The US Startup Is Disappearing (qz.com) 168
Dan Kopf, writing for Quartz: Historically, startups have been the engine of US economy. By creating new jobs and surfacing new ideas, startups play an outsized role in making the economy grow. It's too bad they are a dying breed. While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014. From around 1998 to 2010, the share of private sector workers in companies that were less than two years old plummeted from more than 9% to less than 5%. A new report from the Brookings Institution, finds that in nearly every industry, from agriculture to finance, the share of new companies is falling.
How does outsourcing account for it? (Score:2)
In 1998 there was virtually no outsourcing and start-ups had people on staff that now work for companies like Wageworks and others. Maybe it's better to track the number of actuall start up companies?
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ProTip: If you work for Wageworks and not directly for your startup, you are getting screwed and are most certainly not going to get rich for your efforts.
ProTip: If you work directly for a startup, instead of for Wageworks, you are getting screwed and are most likely not going to get rich because, like most startups, yours is likely to fail. Better to get a steady paycheck.
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Re:How does companies succeeding account for it? (Score:2)
I wonder if it is just caused by less companies failing. If you look at the number of companies being started each year (source [bls.gov]), it has been failure steady over the past 20 years. Maybe the share of companies which are younger than 2 years is a symptom of less companies failing. If company failure rates were higher in the decades preceding 1985, then of course young companies would be larger percentage of all companies.
Could this just be a case of playing with statistics to create a good headline for a sto
Re: How does companies succeeding account for it? (Score:2)
What if the reason for fewer startups is the fact that large oligopolies will buy up his ideas and compete with him or her. Have a good idea about some feature in your field of expertise a very rich competitor will likely buy you up or copy your idea and keep you from growing or even remaining in business.
Historical precedence (Score:5, Interesting)
Re: Historical precedence (Score:5, Insightful)
You know there are other sectors of the global economy besides tech, right?
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Any that you believe isn't already or won't be dominated by tech?
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One difficulty faced by restaurants is needing to offer service like Uber eats to compete, but finding that it's disrupting their pricing as those customers aren't having their food subsidy offset by drinks, say.
We've had articles, here, about restaurants withdrawing from these services, and others that are starting up out of the normal foot traffic areas with an aim to target delivered food as a portion of their business.
Technology is pervasive and disrupting most businesses.
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Same thing is/has been happening to sectors outside of tech too. Some of them may even pre-date tech, with memes like Walmart replacing many mom & pop stores, and old media (tv, newspaper) being owned by a handful of companies, with Rupert Murdoch being portrayed as some Bond villain
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You know there are other sectors of the global economy besides tech, right?
Yes, but where else is there a regular pattern of disruption that allows startups to thrive? Restaurants and fashion are the only ones that come to mind. Fashion is fairly weak as the money is mostly in the barely disrupted manufacturing and retail sides. Restaurants aren't very profitable and few of these "startups" get past the small business stage.
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Construction of any type - Insurance Public liability , Workers comp, licences before you even start
Restaurant - Insurance Public liability , Workers comp, licences, Rent, fit-out
The same goes for many businesses the costs to start now are much higher not just in tech and add to that ongoing costs e.g. energy cost that are increasing I see a lot of younger people give up once they realise that business they want to start-up would req
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Big companies and industries shape the playing field, not just for better regulations for themselves, but to create barriers to competition.
https://en.wikipedia.org/wiki/... [wikipedia.org]
Re:Historical precedence (Score:5, Interesting)
Re:Historical precedence (Score:5, Insightful)
Look at the recent GDPR laws in Europe as an example and ask yourself how much of a pain that would be to deal with if you're a small one or two person company.
Close to zero. While the GDPR is a big chunk of paper, it is for 99% of all companies irrelevant.
You simply only store as much information you need to perform the business with your customer, like billing address, and never share any information with anyone else. And that is the default for small companies. With whom for what purpose would I share any private data of any of my customers?
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lolwut? pretty much every startup is in the adtech space, because the alternative is collecting money from customers. Any information about a user (even a randomly generated cookie) is subject to GDPR.
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lolwut? pretty much every startup is in the adtech space, because the alternative is collecting money from customers. Any information about a user (even a randomly generated cookie) is subject to GDPR.
Not outside the US. Even before the GDPR this was categorically illegal in Europe and most of the civilized world.
