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Start-Ups Aren't Cool Anymore (theatlantic.com)
A lack of personal savings, competition from abroad, and the threat of another economic downturn make it harder for Millennials to thrive as entrepreneurs. From a story: Research suggests entrepreneurial activity has declined among Millennials. The share of people under 30 who own a business has fallen to almost a quarter-century low, according to a 2015 Wall Street Journal analysis of Federal Reserve data. A survey of 1,200 Millennials conducted in 2016 by the Economic Innovation Group found that more Millennials believed they could have a successful career by staying at one company and attempting to climb the ladder than by founding a new one. Two years ago, EIG's president and co-founder, John Lettieri, testified before the U.S. Senate, "Millennials are on track to be the least entrepreneurial generation in recent history."
Some of the reasons have been well-documented. The romantic view of entrepreneurship involves angel investors and venture capital funds, but in fact, the ordinary entrepreneur is more likely to fund a start-up using personal savings -- something underemployed Millennials simply could not build as they entered the workforce during or in the immediate wake of the Great Recession. Funding from friends and family is the next most common source, but this personal network could not help much during the most recent economic downturn, when so much home equity was underwater. Student debt worsened the underlying economic problems. According to a report by the Federal Reserve Bank of New York, between 2004 and 2014, the number of student borrowers rose by 89 percent.
Lately, though, it seems that even those who might typically have access to other forms of funding, like venture capital, are having a hard time getting investors' attention. As Matt Krisiloff, a former director at the Y Combinator start-up accelerator in Silicon Valley, tweeted, "Start-ups are a lot less cool than they used to be." Michael Sadler, an economist at the University of Texas at Austin, is concerned about the rising concentration of start-up investment in just a few super-performing regions such as Austin, New York, and Silicon Valley. As with American politics, it appears the geography of U.S. venture capital and economic growth has become increasingly polarized.
Some of the reasons have been well-documented. The romantic view of entrepreneurship involves angel investors and venture capital funds, but in fact, the ordinary entrepreneur is more likely to fund a start-up using personal savings -- something underemployed Millennials simply could not build as they entered the workforce during or in the immediate wake of the Great Recession. Funding from friends and family is the next most common source, but this personal network could not help much during the most recent economic downturn, when so much home equity was underwater. Student debt worsened the underlying economic problems. According to a report by the Federal Reserve Bank of New York, between 2004 and 2014, the number of student borrowers rose by 89 percent.
Lately, though, it seems that even those who might typically have access to other forms of funding, like venture capital, are having a hard time getting investors' attention. As Matt Krisiloff, a former director at the Y Combinator start-up accelerator in Silicon Valley, tweeted, "Start-ups are a lot less cool than they used to be." Michael Sadler, an economist at the University of Texas at Austin, is concerned about the rising concentration of start-up investment in just a few super-performing regions such as Austin, New York, and Silicon Valley. As with American politics, it appears the geography of U.S. venture capital and economic growth has become increasingly polarized.
Startups are great, but they should have a real product, not just the latest fad app. Advice: learn a trade first, whether it's engineering, medicine, law, plumbing, electricity, or science. Then use your experience to start your own company.
Of course, you might be a unicorn with a brilliant idea just out of high school, but don't count on it.
Personally, I suspect age is a factor. The last decade or two has seen a lot of expansion of investment into younger entrepreneurs.. And there's been a lot of getting burned by investment into that sector.
I'll definitely agree that a lot of young people have the discipline to keep the books, but they're very unlikely to know the finer points of how this is really going to affect them outside what textbooks say. And have far less experience in planning for the tougher times, as they've not had to account for a whole load of continuity factors (which come with experience, and seeing other people's screwups as well as your own, on someone else's dime).
And for every person that brings along a personality trait that offsets experience, you have the younger person with the same traits without the experience, which makes a rough situation untenable.
Back when I was setting up my first company in the '90s, I brought in a PR company to get the word around, and the quote I had then was that it was a shame I didn't have more grey in my hair, as it was a trait that was reassuring to investors, as it brought the impression of experience to the table.
Then it became cool to have young CEOs and entrepreneurs, so the money went with the cool, and the ROI didn't quite pan out as hoped. Yes, there are young people with all the right traits for success, but experience AND traits beats traits. And given that the old cycle of 'older people getting the investment, doing a few decades and retiring' is now broken, you have the young successful people that were invested in originally starting newer ventures and being successful in the 4th, 5th, 6th try by now, and they know how to get the funding. And the ones that were successful in the first place now have the track record, and they're starting new things too, competing with the slightly younger and completely inexperienced people. From an investment point of view, you get two people asking for cash, one with a good track record for return, one completely without record, and unless there's a sure fire win in the untried, by and large, it's returning to the older behaviour of the most probable best return.