#288. It IS About the Startups!

Posted on | The Agurban

It IS About the Startups!

If you are interested in entrepreneurism, then you are likely familiar withThe Kauffman Foundation. In fact, if you visit here you can sign up for various releases from the Foundation. We at Agracel and Boomtown Institute are big fans!This week, we want to start you off with a quiz.

What percentage of net new jobs created in the last 30 years can be attributed to startups?

a.    10%
b.    20%
c.    30%
d.    40%
e.    Sum of all of the above
If you said ‘e’, you would be correct! According to the recently posted report, The Importance of Startups in Job Creation and Job Destruction, “… without startups, there would be no net job growth in the U.S. economy.”


Other key points revealed in the study are:

  1. During recessionary years, job creation at startups remains stable, while net job losses at existing firms are highly sensitive to the business cycle.
  2. Startup firms are responsible for all net job creation during most years, while existing firms (ages one year and older) are usually net job losers. To be fair, startups have a definitional advantage because they can’t lose jobs, and some of their created jobs will surely be lost by next year’s age one firms.
  3. The common zero-sum attempts to incentivize firm relocation are oblivious to the important pattern of gross job creation revealed by the BDS (Business Dynamics Statistics, a new dataset from the U.S. government). States and cities with job creation policies aimed at luring larger, older employers can’t help but fail, not just because they are zero-sum, but because they are not based on realistic models of employment growth.
In conclusion, effective policy to promote employment growth must include a central consideration for startup firms.  Does your community have such a policy?