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Lot of consequences you may not be considering. For example, every Indie/small press writer is a small business. They all tend to have email lists for their readers to subscribe to. For the last few months there has been a huge uproar amongst them while everyone scrambles to figure out what GDPR compliance means they do or don't have to do, just because they send emails to people who want to hear about them and/or their new releases as they come out.
In any case, the real reason for the decrease in new busin
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The tilt that GDPR applies against startups has to do with sharing your company information with potential customers, not sharing customer information.
If you're an existing company with an existing customer base, you have more people intersecting with your "legitimate business interest," allowing you to ignore most of the effects of GDPR when it comes to lead generation (non-customer communications). Essentially, larger companies ignore much of GDPR for outbound communications.
When you're a new company, wit
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If you're an existing company with an existing customer base, you have more people intersecting with your "legitimate business interest," allowing you to ignore most of the effects of GDPR when it comes to lead generation (non-customer communications).
This is not correct: generating leads, i.e. future profits, is not a 'legitimate interest' with respect to GDPR compliance. You'll need consent for that.
Customer data is needed to fulfill (existing) contracts. But having data for one purpose does not allow you to use the same data for another purpose: you'll need a separate justification for using customer data for that new purpose. In that sense, the GDPR levels the playing field by giving large established companies the same options as startups to gain ne
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If you respected its predecessor law chance is that you are fully golden.
Although many companies are loath to admin it, this is spot on!
High risk, high consequence of failure, low reward (Score:1)
Large corporations (universally) set up economic and legal barriers-to-entry to protect their own interests. These barriers stifle startups before they can even start up. Inasmuch as this strategy is successful, we would expect to see fewer startups in an economy dominated by a handful of giants.
As it stands now, one must be kind of crazy, and kind of stupid, to attempt a start up. Getting your foot in the economic door requires you to work yourself to death while taking on considerable risk, including r
Because of the lack of TAXES (Score:2)
The problem is in fact that the big companies do not pay any taxes.
That makes them much more competitive than small ones, and the small ones disappear.
Tax the big ones, as it once was, it will be much more balanced.
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We never called these things "startups" in the past. The mentality of the startup is a modern thing. We used to innovate, but today we copy. I won't miss it if todays startups start to vanish, we can get back to having real companies whose valuation isn't listed in the fantasy section.
And how long is a startup a startup? For one day? Two years? I know private companies that go along fine being profitable for a decade, but somoene calls them a "startup" just because they're not publically traded.
Over regulation (Score:2, Insightful)
Over regulation, cost of entry, corporate cronies in government, high taxation, have all conspired to hurt small businesses.
It's a Democrat/Republican problem though. You cannot pick just one. They are all to blame. If you want a healthy functioning economy with light regulation and sensible government spending & taxation, then you cannot vote for anyone in those two parties.
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Re:Over regulation (Score:5, Insightful)
Would that be the Republicans, not one of which voted for it or had any say in the contents of the bill?
You can't have it both ways. If the ACA sucks it's because the Democrats passed it. If it's great its because Democrats passed it.
Anyone with a brain knew that if you make a business take on a large cost for employees who work more than 30 hrs a week all of a sudden there's going to be a lot more employees working 29 hours a week. So now instead of working 32-40 hours a week and not having benefits you get to work 29 hours a week and don't have benefits. So less money and still no benefits.
Re:Over regulation (Score:5, Insightful)
Yep...and it is getting so bad, that ONLY the big guys can afford full time staff dedicated to the tax and paperwork....keeps the upstarts out.
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Just as the big guys intended all along, since they are the ones writing the legislation nowadays, in many cases literally
The dream of America is dead and the patient cannot be brought back to life
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Don't forget the IP minefields.
If you wind up hitting a submarine patent, the incumbents can simply come in and take over without a fight, or you wind up in a huge legal battle where they drag out discovery and bleed you dry.
If you actually do invent something new, chances are the incumbents will offer a low price and require full transfer of all rights to them to complete the deal. If you refuse, see above about the legal battle you'll be faced with. Also, if you do agree to the deal, whatever you've inven
I call BS (Score:1)
Other than that and the most odious regulation I remember seeing a small business suffer through was having to throw electronic waste in the right p
so fine it's ok pay some one $2/hr to drive an car (Score:1)
Over regulation, cost of entry, corporate cronies in government, high taxation, have all conspired to hurt small businesses.
It's a Democrat/Republican problem though. You cannot pick just one. They are all to blame. If you want a healthy functioning economy with light regulation and sensible government spending & taxation, then you cannot vote for anyone in those two parties.
so fine it's ok pay some one $2/hr to drive an car for uber with no real power to set there own rates or rules.
