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Businesses United States

Start-Ups Aren't Cool Anymore (theatlantic.com) 164

A lack of personal savings, competition from abroad, and the threat of another economic downturn make it harder for Millennials to thrive as entrepreneurs. From a story: Research suggests entrepreneurial activity has declined among Millennials. The share of people under 30 who own a business has fallen to almost a quarter-century low, according to a 2015 Wall Street Journal analysis of Federal Reserve data. A survey of 1,200 Millennials conducted in 2016 by the Economic Innovation Group found that more Millennials believed they could have a successful career by staying at one company and attempting to climb the ladder than by founding a new one. Two years ago, EIG's president and co-founder, John Lettieri, testified before the U.S. Senate, "Millennials are on track to be the least entrepreneurial generation in recent history."

Some of the reasons have been well-documented. The romantic view of entrepreneurship involves angel investors and venture capital funds, but in fact, the ordinary entrepreneur is more likely to fund a start-up using personal savings -- something underemployed Millennials simply could not build as they entered the workforce during or in the immediate wake of the Great Recession. Funding from friends and family is the next most common source, but this personal network could not help much during the most recent economic downturn, when so much home equity was underwater. Student debt worsened the underlying economic problems. According to a report by the Federal Reserve Bank of New York, between 2004 and 2014, the number of student borrowers rose by 89 percent.

Lately, though, it seems that even those who might typically have access to other forms of funding, like venture capital, are having a hard time getting investors' attention. As Matt Krisiloff, a former director at the Y Combinator start-up accelerator in Silicon Valley, tweeted, "Start-ups are a lot less cool than they used to be." Michael Sadler, an economist at the University of Texas at Austin, is concerned about the rising concentration of start-up investment in just a few super-performing regions such as Austin, New York, and Silicon Valley. As with American politics, it appears the geography of U.S. venture capital and economic growth has become increasingly polarized.

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Start-Ups Aren't Cool Anymore

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  • by OffTheLip ( 636691 ) on Monday December 10, 2018 @02:25PM (#57781530)

    Start-ups are a lot less cool than they used to be.

    VC folks like to get a return on their investment and lately, tech hasn't done so well. It's business.

    • Who modded you insightful? What wasn't well known in the '90s is common knowledge now.

      VCs don't want a return. VCs want flop after flop so they can get their fees. They aren't the ones investing. They're the copper wire scrappers of Silicon Valley. They do billions of dollars of damage and get a few percent of the damage cost in return.

      Capitalism at its finest. Making America great once more.
      • Who is going to invest huge sums of money with someone who has no proven track record of a return on investment?

        I get that people who like to go on rants about capitalism probably don't understand economics terribly well, but that is something that should be intuitively obvious if you stop to think about it for a few seconds.
    • by rsilvergun ( 571051 ) on Monday December 10, 2018 @05:21PM (#57782772)
      tech's doing just fine. The way venture capital works is you throw money at 100 businesses, 98 of them fail and you make a killing on the 2 that survive and thrive.

      The article is saying that Millennials don't want to work for start ups anymore. I don't think they ever did, it's just that the economy's finally recovered enough they've got options. Most start ups pay like crap, give you stock options to make up the difference and then either collapse leaving you with worthless options or do like that "OnLive" company did an fold the company on paper forming a new LLC and invalidating all the existing options.

      It's very, very rare that working for a start up pays off. There was a lot of that during the .com boom because it was a whole new technology. That's a once in half a century event. Millennials, like everybody else, would much rather have money in hand, a steady paycheck and several weeks of vacation than some charismatic CEO type giving them free beer in exchange for half the pay and 80 hour work weeks.
    • What other industry has anywhere nearly as good ROI as tech?

