
The US startup is disappearing - bhuga
https://qz.com/1309824/the-us-startup-company-is-disappearing-and-thats-bad-for-the-economy/
======
moorhosj
Very interesting chart in this article that shows more educated people
(masters, bachelor's, some college) are less entrepreneurial than they were 25
years ago. On the flip side, less educated folks (high school graduates and
non-high school graduates) have seen an increase in entrepreneurship.

"In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small
company with at least 10 employees. In 2017, this was true of only 2.2%."

Could it be that the cost barrier is lower today than in the past, but there
is much more money to be made as an educated employee today than 25 years ago?

~~~
rb808
A big difference is that modern kids are conditioned to do what they're told,
work hard and choose a safe path in life.

To get into a good school now you have to spend your time studying hard to
pass the standardized tests.

Previously kids playing around, got bored, chasing girls/boys, leaving home as
soon as possible, maybe joined the army, married young. So a 25 year old
already had a lot of life experience. Able to take the responsibility to
follow dreams and start up a new firm.

Today's kids at 25 are just leaving school and still dont really know much
about the real world. Great candidates to get a safe job in a company, not so
great at starting a firm.

~~~
rmshea
I can attest to this. I'm currently working my way through the college
application pipeline, and my peers are laser focused on what it takes to get
into a good college. Rather than pursuing what interests them, many choose
challenging courses just to have a favorable transcript, and standardized test
stress is an epidemic. Anxiety about "getting in" to a good school supersedes
any dreams of starting a venture or pursuing an option that isn't a 4-year
prestigious university.

The disappearance of new ventures can be attributed in some way to this new
way of thinking. I've been told that college anxiety didn't exist 20 years ago
-- maybe it's time to go back to those days. High school, in my mind, is a
time to experiment and find what actually interests you: not to manifest into
a homework bot that's dominated by stress.

This isn't always the case, though. The 25-year-old with life experience and a
past of experimentation still exists, it's just not the norm anymore.

~~~
varrock
I've done some serious reflecting on exactly what you've said. I'm on that
"safe" route. I went through the college anxiety, the GPA worries -- all of
that was my mantra. To this day, I still admit to being a "resume" builder. I
want things on a paper for a sense of achievement.

This scares me, though. I'm starting to realize that is not what it's about.
It's about making a difference. Sure, you can indeed make a difference doing
what you and I have described. A company needs people like that. But I always
wonder, could I have made an even bigger difference doing something else? I'm
not even talking about my education. I've even thought about this for sports.

For instance, I grew up playing baseball religiously because I had already
invested a lot of my time with it. I didn't want to adhere to anything else
for the fear of wasting my time. Here I am, years later, realizing I would've
been an even better tennis player had I actually been open to trying something
that would've given me more success, but potentially been less safe (starting
a new sport in the middle of being so devoted to one already). Here I am,
hitting with racquet on every volley, wishing that I had bought into the sport
earlier because I know I could've been better at it than I was baseball.

~~~
pteredactyl
I hear you. I believe it's most rewarding, in general, to create your own
path.

You will fail. Embarrass yourself. 'Let down' family and friends. But you'll
know those that really care about you.

And you'll find out what you're made of. Oh, and have some good stories along
the way.

“The best time to plant a tree was 20 years ago. The second best time is now.”

------
adreamingsoul
As a self-educated software engineer, entrepreneur, and business owner I
cringe whenever data statistics of ”educated” people are only represented by
individuals who have a masters, Ph.D., or doctorate.