Re: so fine it's ok pay some one $2/hr to drive a (Score:1)
The biggest thing I don't understand in this is how people come from south of the border that can't even legally get a job, yet they manage to find enough income to be able to afford to live in a house with money to spare, and still they don't rely on shitty Uber. You know why? Because they actually...try...
Re: so fine it's ok pay some one $2/hr to drive (Score:2)
Bleh, edited that poorly, meant I don't understand why some say they rely on Uber, and yet...
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I have always though of starting my own consulting business. The biggest problem isn't what you have listed, it is finding a Customer base to get my company off the ground.
Customers want to deal with established companies, knowing they will not be out of business in a year. Offering a product/service they can value over a long time. Also a lot of small companies with limited marketing ability, usually fall under used car salesmen like advertisements which makes them seem like shady individuals to work with
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If all competitors are too big - time to adjust antitrust laws. Don't let corporations grow so big before forcibly breaking them up. You could start by changing anything "too big to fail" into "too big to exist as a single unit".
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Cool story bro. Have you worked in a small business, or are you parroting things you heard elsewhere?
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Take a person who has an idea in the USA and welcome them to your state.
Show them the nice housing. The fast internet. The educated locals.
What their investment in your state gets. A house, a workplace. Services that support a productive community, roads for transport. Not tent cities and people living in parked RV.
That they can grow their new idea in your state.
The startup problem is a problem for a few state
Maybe (Score:3, Insightful)
Risk vs reward (Score:5, Insightful)
Start up risk is huge. That's the problem. It's massive. Sure there are some people that are successful and the risk pays dividends, but success is actually pretty rare. Most rational people look at the risk of starting your own company and shrug it off because simply being an employee is typically not that bad of a deal. In fact, it's really a pretty good deal. Your risk is greatly limited. Most people are perfectly ok with that.
Re:Risk vs reward (Score:5, Insightful)
That few people start their own business is not surprising. What's interesting is that fewer people than usual are doing it.
Re:Risk vs reward (Score:5, Insightful)
Honestly I think it's mostly that being a middle-class employee is generally becoming a better trade for the employee. If you have a salaried position (guaranteed reliable and regular pay), have general health benefits, and an IRA or 401K, why would you throw that away just to work harder and be responsible for entire company?
Being a lower-class employee is getting worse, but those people are less likely to have the ability to raise the funds necessary to start their own companies.
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All of that is true if you look at the country as a whole. But if you break the country out into classes a different story unfolds. Upper and upper-middle incomes have greatly improved. Healthcare is pretty in America great for those with upper-middle class jobs. Housing selection across the country is great for those with upper-middle incomes.
The story is very different for those on the lower end of the spectrum, but those people aren't the ones in positions to start-up new companies, which is the point o
Re:Risk vs reward (Score:4, Interesting)
I think a good part of it is regulation. Not just federal regulation either, though a lot of EPA and OSHA and other regulations don't help either.
Before anybody screams about libertarianism or small-goverment or even socialism lets take a dispassionate look at things.
In 1960 if you wanted to start a business washing cars you rented a place, hired some people and dumped your dirty water either in the street or the sewers. In other words you externalized your disposal cost.
The same thing if you had a company that constructed batteries. You dumped your used chemicals somewhere at no cost. You externalized your disposal costs.
Now the EPA came along and suddenly you have to pay fro proper disposal. Your company is less profitable. The small guys, the ones most likely to running on the edges with little profit now become unprofitable.
So prohibiting companies from externalizing their disposal cost is good for society, however it does reduce the number of new business that are started because it raises the bar necessary to enter the market. This might be a societal bad, but on balance is better than allow cost externalization that we all pay, in both cost and reduced quality of life.
Do this for a number of decades and of course you're going to see a decline in the number of new business.
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But this has limited predictability. For example, how many new advertising consulting businesses are there each year. Of course there are lots, but I bet you would find that the rate of ad agency start-up has similarly decreased significantly over the decades. Can't really blame OSHA or the EPA for that.
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> Now the EPA came along and suddenly you have to pay fro proper disposal. Your company is less profitable. The small guys, the ones most likely to running on the edges with little profit now become unprofitable.
Slight adjustment there: The EPA has no problem shielding companies like BP from hundreds of billions in pollution lawsuits, such as wrecking the entire gulf of mexico.
