides some useful context for the Silicon Valley startup boom of recent years. If the Census Bureau numbers are to be believed, fewer individuals overall are opting to start businesses. While the Kauffman Foundation doesn’t really speculate on the reasons, they’re not too hard to identify. From the tough macroeconomic situation to the tough regulatory environment, there are plenty of barriers to starting a business today and anyone with the capital to fund themselves would have good reason to think twice.
It may be a bit easier for entreprenerus in Silicon Valley, where venture capitalists and angel investors flush with cash are currently willing to lavish inexperienced twenty-somethings with millions of dollars in the belief that they’ve got the ‘right stuff.’
But if would-be entrepreneurs in general (read: the type who are more likely to be older and of independent means) are starting businesses at a noticeably slower pace than they have historically, it might be worth taking that as a red flag that the startup ecosystem we’re seeing today, which has wannabe entrepreneurs flocking to Silicon Valley as wannabe actors flock to Hollywood, is not built to last.