I have studied at universities, but unfortunately, the education system in the
USA is not suitable for Autism. From an early age I had to teach myself
because 99% of my teachers and professors didn’t have the resources or time to
help me. Does anyone here have a similar experience?

~~~
DoreenMichele
I was briefly Director of Community Life for the TAG Project. I was
homeschooling my 2xE sons and moderating a gifted homeschooling list,
basically.

Since he was a preschooler, I have told my oldest son he will need to be an
entrepreneur. He won't make it as an employee. I tried to enroll him in
college classes when he was 13. The college accepted him, but the classes fell
through. I think one was full and the other was cancelled.

After that, he told me he really did not want to attend college. He wanted me
to keep homeschooling him, even though what he knew in some areas was beyond
me, so I wasn't really qualified to teach him per se in some areas. So I
became a resource person that fostered his own self education.

Bill Gates is a college drop out. So is Madonna. I used to be able to quote
statistics. A fairly high percentage of entrepreneurs can't be arsed to finish
a degree program. They are too busy making things happen.

Degrees are about credentialing. Entrepreneurs often take classes for a
specific purpose, to learn specific knowledge or skills. Credentials tend to
matter less to them than knowledge and skill.

The minute I post this, you can bet someone will rebut it. It isn't true of,
say, 90% of entrepreneurs and there are plenty who do have substantial formal
education. But the aggregate figures show (or did at one time) that these
things are generally true.

It's certainly not just you. Plenty of entrepreneurs describe themselves as
_mavericks_ or _misfits_ or similar.

~~~
HillaryBriss
i once heard that most small business owners are either the children of small
business owners or small family farmers.

if this is true, perhaps we're in a downward spiral, given historically
smaller startup cohorts and the agglomeration of family farms into corporate
farms.

------
laser
[https://www.theatlas.com/charts/Syh34PDZm](https://www.theatlas.com/charts/Syh34PDZm)

That graph is fascinating. The decreasing value of formal higher education to
becoming a successful entrepreneur is being accelerated from so many angles.
The cost of collegiate education itself has risen dramatically, while at the
same time the cost of access to collegiate educational materials has plunged
to zero due to the internet and open publishing. If this trend continues, I
wonder if motivated, aspiring entrepreneurs will be better off skipping formal
higher education altogether. Could that already be true today? If someone can
decide that the college path is not for them at a young enough age with a high
enough level of maturity, then they can unschool and skip the bull-shit
college-admittance optimization altogether, and instead focus on actually
becoming an educated, masterful individual in domains that will help them
create new value that they, and society, care about.

Of course, there's so many confounding factors feeding into this one simple
graph that I may have over-extrapolated to this particular thrust, but I think
it's a perspective completely absent from the article that should be
articulated.

~~~
usaar333
That's one conclusion you could make.

An alternative conclusion is that educated would-be entrepreneurs are now
receiving higher wages in industry, resulting in the group shifting to
industry. Less educated would-be entrepreneurs see wages lowering/stagnant in
corporations and thus shift to entrepreneurship.

Income source:
[https://www.advisorperspectives.com/dshort/updates/2017/09/1...](https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-
household-incomes-a-50-year-perspective)

~~~
laser
Right, that's definitely a huge component, and one that is focused on in the
original article. I bring up these other factors because they're not
mentioned, including the fact that the rate of entrepreneurship has actually
increased among the least formally educated.

------
nemo44x
Every nascent industry is dominated by startups and little guys becoming big
guys. It happened with oil, the auto industry, electronics, and among many,
many others.

Although I believe we're only in the midst of the information revolution it
would make sense that over time as the industry matures it becomes more and
more difficult to break into it. The big guys have leverage and lawyers and I
think what we see today with many startups being built to get bought rather
than as new enterprises that will stand on their own is evidence of this new
phase shift.

------
yohann305
I would love to see if there is a correlation between the quantity of startups
VS new major innovation waves.

Yes, there are less new startups today but if you come to think of it, we
don't have a major innovation at the moment that's easy to jump into. Look at
the late 90s, we had the INTERNET, anyone could make a website with frontpage
or a little html tag understanding.

Then in the late 2000s we had the MOBILE PHONES... I have an idea for an app!
(everyone did!)

At the moment, we have AI/ML but my opinion is that it's not ripe for an
average person to start an ML company. Another major upcoming branch is
blockchain but it's also not mature enough for this major innovation to
trickle down a leaf tree of startups.

What do you think?

Oh, almost forgot to mention AR/VR! Not there yet!!

~~~
HillaryBriss
i also wonder about the funding mechanism and landscape.

could it be that the VC firms have come to dominate and guide the funding
process in such a way that starting a firm is a lot less attractive now?