The EPA working as designed to protect he big polluters from competition.
If you actually cared about pollution, it would not be s
Re: Risk vs reward (Score:2)
Liability is a form of regulation.
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you have hit the nail on the head. I'm a volunteer in a local entrepreneur group and we have been trying to figure out why our membership is declining. My long-term suspicion has been that it tracks the availability of a social safety net. I did a quick Google while writing this and found this very interesting article from back in 2015 about how welfare availability makes people more willing to take a risk on starting a business [theatlantic.com].
so if we want more startups, more entrepreneurial activity, make sure every
Re: Risk vs reward (Score:2)
That and all of the above listed risks are correct.
But that was my point. The risks are too high to justify the work.
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I actually didn't hate Hillary so much as I hated the environment that propped her up and the tens of thousands of leeches who expected to profit from her reign or to keep being smug and tell others what to think. I loathed the idea of her being President but at some level I respected her as a person, she was fighting for what she thought was right (her becoming the center of the Universe), and she fought a good fight.
That she lost is, in my view, not just lucky for us, but for her too -- I believe the powe
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Clinton was OPENLY selling influence. Her supporters still lie for her. That would have been a very dangerous line to cross. It's not that the system wasn't corrupt before Clinton, it's that Clinton was doing dirt right out in the open and her supporters didn't care, because 'vagina'.
Is there a non-corrupt explanation for why the bribe flow into the Clinton global fund went to virtually zero, just when she had time for charitable work? I haven't heard it.
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Really? Bullshit!
Trump was collecting millions/year in bribes in a charity fund? That fund's cash flow was affected by the election?
You could have believed the 'Clinton Global Fund' was legit, until after she lost the election and all the bribes dried up. Now you're just lying to yourself and acting a fool.
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Clinton was the better choice.
Actually she wasn't. She was and is a horribly flawed candidate, who only got the nomination because the DNC subverted their own primary process. You want to know the real reason she lost? She T'ed off enough Bernie Sanders voters by stealing the primary from him that they stayed home.
With Trump, we don't have a leader. He's making a fool out of us on the World stage.
He's doing that how? Let me tell you something about the world stage. Nobody is your friend. Each and every world leader is more interested in their own people than in anyone else's people. As they should be. I didn't elect A
The startups I see (Score:5, Insightful)
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indeed, vc's seem only interested in those offering new ways to cheat people (business model innovations), not in new or better ways to actually do real things.
Dodd-Frank (Score:2)
All those new IPO expenses really saved the economy!
Dropping since the mid-eighties? (Score:1)
Gee, that was in the midst of Raygun and the Republicans' (not my cover band) onslaught of deregulation.
Btw, those of you who work for a living... has your company been bought lately by a bigger company? Mine's been *twice* in the last three years....
Meanwhile, the middle class is squeezed tighter and tighter.
But I can't guess why there are fewer startups....
Seems self-contradicting (Score:4, Interesting)
I am having a hard time reconciling the following two parts of the write-up: "Historically, startups have been the engine of US economy" vs. "While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014". Even at their highest number of 13% during the, supposedly, "good old days", how can they be considered "the engine"?..
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I am having a hard time reconciling the following two parts of the write-up: "Historically, startups have been the engine of US economy" vs. "While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014". Even at their highest number of 13% during the, supposedly, "good old days", how can they be considered "the engine"?..
Engine is probably the wrong word, maybe fertiliser or seed is better. With less fertiliser or seed you eventually produce less food. This will have consequences sooner or later.
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Is "fertilizer" really a better word for something — anything — you'd wish to praise?
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Is "fertilizer" really a better word for something — anything — you'd wish to praise?
Is Fertiliser not a good thing where you live? Strange comment....
total # of companies? flawed study (Score:3)
Risk/Reward (Score:2)
Predictable result.... (Score:2)
Being a dying breed ... (Score:2)
... is the whole point about "StartUps".
Fail fast is the motto and the most fail.
Something like 98%.
So this is news how?
Top-of-bubble consolidation maybe? (Score:4, Insightful)
"While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014. From around 1998 to 2010, the share of private sector workers in companies that were less than two years old plummeted from more than 9% to less than 5%. "
This makes sense given the timeline. In the mid-80s everyone was experimenting and you had tons of small companies chipping away at the monolithic UNIX/mainframe computing culture...as well as a few manufacturers actually making physical goods. From 1998 to 2010, you had the top of Dotcom Bubble 1.0, followed by the financial crisis in 2010, so you go from 8% at the height to 5% at the start of the recovery cycle. Then in 2014, you have the inflation of the Second Dotcom Bubble which (IMO) we're nearing the top of. plus smartphones and social media really go nuts from 2010 to 2014, hence the increase to 8%.
