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?

Startup Weekend Dallas

For those in Dallas who love "all things startup" as I do, you might want to check out Startup Weekend Dallas.

Where:

Company Dallas
1701 N. Collins Blvd
Richardson, TX 75080

When:

Friday, April 16, 2010 at 5:30 PM
- to -
Sunday, April 18, 2010 at 10:00 PM

Tickets can be purchased here.

Why do I love startups?

• You get to use your right brain for creativity and your left brain for analysis.
• You get to birth and shape something new. (I have five kids. I still love babies - even baby organizations).
• You get to break out of the ordinary and mundane.
• You get to make decisions quickly.

I could go on and on, but I'll stop now. What about you? Why do you love startups?