~~~
umeshunni
Well, for one, they have ensured that joining a startup is financially less
attractive than working at a large company/FANG.

------
sjbase
I'm not sure "the startup is disappearing" is the only explanation for this
data. Isn't it possible that companies are just lasting longer than 2 years?

What if there was a larger percentage of age 0-2 companies '85 because back
then, so few were making it past 2? Maybe easier access to capital has
increased survival rate (or at least slowed down dissolution by a few years).

This explanation also fits better with the massive influx of cash into VC over
the last ~10 years.

~~~
jimbofisher1
Startups lasting longer would have nothing to do with this? 0-2 Years
represents "New" startups, so the number of new startups is declining.

~~~
sjbase
That would be true if this was actually a number, not a percentage. To take a
hyperbolic example, there could be 100x more startups at 0-2 years right now
than in '85 and 100,000x aged 2-4 years; you'd still see a percentage decline
in the former and we'd be pretty far from "the startup disappearing."

------
thisisit
I am curious about the methodology to count startups. One of things is sure
that we are now in a consolidation phase. We are seeing a glut of M&A deals.
In that vein many startups are disappearing because they are getting acquired
by larger companies. No one wants to be the next Yahoo refusing to buy a
company which might become their next chief competitor. And the cheap credit
environment is making this easier.

------
mlthoughts2018
I don’t have enough broad economic insight to know if this should be worrying
generally or possibly even be seen as good.

But what I do know is that work conditions, pay, and equity risk
characteristics in start-up jobs are miserable, not to mention that work life
balance is often poor and the start-up management is often deluded about the
scope and importance of the business.

I would be happy if entrepreneurs believed they needed a far greater amount of
initial capital before starting a business, and viewed it as essentially
mandatory to provide market rate salaries, comprehensive insurance, and
seriously professional work life balance and workplace behavior, all _before_
even hiring the first employee, and also even after accounting for early stage
equity.

If it was something of a cultural norm that you are a shyster, suspicious
“entrepreneur” if you attempt to convince people to work for you without
already having the capital arranged to invest that significantly in giving
them good jobs from day one, I think this would be a great thing for the labor
market generally, and would greatly deter a bunch of hype-driven nonsense
startups that essentially allow already wealthy people to treat it like
lottery tickets at the expense of employees.

------
magd
In my experience, only the founders of startups make any money. If the startup
is successful, then the founders walk away with millions. Everyone else would
be financially better off if they worked for a large company instead.

Also, the executives of the startups take free trips and expense everything on
the company's dollar. While the employees receive low pay.

I don't think the large companies are winning. The startups are killing
themselves.

~~~
usaar333
> Everyone else would be financially better off if they worked for a large
> company instead.

To be fair a lot of the change is because large companies are paying people so
much these days. Barring large amounts of funding, a Series A- startup (based
on the company being 0-2 years old definition of the article) simply can't
compete with salaries.

Perhaps startups should start offering far more equity to early employees (I'm
surprised you don't see more seed stage firms offering ~5% to senior devs) to
compensate for the cash loss.

~~~
foepys
Nobody will give a senior developer 5% equity when even VCs only take 7% for
the first investment that also includes access to professional networking
events.

~~~
s73v3r_
Then maybe those companies don't deserve a senior developer?

------
devilshaircut
The author of the article uses "start up" to refer to a business less than 2
years old - fair enough. As someone who runs a business which falls into this
category, it certainly is frustrating to know how heavily our government
subsidizes well-funded, monied large corporations (whereas small business
owners have very little government-supplied - or otherwise - financial
incentive to fuel their endeavor).

I don't suppose I would want them to stop subsidizing certain deals in the
private sector with corporate America. A lot of that seems to be smart
business to me. But I certainly would like to see the government to place a
higher value on small business innovation. Starting something from nothing is
already hard enough.

~~~
dv_dt
Have you looked at the SBA? There's actually a fair amount of support there,
including preferential treatment for bidding on set aside gov't contracts,
including SBIR - Small Business Innovation Research contracts. Is it dollar
and lobbying wise the same, no, but it is there.