My opinion is that startups aren't sticking around very long, simply because they're easier to cobble together from outsourced parts. SaaS providers offer HR, finance, payment acceptance, logistics, and IT in a box. Cloud providers will host your workloads for a monthly fee which the VCs probably like a lot, because they slowly burn money rather than give millions at a time to build data centers and such. So, some guy building Yet Another Provisioning Tool or Yet Another Abstraction Layer on JavaScript can follow the First Dotcom Bubble playbook on an accelerated timeline...either they get big enough to IPO, or get bought by Microsoft/Facebook/Google/Netflix.
The other thing that might be driving this is just the sheer risk involved. Despite what the media portrays about SV startups, they are not stable places to work. It's great when you're fresh out of college and can continue the lifestyle...getting paid in free food and doing 100 hour weeks in the office with your buddies. But when you grow up, steady paychecks have a huge appeal, especially when you have a family.
So what? (Score:1)
It's an interesting fragment of trivia, but how's the larger picture?
The economy is booming.
Re:So what? (Score:5, Interesting)
Is it? Last time I checked unemployment was down, but wages are still stagnant.
The "economy" is booming if you have millions of dollars, if you are middle class or under, "the economy" being in a "boom" or a "bust" doesn't really matter since you are still treading water with far less buying power than your parent's generation.
https://hbr.org/2017/10/why-wages-arent-growing-in-america
You'll also note a line in that article that links the two ideas you flippantly disregarded: one factor that encourages large wage growth is young companies. High numbers of start-ups and younger companies tend to drive wages up. Without this competition, larger / older companies don't pay as well.
The "economy" isn't really booming-- the people at the top have simply found new ways to siphon more money off the lower and middle classes. Welcome to the end game of capitalism, we've managed to stay here a lot longer this time without the lower classed players breaking out the guillotine. I'm not really keen on seeing the end of this round, but I feel like we aren't as far away as I thought we were.
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Maybe we should break out the guillotines. Why? It sure as hell seemed to work [tees.ac.uk] for the French. Wages for laborers, artisans, and tradespeople went up dramatically after they scared the living shit out of the rich folks. Start with the billionaires and see if the millionaires feel like un-assing a bit more wages. I bet it wouldn't take many heads in a basket to convince them wages need to rise and the H1B assholes need to go home.
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Have you noticed how many of the most vocal proponents of minimum basic income are tech billionaires?
They're the ones who know where tech is going, are smart enough to realize the societal implications, and are aware that it's good to be rich, but not good to be TOO rich when a bunch of poor people are getting desperate.
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NOPE (Score:1)
Historically, startups have been the engine of US economy.
NOPE! When you start with that, you're just telling everyone with a brain to tune the fuck out.
Chances to be sued (Score:2)
"Pig in the Python" effect? (Score:4, Interesting)
Lim n-infty (Score:2)
Given enough time, unrestrained capitalism ends with oligopoly
Interesting statistic (Score:2)
But with that said, we were coming out of a recession. There's probably a considerable lag time. Anecdotally, the economy would need to be pretty healthy for quite a while before I'd risk working for a startup. So I'd be interested to see statistics in the 2020-2025 time frame. I'm not panici
Insurance Cost (Score:2)
the world according to 1998 (Score:2)
Excellent choice of end-point. Fucking morons.
Nortel market cap rivals IBM [theglobeandmail.com] — 29 June 2000
Blame big biz... (Score:1)
Think about it. Do the easy research. Big biz either swallows-up those startups early (usually hostile takeover),
or squashes them (via product/patent theft, direct interference/manipulation, etc...) before they can get established.
Not to mention the difficulty in getting startup capital.
This is why big biz needs tighter regulation.
History has shown that big biz gets less and less individual-friendly as it gets bigger.
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"Regulatory burdens of all kinds are absolutely killing small businesses, which makes the buyouts from large players all that more lucrative."
I deal with lots of "entrepreneurs" who constantly repeat this refrain over and over. What regulation is killing a business? Paperwork is handled by accounting software. Collecting sales tax is done via your POS software or online merchant processor, and you can even pay them online as well. Minimum wage is just something business owners have to live with...if you can