What If America Isn’t Startup-Friendly After All?

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America is a nation of startups—or that’s how the story goes, at least.

But is it true?

The Los Angeles Times offered up some stats about the current state of the nation’s startups, and the findings aren’t pretty: As reported by the newspaper, data from the U.S. Census Bureau suggests that the number of new startups fell 28 percent between 1977 and 2011. Nor is that the only bad news for entrepreneurs: People aged 20 to 34—the so-called “Millennial” generation—were responsible for 22.7 percent of new companies in 2013, a decline from 34.8 percent in 1996.

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Even in Silicon Valley, the nation’s legendary hotbed of startup activity, the number of entrepreneurs striking out on their own seems lower than in past years. According to the Brookings Institution (again, as reported by the Times), 8 percent of the companies in San Francisco and San Jose were startups, a drop of 50 percent from 1980. “The first reaction of everyone who sees this is they can’t believe it, especially anyone from California,” Bob Litan, a senior fellow at Brookings, told the newspaper.

If accurate, the data seems to run contrary to the popular perception that entrepreneurship in America is at an all-time high. Venture capital flows into firms of all types; hiring is on the upswing in many states, suggesting that new companies are on the lookout for talent; the national unemployment rate is slowly ticking down from its Great Recession highs. More people are working, in other words; but maybe only a small percentage of those workers are devoting their energies to creating the next Facebook or Tesla.

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2 Responses to “What If America Isn’t Startup-Friendly After All?”

  1. It’s commonly accepted that there are more start-ups during economic troubles that during good times. When people have jobs, they rarely risk them to create new ones. Now that the economy is improving, seems that fewer people are in start-up mode.
    As for Silicon Valley, it’s tough to start a new business in the most expensive area of the country, because you have to be successful very quickly to pay the bills. Better to start up in areas with lots of opportunities and lower cost-of-living, which is probably why places like Austin, TX are starting to thrive with small businesses.

    • sam sneed

      Austin is a horrible place for startups, very few venture capital firms who are so far behind the times they cant spot a good thing if it spit on them.

      America has fewer startups because getting money out of VCs has become near impossible. It used to be if you had a prototype and a plan you could get funding, Now they want 400,000 customers and earnings. Its absurd.

      The venture capitalists lost so much in their stupidity that now they are making the bar so high that many startups die before they can complete their products.