Holy bad data Batman, and during Global Entrepreneurship Week! The Wall Street Journal covers data showing fewer new firms being created they are creating fewer jobs. From the WSJ (sub req);
In the early months of the economic recovery, start-ups of job-creating companies have failed to keep pace with closings, and even those concerns that do get launched are hiring less than in the past. The number of companies with at least one employee fell by 100,000, or 2%, in the year that ended March 31, the Labor Department reported Thursday.
That was the second worst performance in 18 years, the worst being the 3.4% drop in the previous year.
Newly opened companies created a seasonally adjusted total of 2.6 million jobs in the three quarters ended in March, 15% less than in the first three quarters of the last recovery, when investors and entrepreneurs were still digging their way out of the Internet bust.
The article highlights some bootstrapping entrepreneurs who are, by necessity, taking longer to grow their new ventures.
Lack of seed capital (home equity lines of credit, friends/family) is a major problem. (Is this why venture accelerators like Y Combinator and Seedcamp are growing?)
Others claim that the lack of certainty regarding health care and taxes put them in a decision making bind.
So uncertainty and lack of seed funding have led to fewer start ups and the ones that do start, are much leaner (no/fewer employees).
This is the new reality of entrepreneurship. Some will call it bootstrapping, but, as I mentioned above, the rise of venture accelerators highlights that there is more to the answer than just ‘bootstrapping’. The article points out how the decreasing cost of technology and global networks for contractors makes lean firms easier to create and less capital intensive.
The new reality of entrepreneurship will bring new opportunities and business models for entrepreneurs and society. The period of adjustment will clearly take time.