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.

Comments

Maybe not profitable

[OffTheLip]

Start-ups are a lot less cool than they used to be.

VC folks like to get a return on their investment and lately, tech hasn't done so well. It's business.

Start-ups were not meant ot be cool.

[jellomizer]

They are a high risk and long term investment.
For every Google there are thousand failures all from energetic people who believe that they have the next big thing to change the world. If you are going to invest in a startup vs an established company, you need to get past the flash and focus on the business plan, income, and market share. Opening a Deli next to the new Amazon warehouse may bring in much more money then trying to use the latest AI and other buzzards to add synergy to the creative personal to streamline business processes, and make teens flock to it.

Small business is not the same thing as a startup

[nealric]

The article talks about millenials as business owners, but then goes on to talk about "startups" which are not really thie same thing. When people talk about "startups", they are talking about the kinds of business that are funded by Angel investors, VC, and the like, which are formed with the hope of one day becoming a public company or being bought by one. These days, such business are usually in the tech industry or some offshoot thereof.

But the vast majority of small-businesses are just that and always will be. We are talking about things like restaurants, dry cleaners, auto repair shops, and the like. The fact that young people aren't forming small business enterprise has little to do with anything happening in silicon valley or other tech centers.

There isn't

[rsilvergun]

multiple studies have already shown that Millenials are no different than any other generation in how hard they work or what they want. The only major difference is they came of age in the 2008 market crash and that they're saddled with over $1 trillion in student loan debt.

Every generation likes to talk about how lazy the next one is. It's a narrative pushed by our ruling class to keep us at each other's throats while they rob us blind. Along with racism and classism it's a key strategy the ruling class uses to maintain power and wealth inequality while being about 1% of the population. I really wish that here, now, in 2018 with the power of the internet, we could get a majority of people to spot this pattern and start pushing back against it.

Don't forget Monopolies

[rsilvergun]

and the general consolidation of power that's been going on for about 30, 40 years now.

I think it was Zuckerberg that made this point, but the next generation of billionaires will likely live into their 150s and be productive for most of that time. Most of the tech that keeps them living that long will be too expensive for the working class too.

If you think it's hard to keep wealth inequality and the power gap that includes in check now wait until the aristocracy lives 30-50% longer than you and I do.

Re:More like startups take a lot of work

[Actually, I do RTFA]

It's not the amount of time a start-up takes, it's the risk. A start up is a long shot. You might get rich, or you might spend years going nowhere. Risks are taken by people who can afford them. Fewer people can now.

Startups are great

[b0s0z0ku]

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.

Start ups are actually HARD

[argStyopa]

ACTUALLY starting a business is fucking hard: You risk your OWN money* as well as a shit ton of time, sweat, and (more or less) your family, relationships, prime working years - all for something you "hope" will work.

This is essentially what Marx got *completely* wrong, by positing "capital" just existing ex nihilo, instead of recognizing the massive amount of wealth that was invested in all those businesses that didn't succeed. By discounting the 'red in tooth and claw' investment carnage that happened so that the (current) businesses exist, one hand-waves away essentially the entire justification for why business owners are ENTITLED to make more than the downtrodden wage slaves they employ - it is that disparate result that incentivizes people to take the risk to found businesses in the first place.

But I wouldn't say that Millennials are necessarily perceiving it wrongly; as much as that might make their elders uncomfortable. The fact is that capitalism as is practiced in the US isn't really much like capitalism; it's "capitalist" on the up side, but socialist on the down side. (When in fact, capitalism like evolution ONLY advances by the death of noncompetitive entities.) Why found a business, if every buggy-whip-maker you are putting out of business is only going to go on the federal protective dole ensuring that the poor devils never actually fail?

If there's no ability to eliminate your competitors, there's little incentive to jump into the competition.

*Kickstarter is bullshit - and closer to a religious donation than investment. The idea that people are sinking money is only working by the principal of distributed risk, with the interwebs making the distribution part easier; if you can convince 10 million people to each 'risk' $10 with you, that is in some ways a lower bar than getting a handful of VC funds to each invest $25 million in your idea.

Re:Start ups are actually HARD

[Aristos Mazer]

argStyopa started with a good post, but I agree with Actually -- there seems to be a gap in the argument about entitlement. In argStyopa's post, the claim is that owners are entitled to make more because they took the risk. But the failed entrepreneurs also took the risk. So the owners that succeed are only entitled if they succeeded by their own skill. If they succeeded by luck or by having an advantageous start, then they are not entitled. The US system recognizes that luck and advantageous start are the predominant reasons for why one business succeeds over another. And even when they succeed by their own skill, that skill is not necessarily in providing better service: the first guy who realized that "AAA Plumbing" got you a better position in the old phone book and thus made you the default choice for desperate customers was a business genius who legitimately out-competed, but he was not necessarily the best plumber.

"Seeing a void in the market and risking capital to fill it" does (in my opinion) justify owners having greater share of the profits, but that does not appear to be the most common basis of entrepreneurial success in US society.

Re:Young CEOs aren't cool anymore

[malkavian]

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.

That's not what TFA is about

[rsilvergun]

tech's doing just fine. The way venture capital works is you throw money at 100 businesses, 98 of them fail and you make a killing on the 2 that survive and thrive.

The article is saying that Millennials don't want to work for start ups anymore. I don't think they ever did, it's just that the economy's finally recovered enough they've got options. Most start ups pay like crap, give you stock options to make up the difference and then either collapse leaving you with worthless options or do like that "OnLive" company did an fold the company on paper forming a new LLC and invalidating all the existing options.

It's very, very rare that working for a start up pays off. There was a lot of that during the .com boom because it was a whole new technology. That's a once in half a century event. Millennials, like everybody else, would much rather have money in hand, a steady paycheck and several weeks of vacation than some charismatic CEO type giving them free beer in exchange for half the pay and 80 hour work weeks.