------
pascalxus
They always want to equate disappearing startups with lack of labor supply.
That just seems completely ridiculous. Lack of labor in startups is a
result/effect, not a cause. Labor, as a general rule of thumb, always follows
the money. If Startups were more successful, they'd get more investment and
more labor. If you doubt this, just remember what happened when facebook
opened up it's app store. Just like that, overnight, thousands of developers
and start ups appeared out of no-where. As soon as people smell the money,
they'll leave their cushy jobs at google or anywhere else in a heartbeat. It
all comes down to opportunity.

I mean, just look at the ycombinator and other investor's acceptance rates.
They're that low because there's only so many opportunities. When there's too
many people chasing too few opportunities, this is the result.

The real reasons why start ups are far fewer, is much more complicated: an it
has to do with fewer opportunities. Some opportunities are limited legally,
some due to market barriers and some are just due to what's currently
possible.

The solution is to look at all those barriers and see what govt can do to
reduce or get rid of the barriers. Look at the industries in most dire need of
innovation: transportation, housing, and health insurance (where need is
measured by $ opportunity) ~ and all the downstream industries that support
these - like manufacturing, raw materials, etc. How many start ups are
addressing these needs, and why is it so low?

~~~
toomuchtodo
You were on the right track and then veered off course at the end. The problem
is startups don’t pay enough for the risk you have to take, and there are few
easy problems left to disrupt. There will always be small businesses and sole
proprietors, but there are few winner take all startup opportunities that
require little capital to start.

Also, after seeing what happens when startups flout regulation (Uber, Airbnb,
Theranos), I prefer government regulation stay intact or more of it. The less
startups abusing the commons, the better.

------
baron816
Are mom and pop stores included in the data? What about law firms, doctors
offices, mutual funds? I don’t think we’d consider those new businesses to be
start ups.

------
whatthesmack
I'm surprised nobody's mentioned it, but the bureaucracy of licensing, taxes,
and now national sales tax collection is unhelpful to the startup. Not that
it's a startup, but I just jumped through all the hoops required to legally
hire a nanny in the US state of Washington:

\- obtain Federal EIN number \- obtain state business license & UBI number
(still waiting on this, and I need childcare _now_ ) \- file with state
employment security department \- pay state labor & industries insurance \-
pay state employment security taxes \- pay my portion of income taxes for the
nanny \- pay payroll company to deal with all the tax payouts and paychecks

Oh, and actually pay the nanny.

All of this to just have a nanny and be above board. And what I do for my
startup is way more complicated than this.

~~~
ChristianBundy
I'm confused, to legally hire a nanny you need to start a legal entity and
hire the nanny as a contractor/employee? It seems to me that this would be the
nanny's responsibility to start a business and charge the customer (you) money
for their service.

I'm sure you're much more familiar than me, can you help me correct my
intuition?

------
quadcore
Another factor could be that before, big companies kinda sucked for the
employee. Today's big companies like Google and Facebook are wonderful place
to work for. In the grand scale of things, the new management styles are
considerably more comfortable for the employee, the decision making and the
promotion methods are significantly more efficient, interesting and smart. Not
saying they are perfect, there is definitely room for improvement but 30 years
ago, it was all wage slavery.

~~~
HillaryBriss
i like your idea, but Google and Facebook are very far from typical.