  • by jellomizer ( 103300 ) on Monday December 10, 2018 @02:31PM (#57781596)

    They are a high risk and long term investment.
    For every Google there are thousand failures all from energetic people who believe that they have the next big thing to change the world. If you are going to invest in a startup vs an established company, you need to get past the flash and focus on the business plan, income, and market share. Opening a Deli next to the new Amazon warehouse may bring in much more money then trying to use the latest AI and other buzzards to add synergy to the creative personal to streamline business processes, and make teens flock to it.

  • by nealric ( 3647765 ) on Monday December 10, 2018 @02:37PM (#57781644)

    The article talks about millenials as business owners, but then goes on to talk about "startups" which are not really thie same thing. When people talk about "startups", they are talking about the kinds of business that are funded by Angel investors, VC, and the like, which are formed with the hope of one day becoming a public company or being bought by one. These days, such business are usually in the tech industry or some offshoot thereof.

    But the vast majority of small-businesses are just that and always will be. We are talking about things like restaurants, dry cleaners, auto repair shops, and the like. The fact that young people aren't forming small business enterprise has little to do with anything happening in silicon valley or other tech centers.

    • by Junta ( 36770 )

      Yep, more that they see most small businesses are overwhelmed by big chains.

      VC may also be taking a dive, but by number of people by far more are involved in those other sorts of businesses.

  • A common trope is that Millenials are poorer that previous generations. However, they have many things that earlier generations did not:

    High-efficiency homes and appliances
    Cars with many safety enhancements, lower pollution and better mileage
    Better insulated, less polluting, better constructed and safer homes
    "Green" energy supplies of fuel and electricity
    Much more recycling
    New drugs and healthcare technology
    Higher spending on schools
    Higher safety from crime and terrorism
    New government departments and agenc

    • Unfortunately paying for all those things, socially beneficial though they may be, means that they don't have spare cash to invest in start-ups.

    • Re: (Score:3, Funny)

      Millenials own MacBooks and iPhones, not homes.
    • Are you USA-ian?

      A common trope is that Millenials are poorer that previous generations. However, they have many things that earlier generations did not:

      High-efficiency homes and appliances
      Cars with many safety enhancements, lower pollution and better mileage
      Better insulated, less polluting, better constructed and safer homes
      "Green" energy supplies of fuel and electricity
      Much more recycling
      New drugs and healthcare technology
      Higher spending on schools
      Higher safety from crime and terrorism
      New government departments and agencies to look out for the public's interests.

      It should be pointed out that these benefits don't come for free, which may explain why millenials are poorer in cash terms, but richer overall. This is the choice made by society.

      None of those are explicitly for millienials. I'm far away from millienial yet I drive a fairly recent car, partake in recycling, live in a safe area, have access to the new drugs and medical techniques. Plenty of new housing around here, only I chose my 1973 home carefully, in a quieter-than-usual corner of my neighborhood.

      New government agencies? What.. Space Command or whatever Trump's Space Force is called? What new waste of money has the Feds come up with that you're speaking of?

      Hig

      • You are correct that Millenials are not the only ones to "benefit". However, I believe they bear the brunt of the cost consequences and corresponding drag on growth.

        New government agencies? Take a look here https://en.wikipedia.org/wiki/... [wikipedia.org] . If you start in 1973, the same age as your house, you will note the massive success called the Drug Enforcement Administration. There are many others, and we all look forward to Millenials funding the Space Force.

        Higher spending in schools? A contentious subject,

        • by Win0ver ( 613215 )

          If you start in 1973, the same age as your house, you will note the massive success called the Drug Enforcement Administration.

          And now we now for sure you're a full of shit boomer. The DEA is overall a massive failure. The war on drugs is a massive failure.

          • From the Wikipedia I linked:

            "In 2014, the DEA spent $73,000 to eradicate marijuana plants in Utah, though they did not find a single marijuana plant. Federal documents obtained by journalist Drew Atkins detail the DEA's continuing efforts to spend upwards of $14 million per year to completely eradicate marijuana within the United States despite the government funding allocation reports showing that the Marijuana Eradication Program often leads to the discovery of no marijuana plants."

