The Only Startups That Matter to Job Creation – Bloomberg 08-16-13

Salient to Investors:

Paul Dwyer writes:

  • Small business is NOT the engine of US job creation. Census Bureau data show that small businesses destroy almost as many jobs as they create.
  • There is more geographic and economic diversity among high-tech formations than for the private sector as a whole, where they tend to happen only where entrepreneurship is already high.
  • Studies show that one high-tech job results in four others in the local service economy, and that the disruptive process of innovation and entrepreneurship leads to productivity growth.

Ian Hathaway at the Kauffman Foundation says:

  • Not all small businesses are job destroyers – high-tech startups create net new jobs.
  • Colorado outshines as a hub of innovation, with Boulder, Fort Collins-Loveland, Greater-Denver and Colorado Springs in the top 10 metropolitan areas ranked by density of high-tech startups.
  • Some of the most dynamic cities include Missoula, Montana, and Cheyenne, Wyoming.
  • The important element in job creation is not the smallness of a business but the newness. Half of all new businesses fail within 5 years. Small tech companies tend to fold or grow rapidly. The survivors in the subset of information and communications technology (ICT) are the most likely to go on and create net new jobs.
  • In 2011, high-tech companies aged between 1 and 5 years created a net 16,700 jobs, while other businesses between 1 and 5 years in the private sector overall lost 513,700 jobs.
  • High-tech was 23 percent more likely, and the ICT subset 48 percent more likely, than the private sector as a whole to form new businesses in 2011.
  • Young high-tech and ICT firms start small but tend to grow especially rapidly in the early years, strong enough to outshine the job destruction from early stage business failures.
  • Net job destruction in the early and middle years for new firms broadly is substantial.
  • Young high-tech companies are more widely dispersed throughout the US than other private-sector startups.
  • The metro areas with the highest density are located either near a university or a well-known technology or aerospace hub. The secret sauce seems to be a highly skilled workforce.
  • Major metropolitan areas and existing high-tech hubs, including San Francisco and Boston, see many startups, but smaller regions show the strongest growth.

Read the full article at  http://www.bloomberg.com/news/2013-08-16/the-only-startups-that-matter-to-job-creation.html

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