The US Startup Is Disappearing (qz.com)

Dan Kopf, writing for Quartz: Historically, startups have been the engine of US economy. By creating new jobs and surfacing new ideas, startups play an outsized role in making the economy grow. It's too bad they are a dying breed. While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014. From around 1998 to 2010, the share of private sector workers in companies that were less than two years old plummeted from more than 9% to less than 5%. A new report from the Brookings Institution, finds that in nearly every industry, from agriculture to finance, the share of new companies is falling.

Comments

Historical precedence

[sinij]

There is a historical precedence where wild west era was followed by consolidated power of robber barons. Comparable is happening in modern technological world - we have Google, Facebook, Apple, Microsoft and so on filling all technological niches and monopolizing them. So until the next niche opens up, be it applied AI or something else, there is less to start up to.

Re:Historical precedence

[alvinrod]

There's always a history of new comers becoming incumbent giants and eventually being supplanted in turn. Look at Sears which once revolutionized the way that people shopped and is now a tiny bit player this is closing down its stores. Perhaps there's some cycle in the rate of new startups within that greater cycle of corporate birth and death, but I'm willing to bet that the bigger culprit is an increasing amount of hoops that a new startup must jump through. Government is always eager to put new hoops in place, while seldom bothering to remove old ones that may not be relevant. The existing companies love this as even though it costs them additional money in order to comply with those rules, it's much harder on the little guys. Look at the recent GDPR laws in Europe as an example and ask yourself how much of a pain that would be to deal with if you're a small one or two person company. Or consider companies like Uber, Lyft, etc. that are successful precisely because they're doing their best to skirt the draconian regulations surrounding Taxi services in most cities.

Seems self-contradicting

[mi]

I am having a hard time reconciling the following two parts of the write-up: "Historically, startups have been the engine of US economy" vs. "While companies that were less than two years old made up about 13% of all companies in 1985, they only accounted for 8% in 2014". Even at their highest number of 13% during the, supposedly, "good old days", how can they be considered "the engine"?..

Re:So what?

[Anonymous Coward]

Is it? Last time I checked unemployment was down, but wages are still stagnant.

The "economy" is booming if you have millions of dollars, if you are middle class or under, "the economy" being in a "boom" or a "bust" doesn't really matter since you are still treading water with far less buying power than your parent's generation.

https://hbr.org/2017/10/why-wages-arent-growing-in-america

You'll also note a line in that article that links the two ideas you flippantly disregarded: one factor that encourages large wage growth is young companies. High numbers of start-ups and younger companies tend to drive wages up. Without this competition, larger / older companies don't pay as well.

The "economy" isn't really booming-- the people at the top have simply found new ways to siphon more money off the lower and middle classes. Welcome to the end game of capitalism, we've managed to stay here a lot longer this time without the lower classed players breaking out the guillotine. I'm not really keen on seeing the end of this round, but I feel like we aren't as far away as I thought we were.

"Pig in the Python" effect?

[Steve1952]

An additional contributing factor might demographics. Consider the baby boomer population. This is often called the "Pig in the Python". During the 1990's, there were a large number of educated baby boomers in their 30's, in an environment where there were fewer open slots of any type above them. So there may have been a greater incentive to "create your own slot" by doing a startup.

Re:Risk vs reward

[terrycarlino]

I think a good part of it is regulation. Not just federal regulation either, though a lot of EPA and OSHA and other regulations don't help either.

Before anybody screams about libertarianism or small-goverment or even socialism lets take a dispassionate look at things.

In 1960 if you wanted to start a business washing cars you rented a place, hired some people and dumped your dirty water either in the street or the sewers. In other words you externalized your disposal cost.

The same thing if you had a company that constructed batteries. You dumped your used chemicals somewhere at no cost. You externalized your disposal costs.

Now the EPA came along and suddenly you have to pay fro proper disposal. Your company is less profitable. The small guys, the ones most likely to running on the edges with little profit now become unprofitable.

So prohibiting companies from externalizing their disposal cost is good for society, however it does reduce the number of new business that are started because it raises the bar necessary to enter the market. This might be a societal bad, but on balance is better than allow cost externalization that we all pay, in both cost and reduced quality of life.

Do this for a number of decades and of course you're going to see a decline in the number of new business.

Re:Risk vs reward

[Srin Tuar]

> Now the EPA came along and suddenly you have to pay fro proper disposal. Your company is less profitable. The small guys, the ones most likely to running on the edges with little profit now become unprofitable.

Slight adjustment there: The EPA has no problem shielding companies like BP from hundreds of billions in pollution lawsuits, such as wrecking the entire gulf of mexico.

The EPA working as designed to protect he big polluters from competition.

If you actually cared about pollution, it would not be solved via regulation but by liability.

Regulations increase pollution and reduce competition.