Someone has been following startups for the last thirty years. The findings from the follow up is interesting because it has significant implications on startups’ contribution to job creation. We all know that the youth especially in countries with high unemployment rate have been constantly bombarded with messages asking them to create jobs instead of looking for employment. However, report by Technology Policy Coalition Engine and the Ewing Kauffman Foundation reveal that startup failure rates is very high leading to more job losses than they create. An exception to this rule is high-tech starturps that have high success rate to the extent that they counter the effects of job losses resulting from failures of the other startups.
The latest report seem to contradict another report highlighted at Westfaironline which concluded that it is startups, generally, that contribute to job growth and not small businesses at Connecticut USA. The report from Connecticut’s department of labour did not categorize the startups by industry neither did it give year-in year-out trend of startups creation vis a vis failure rates.
In the report by Technology Policy and Ewing Kauffman, private sector business creation rate declined by 9% between 1980 and 2011. In the same period new new tech businesses increased by 69%. Jobs created by businesses that were 1 and 5 years old – was twice as robust as the average rate for firms in the rest of the private sector. The scenario is attributed to “up-or-out” dynamic: that is, startups tend to either fail quickly or grow rapidly.
What the findings imply is that concentration should be put on high-tech startups, but economically this can be done only until the sector is saturated.