            Remember that when you

        • If you start in 1973, the same age as your house, you will note the massive success called the Drug Enforcement Administration.

          Oh wow, DEA 1973. Hardly a "new" agency. It's almost as old as I am. The others I can think of are nothing to be proud of. DHS? TSA? Please, fetch me my sick sack, I'm about to return my breakfast.

          The DEA and the whole war on drugs is a fail.

          And where's all this spending for schools? I certainly don't see it. Teachers are paid a pittance, schools are in disrepair.

      • "USA-ian"

        Is that similar to a Euroturd?

  • by rsilvergun ( 571051 ) on Monday December 10, 2018 @02:43PM (#57781686)
    and the general consolidation of power [theatlantic.com] that's been going on for about 30, 40 years now.

    I think it was Zuckerberg that made this point, but the next generation of billionaires will likely live into their 150s and be productive for most of that time. Most of the tech that keeps them living that long will be too expensive for the working class too.

    If you think it's hard to keep wealth inequality and the power gap that includes in check now wait until the aristocracy lives 30-50% longer than you and I do.
    • by Anonymous Coward

      Maybe if the government weren't propping these bad actors up with copyright, patents, and by enforcing anticompetitive contracts, we wouldn't have this problem?

      Solution is right here people! Copyright, Patents, and Antitrust. Fix these three things!

      • I would mod this up if I had not already commented elsewhere.

        Copyrights and patents' scope and duration are absurd, and contradict the intent of the Constitution in granting them. So I lose little sleep over my civil disobedience in pirating.

        99% of monopolies are granted, enabled and sustained by the government. If legislators did not have so much power to pick and choose winners and losers, Citizens United would be a non-issue.

        "When buying and selling is controlled by legislation, the first to be bought

    • I don't think so. Paul Allen, Steve Jobs, as examples. Both had all the money and resources in the world and still died young. I feel bad for Paul Allen, but for the life of me can't understand why he didn't put something like 50% of his fortune towards a cure for Hodgkin's & non-Hodgkins lymphoma after his initial diagnosis in the 80's and again in the early 2000's.

      Can't watch the Trailblazers if you are dead. Can't look cool with an iPhoneX if you are likewise dead. Like most technololgy any bi

      • Until it was way too late. Allen got his diagnosis in 1982 and made it until 2018. He didn't die from the cancer per se, it was septic shock. Better treatments will fix that.

        Zuckerberg is young, rich, and got rich when he was young. He's going to have the advantage of several decades more advancement.
    • by Tablizer ( 95088 )

      and the general consolidation of power that's been going on for about 30, 40 years now.

      Between roughly 1996 and 2006, I tried 4 different dot-com start-ups. Two were big flops, and two were minor flops that hinted of promise if I had spent more time on them. But we had young kids and I thus had less time to spend on uncertain startups. One also starts thinking more practical when family comes: you need money here and now.

      I also worked for a startup. Their "pay" was partly in stock-options, which were worth

    • No one, recorded (unless you accept the Bible as a valid record), has lived into his 150s. So he's basically talking out of his arse.

      The inequality in terms of lifetime actually used to be WORSE at one point. Unfortunately it has been getting worse in places like the USA again.

  • by wyattstorch516 ( 2624273 ) on Monday December 10, 2018 @02:59PM (#57781816)
    Anybody wanna buy some Pets.com stock?
    • by Anonymous Coward

      Sure, do you take Flooz?

  • Startups are great (Score:4, Interesting)

    by b0s0z0ku ( 752509 ) on Monday December 10, 2018 @03:05PM (#57781862)

    Startups are great, but they should have a real product, not just the latest fad app. Advice: learn a trade first, whether it's engineering, medicine, law, plumbing, electricity, or science. Then use your experience to start your own company.

    Of course, you might be a unicorn with a brilliant idea just out of high school, but don't count on it.