~~~
quadcore
I guess you may be right. Is there still big companies which would fire you
because you're late 2 minutes 3 times this year? Where everybody have to be
there at 8am? And stuff.

~~~
phil248
I've always assumed the laid back approach of employers here was a West Coast
thing.

------
ummonk
Small local businesses / startups get squeezed out by larger brands with name
recognition. No one looks for stuff in the yellow pages anymore - they go to
the most successful brand off the internet.

Additionally, the risks of starting a business / startup are much higher when
the cost of housing and healthcare is so much higher. And on top of that you
have student debt.

------
inetknght
> _This means that, contrary to popular belief, jobs in the US are far more
> secure than they were in previous decades._

This is a fallacy. Your job is not secure if you're not able to speak up about
injustices because there's no competitors to hire you if you were to get fired
about speaking up about something that's immoral but not illegal.

------
HillaryBriss
the paper seems to be talking about "startups" as firms less than 2 years old.
i guess this includes startups in plumbing as well as startups in software.

maybe the reason a young plumber doesn't go out and start their own new firm
is different from the reason a young software engineer doesn't go out and
start their own new firm.

------
tsenkov
If startups fail (test bad ideas) 5x faster than in the 80's and 90's and if
most founders quit entrepreneurship after their 1st failure, even if 2x more
people are founding companies, then it's probably normal that, overall, less
man-years would be spent in startups every year in the US.

------
solarkraft
What I always thought the economic system would naturally come to is actually
happening now. It's interesting why it's only happening now, likely because of
the new growth dynamics of data companies.

------
shmerl
_> Startups are struggling in this era of rising market concentration._

To rephrase it, current anti-trust is often too toothless.

------
arcaster
Oh please... People are just realizing that startups aren't all that glamorous
and at times attract a special breed of shitty egotistical workaholics.

By the merits of this article we should wait to see Paris or some other benign
socialist hell-hole become "the next startup hub". I can assure you that won't
be happening anytime soon.

Silicon Valley is an incredibly un-sustainable incestuous bubble. The future
of startups will be distributed, not in one place.

------
molteanu
From the article:

 _Startups are struggling in this era of rising market concentration. In most
industries, since the 1980s, the share of all sales going to the top firms is
increasing. Startups may have a hard time competing with these mega firms,
which can out pay them for the best talent and sometimes attempt to drive them
out of the industry. Previous Brookings research found there are fewer
startups in states where a smaller number of companies dominate the market_

From Lenin, "Imperialism, the highest stage of capitalism" (1916):

 _This transformation of competition into monopoly is one of the most
important — if not the most important — phenomena of modern capitalist
economy._

------
pnathan
I paid out $100,000 to pay off my wife & my own student loan debt early.
Student loan debt can not be discharged by bankruptcy; it's always waiting for
you.

This implies several things immediately:

\- You have to take a job which can make payments on the debt.

\- You have to choose stable jobs which will not suddenly fold under you.

There's also a somewhat hard to define aspect to the problem where you have to
ensure that your local system is fiscally stable.

Anyway, non-1% Americans graduated from college not taking risks in their
first 10 years out? _Totally_ predictable, just from the debt perspective.

Then, at 32, 34, a lot of people are married and/or have a kid on the way.
Welp, there's your high levels of downside again.

Add in to all this the fact that housing prices are effectively tethered to
the availability of cash provided to the "highly paid" market (inequality
increases)....

... so if your startup fails, you'll lose your place to live, and remote jobs
are very rare, so you're in trouble in the big city with now-unaffordable
costs of living.

the solution, in part, has a simple policy component: declare jubilee on all
federally-originated student debt; free college for all students who maintain
adequate gpas, no more federal loans. impose cost controls on universities
that take federal money.

that effectively derisks an entire generation and opens up new options.

housing costs are less directly tractable and more politically problematic:
the effective solution is to federally strip single family zoning from all
land, and mandating density minimums and other supply-increasing zoning. (I
_assure_ you, the housing market is an interstate commerce system. :) ). But
that only staunches the wound, it doesn't bring down housing prices into line
with the median American's income.

Wait, this is about _startups_? Ha! No. That's a third order consequence
caused by increasing early-career & mid-career risk, which in turn is
increased by the planning & zoning codes and governmental defunding of
education.

~~~
merpnderp
Just make student loans dischargeable. The market will sort it out at that
point. Loans for degrees that are valuable will be granted, and loans that are
for selfish degrees that produce no skills anyone else wants or cares about
won't be granted. And colleges would have to start cutting costs to make their
degrees more affordable. And given the mind boggling increase in tuition over
the last 40 years, there's an epic amount of fat to be trimmed.

~~~
risotto_groupon
Wait? What? You can't be serious? The market will sort "what is a worthwhile
education"?

Why not let the market sort out legislation? Or court cases? Or child custody?

This is a pretty sad statement of your personal values if you're serious.

