Kauffman Is Looking for the Magic Sauce

I will be following Kauffman Foundation's research on entrepreneurship even closer as they are in pursuit of the "Magic Sauce". Here are some of the questions they are asking:

• Can we democratized the process of entrepreneurship so that it would be easier for people to pursue?
• What would it take for new firms to be more successful?
• How do we make companies grow faster?

We know the ingredients, but if they come up with something tasty, I will be sure to pass it along.

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A Better Startup Study

The Kauffman Foundation research study, "After Inception: How Enduring is Job Creation by Startups", paints a better picture of startups and the U.S Economy. Some highlights from the study are:

• Job destruction caused by failing and contracting ventures is at least partially balanced out by the job growth that occurs at surviving firms from birth to age five
• Twenty-five years after firms start, only about 20% survive, but the employment numbers appear to level off at around 68% if their initial values.
• A recession does adversely affect startups' employment in the first, second, and third year.
• The consequences of starting during a recession do not last until year five when employment reaches about the same level as firms that were not started in recessions.
• Exposure to prolonged recessions (such as the current recession) does negatively affect job creation.
• Surviving startups retain 80% of the jobs they create at birth five years later.
• While approximately 50% of startups fail within the first five years, the other 50% that grow open up new opportunities for employment.

 In the days ahead, I am delving deeper in order to determine which startups are more likely to survive? What are the factors that affect survivability? How can we better help the survivability rate of startups?

Why Startup Job Creation Is Not News to U.S. Economy

I am always on the lookout for startup news. Earlier this month, I read the Kauffman Foundation's report which indicates that without startups, there would be no net job growth in the U.S. economy. Initially, I was elated until I read the complete report.

Startups, or age zero firms, create an estimated 3 million jobs per year. While this statistic may "wow" you, control yourself. After year 0, startups join the ranks of existing firms which actually lose more jobs than they create.

The author of the report admits that startups have a definitional advantage because they can't lose jobs. They can only create. Some of the jobs created in inception will surely be lost the following year when they move from startup status to existing firm status.

I have said before that I love all things startup. However, how can such a temporary creation of jobs matter to the U.S. economy? I think we need to dig deeper to determine the primary reasons for net job losses each year. How can we move from short term survivability to long term sustainability?

Do You Have the Mindset of an Entrepreneur?

I am currently enrolled in Mindset: Tapping Your Entrepreneurial IQ, an online learning program developed by the Entrepreneurial Learning Initiative that enables aspiring entrepreneurs to tap directly into the knowledge and experience gathered from some of today’s most successful entrepreneurs. The two-hour, 38-minute "Mindset" program is currently being offered free to the first 250 qualified applicants through a scholarship funded by the Ewing Marion Kauffman Foundation.

I'm not sure when they will be cutting off scholarship applications, but give it a shot. Go to entrepreneur.org to fill out the application. The the material is outstanding.  Below is one of the compelling videos discussed in course entitled, "Shift Happens" by Karl Fisch, and modified by Scott McLeod.