    • usually have rich parents to fall back on so they can go back and finish their real degree when the start up fails.
    • by fat_mike ( 71855 )
      And take some basic and intermediate accounting classes. If the company takes off you'll actually be able to understand what your accountant is saying.
    • by ljw1004 ( 764174 )

      Startups are great, but they should have a real product, not just the latest fad app. Advice: learn a trade first, whether it's engineering, medicine, law, plumbing, electricity, or science. Then use your experience to start your own company.

      Are you basing your advice on the way you think the world should work, or the way it actually seems to have been working? My impression is that the startups which produce useless terrible apps are the ones that do well in their funding rounds. I don't like it. It's just my impression.

  • by nehumanuscrede ( 624750 ) on Monday December 10, 2018 @03:06PM (#57781872)

    " threat of another economic downturn make it harder for Millennials to thrive as entrepreneurs. "

    Not to point out the obvious but economic downturns have a tendency to wreak havoc on everyone, not just Millennials.
    ( Welcome to the real world btw where things don't always go as expected. )

  • by argStyopa ( 232550 ) on Monday December 10, 2018 @03:07PM (#57781880) Journal

    ACTUALLY starting a business is fucking hard: You risk your OWN money* as well as a shit ton of time, sweat, and (more or less) your family, relationships, prime working years - all for something you "hope" will work.

    This is essentially what Marx got *completely* wrong, by positing "capital" just existing ex nihilo, instead of recognizing the massive amount of wealth that was invested in all those businesses that didn't succeed. By discounting the 'red in tooth and claw' investment carnage that happened so that the (current) businesses exist, one hand-waves away essentially the entire justification for why business owners are ENTITLED to make more than the downtrodden wage slaves they employ - it is that disparate result that incentivizes people to take the risk to found businesses in the first place.

    But I wouldn't say that Millennials are necessarily perceiving it wrongly; as much as that might make their elders uncomfortable. The fact is that capitalism as is practiced in the US isn't really much like capitalism; it's "capitalist" on the up side, but socialist on the down side. (When in fact, capitalism like evolution ONLY advances by the death of noncompetitive entities.) Why found a business, if every buggy-whip-maker you are putting out of business is only going to go on the federal protective dole ensuring that the poor devils never actually fail?

    If there's no ability to eliminate your competitors, there's little incentive to jump into the competition.

    *Kickstarter is bullshit - and closer to a religious donation than investment. The idea that people are sinking money is only working by the principal of distributed risk, with the interwebs making the distribution part easier; if you can convince 10 million people to each 'risk' $10 with you, that is in some ways a lower bar than getting a handful of VC funds to each invest $25 million in your idea.

    • by bigpat ( 158134 )

      I think what concerns me most about this economy is how much of it seems wrapped up in the Federal Reserve banks handing out cheap money to a select few big city banks from which it is further doled out with bankers and investors taking up the largest share until what trickles down is not nearly enough to capitalize the actual economy.

    • I'm not sure why you think business owners are (in caps) "ENTITLED to make more money". It seems like you think you demonstrated something, but instead seem to just be asserting it loudly.

      • by Aristos Mazer ( 181252 ) on Monday December 10, 2018 @04:25PM (#57782442)
        argStyopa started with a good post, but I agree with Actually -- there seems to be a gap in the argument about entitlement. In argStyopa's post, the claim is that owners are entitled to make more because they took the risk. But the failed entrepreneurs also took the risk. So the owners that succeed are only entitled if they succeeded by their own skill. If they succeeded by luck or by having an advantageous start, then they are not entitled. The US system recognizes that luck and advantageous start are the predominant reasons for why one business succeeds over another. And even when they succeed by their own skill, that skill is not necessarily in providing better service: the first guy who realized that "AAA Plumbing" got you a better position in the old phone book and thus made you the default choice for desperate customers was a business genius who legitimately out-competed, but he was not necessarily the best plumber.