~~~
thomascgalvin
The market might not be fit to decide what education is worthwhile, but it
will certainly figure out what degrees are lucrative.

It would be nice if we could all go to college to chase our childhood dreams,
but the reality is that most of us need to prepare to support ourselves and,
someday, a family. That's why I'm a software engineer and not a novelist, and
that's why I got a CS degree and not a BFA in English.

Are the humanities "worthwhile?" Certainly. But should the average person drop
$100,000 on a humanities degree? Absolutely not. And the fact that we're
willing to bury children under that kind of debt so that they can get a
Master's in French Opera or whatever is a crime.

~~~
s73v3r_
"The market might not be fit to decide what education is worthwhile, but it
will certainly figure out what degrees are lucrative."

And those are completely separate things, and should not be conflated.
Basically, you're saying that only the rich should be able to study non-STEM
stuff.

~~~
thomascgalvin
> Basically, you're saying that only the rich should be able to study non-STEM
> stuff.

I'm saying that only rich people _are_ able to study non-STEM stuff. I mean
sure, a disadvantaged person can study literature or interpretive dance or
whatever, but that choice will make them a debt slave with no significantly
increased earning potential.

You don't need to go to college to improve yourself as a human being. You can
be well-read and appreciative of the arts without paying $100,000. And for the
vast majority of people, that is the only sensible course of action.

------
lando2319
Regulations are the problem, imagine wanting to build something and finding
out you'll need to spend $20K on lawyers to go through thousands of pages of
GDRP.

That's even before hiring a developer to actually build an MVP.

... And people laughed when Trump said he wanted to eliminate two regulations
for every one being added.

~~~
lovich
Imagined you bought a meal and had to go to the hospital because they cut
corners on food safety? Regulation is a balancing act between compet in forces
not just a Boolean good/bad

~~~
TangoTrotFox
There's a strange thing about that. I enjoy traveling and living in developing
nations. Food safety organizations and inspections are basically nonexistent.
And in a decade I've gotten food poisoning exactly once - no hospital visit
even then. It's anecdotal, but it's also very typical among other expats.
People that make their living selling food generally know how to cook and
enjoy it! And they also know full well what happens when they serve bad food.
Think about the places you eat at. There's going to be a handful of places you
eat at, over and over again. And this is also typical. Serve bad food just
once, and a business stands to lose immensely. They're going to not only
permanently lose that customer but also deal with all the terrible word of
mouth that they will spread.

And in the end the biggest risk of food poisoning is often not from the food
itself, but from unclean handling of the food. And all the FDA rules and
regulations in the world don't mean a thing when a disinterested minimum wage
worker chooses to not wash her hands after a bathroom visit, or just keeps on
prepping after sneezing on the produce. The one time I got food poisoning was
not from one of the literally thousands of dishes I've ordered from street
vendors, but from a western-targeted chain restaurant. Instead of having the
business owner being the person prepping the food, it was our low wage
disinterested worker -- same story as the times I've gotten food poisoning in
the US.

This video [1] just makes our whole system of food safety regulation seem so
backwards, at Berkeley no less. Not an appeal to pathos, but an appeal to
logos. We're treating people like shit and deterring entrepreneurship for the
sake of enforcing these rules and regulations which don't really have such a
major benefit as we might believe. It's an undesirable cost:reward ratio.

[1] -
[https://www.youtube.com/watch?v=2_TvG_ZNvQo](https://www.youtube.com/watch?v=2_TvG_ZNvQo)

~~~
lovich
Instead of theoretical ideas about what would happen to the food industry or
your anecdote about being fine when eating food that was unregulated I am
going to point you to "Jungle" by Upton Sinclair.

~~~
pitaj
_The Jungle_ is fiction. Only 12 pages of the novel concerned anything close
to food safety, and at the time there were _already food inspections_.

[https://www.zeroaggressionproject.org/uncategorized/upton-
si...](https://www.zeroaggressionproject.org/uncategorized/upton-sinclairs-
the-jungle/)

~~~
lovich
Huh. I knew Jungle was a novel but the part based on food safety was based on
actual situations he observed

