According to a recent study by the Ewing Marion Kauffman Foundation, companies less than five years old generated nearly two-thirds of the new jobs created in the U. S. in 2007. But what’s even more important is that without these startups more jobs would be lost than created, the U. S. economy would permanently shrink and America would eventually lose its superpower status, simple as that.
This is because big companies grow by increasing scale and productivity, which is to say by reducing the number of jobs per unit of sales, while startups grow by inventing cool stuff. See the difference?
The startups that most reliably become giant American corporations and creators of wealth are technology startups. Without startups to compete with or acquire, big technology companies would do almost nothing new. In the United States large companies depend on startups to explore new technologies and new markets. Startups play a particularly important role in growing jobs out of a recession. New companies produced all of the net new jobs in the U. S. from 2001-2007, and also from 1980-1983, the last big American downturn.
Why then, has U. S. economic policy been aimed almost entirely at saving large and dying industries (banks and car companies)? Because sometimes even Presidents don’t get it.
U. S. technology startups are born and die at astounding rates. Ninety-five percent of technology startups fail — ninety-five percent. With odds at 19-to-1 against success, why do entrepreneurs even bother to build these companies? Because the potential rewards are huge (Microsoft and Apple, Cisco and Intel were all startups, remember) and for real entrepreneurs there are some things even worse than failure, like boredom or being like everyone else.
American technology startups change the world all the time and are this country’s primary global advantage, though hardly anyone understands that. Encouraging technology startups is the key to keeping America competitive and prosperous, though hardly anyone does that. Technology startups succeed despite these adversities because Americans are full of ideas, startups are so darned fun to do, and they don’t have to cost that much, either — sometimes nothing at all.
Technology export sales drive the U. S. economy and technology startups drive U. S. industry, yet in this era of too-big-to-die companies hardly anyone knows about or understands this phenomenon. The experts are supposed to be the venture capitalists of Silicon Valley and Boston, but they don’t really know what they are doing. VC returns are way down for a variety of reasons mainly coming back to the same greed and stupidity we’ve been seeing at work in other financial markets.
Something needs to be done, then, to encourage America to restart itself, and I’m just the guy to try it.
Announcing the Cringely 2010 (Not in Silicon Valley) Startup Tour.
Starting next month I will be accepting from readers nominations for interesting startup companies in six general categories — biotech, energy, entertainment, information technology, materials, and transportation. Over the course of about six weeks we will examine and discuss as a community these nominated companies of which I am hoping there will be hundreds, primarily not from Silicon Valley or any other tech hotbeds. I’ll have some assistance in this process from the Kauffman Foundation.
Together we’ll whittle the number down to 24 then come June I will set off with my family in our RV to visit all 24. We’ll camp in the parking lot or in the driveway of the CEO and spend a couple days at each startup, learning about the company, the people, their technology and their market. I’ll take with me a small camera crew and we’ll produce what will begin with a summer of blogging and end with a 13-part TV reality series
That’s my plan for restarting America and I hope you’ll be along for the ride. Look for details soon, but no nominations yet, please.