        "Seeing a void in the market and risking capital to fill it" does (in my opinion) justify owners having greater share of the profits, but that does not appear to be the most common basis of entrepreneurial success in US society.
        • Thanks for being more articulate than I was. I'll go further though, in the spirit of discussion. The OP never said that they were entitled to because of their skill, but risk. Heck, since frequently there are owners of the business (e.g. a VC/Angel/stockholder) aren't the ones supplying the skill, I'm not sure where your argument applies to them being entitled. And certainly there are non-owner key hires whose skill is vital.

          I think your point about failed owners is really valid - if the only criteria

      • If you own something and it increases in value, are you not entitled to that value as the owner of the asset? If not, what does it even mean to own that asset?

        I don't think the connection is difficult to make, unless your worldview very much relies on dismissing that connection.
        • If you own something and it increases in value, are you not entitled to that value as the owner of the asset?

          What do you mean by the word "entitled"? It may sound like I'm being an ass, but there is the "entitled means have a legal right" and "entitled meaning worthy of X". (There are other definitions, but we'll ignore them). The conversation up to now seemed to focus on the second definition. And I want to know if you're trying to shift it to the first or if I'm misunderstanding.

    • by mvdwege ( 243851 )

      If, accoding to the article, the prime funding sources are own capital and freinds and family, then I think it is fair to say that Marx had a very good point.

  • Going somewhat OT but I wonder how many start-ups of back in days were really start-ups? I remember many of these "entrepreneurships" had only one customer (not in first year but year after year) such as Lockheed, Tandem Computers, Rolm, etc.
  • Maybe millennials did the sums and realised their hourly pay was somewhat closer to burger-flippers after finishing their 100 hour weeks!
  • Competitive environments are seen as discriminatory because by their very nature they discriminate against people who achieve less. If your mentality is "everyone deserves a trophy because they tried", and "it's not fair to use one's advantage, whether genetic talent of the fact that parents had time and money to school the child", of course startups are not cool.

  • by AHuxley ( 892839 ) on Monday December 10, 2018 @06:48PM (#57783244) Journal
    1. Study hard so you understand all the needed topics. Go full Renaissance man on all the topics needed.
    2. Read up on emerging science.
    3. Have the academic ability, time and wealth to study more.
    4. Have the skill to talk about what is emerging. Learn to talk to people and to talk to large numbers of people.
    5. The money and location to build on ideas. To buy new equipment needed.
    6. To know your own limits and know when to bing in an outside expert to clear a problem.
    7. How to create something new.
    8. To protect that creativity. Sell the brand to the world.
    8.5 Learn how to do a great interview. Have a great translator to help with international languages. Do an interview at 3 am when needed. Be nice to the person doing the interview. Know your topics and be ready for many varied questions about your past, skills, interests and product/service/brand.
    9. How to grow with your brand and when to start a new brand.
    9.5 When people report problem thank them for the report and tell them how the problem is getting fixed. Fix the problem and thank the person again telling them what was fixed and when.
    10. Teach other people how you did something really new and great.

    People don't do great:
    They are not that smart.
    That are not able to talk about their product to random people.
    Their nation has strange tax and funding laws. Starting a new business is really difficult in their nation. Laws stop people. They have no money.
    They don't protect their product.
    They don't seek the best help to get their product ready in time. Average engineers and artists working for big brands are working on the same problems too.
    Don't go to failed nations that allow all your great work to be copied by a local brand.
    Look into your workers pasts. Are they criminals? Do they have political activist friends, a political past?
    • by kiviQr ( 3443687 )
      You have to be good at sell ideas and keep trying. Once you can do that you can find people to follow you (from developer to investor). If it fails you try it again and again.
  • There are no angles in investing - there is only a pure business where you work your ass off for pie in the sky that may never realize. The only one who benefits is owner - which is not you but your Angle Investor!

Understanding is always the understanding of a smaller problem in relation to a bigger problem. -- P.D. Ouspensky

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