Startups: Job Creation Engines (Are You Listening Obama?)

In this week’s issue of BusinessWeek, we published the inaugural list of “The World’s Most Intriguing New Companies.” I am thrilled that we launched the package right as Global Entrepreneurship Week kicks off, taking place Nov. 16-22, in 85 nations.

In my lead story for the package, “Fertile Ground for Startups,” I made two big points:
1. Startups are playing an increasingly important role in American business
2. Startups may play a central role in any recovery.

There was one startling new study, based on 2007 Census data, I was unable to work into the story that I want to highlight now, which provides some empirical evidence supporting the second point.

According to a new study by the Ewing Marion Kauffman Foundation, which was co-written by the respected economist Robert Litan, companies less than five years old generated nearly two-third of the net new jobs created in the U.S. in 2007. Without these startups, “net job creation for the American economy would be negative in all but a handful of years.”

The upshot: It is clear more than ever that new companies and the entrepreneurs that lead them are the engines of job creation and economic recovery.

It is well known within economic circles that new companies produce the majority of new jobs in the U.S. economy. What this reports reveals for the first time is extent of that trend, and the fact that startups play a particularly important role in growing jobs out of a recession. New companies have produced all of the net new jobs in the U.S. from 2001-2007, and also from 1980-1983, the last big American downturn, according to the study.

Read the rest of the BusinesssWeek blog post here and also see an embedded link of the report.

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4 Responses to “Startups: Job Creation Engines (Are You Listening Obama?)”

  1. Stephen Says:

    Spencer,

    I totally agree. Small business owners have always been the creators, innovators and sustainers of economic growth for this country. I am currently leading a technology start up that actually addresses the problem and opportunity that you wrote about in Business Week last month “Amazon: Turning Consumer Opinions into Gold”. I would love to speak to you about it in detail and get your invaluable insight.

    Look forward to hearing from you.

  2. Spencer Ante Says:

    Thx Stephen. Shoot me a note at spencer_ante@businessweek.com

  3. thomasogephart Says:

    Bank loans, lower cost medical insurance, and lower taxes are not the answer in stimulating job growth. All these help, however, jumpstarting jobs with equity capital must become America’s #1 domestic priority. Innovative small and mid-sized businesses are job-ready, but in desperate need of equity capital. With equity capital, they are the true job creators.

    Wealth creation comes from private sector efforts. Obama said, “There is only so much government can do. Job creation will ultimately depend on the real job creators. But government can help lay the groundwork on which the private sector can better generate jobs, growth and innovation. “

    To create a significant number of jobs, a public/private partnership needs to be formed. Government provides the set-aside funds, while private “job creation” investment managers provide know-how and mentoring, which are directed exclusively at growth and U.S. job creation. Job ready companies can’t get bank loans because they can’t demonstrate a historical repayment capability. Therefore, job ready companies need equity!

    America needs the private sector to create high-value, sustainable jobs for the economy to thrive. What has helped the economy recover in the past? Innovations, integrated with capital management teams, that created new employment opportunities to replace jobs lost during the downturn.

    President Obama said innovation could return America to the stature of being #1 again. The catalyst national fund concept was established to create tens of thousands of jobs by investing in 500 innovative, job ready companies. To bring America back as the #1 innovator, we need venture capitalists as business builders, and Catalyst Funds as the national delivery system to provide both the equity and mentoring to create thousands of high-value, sustainable jobs for Americans.

    Because of the unique circumstances of having a national delivery system already in place, investments could begin immediately. The delivery system is available by selecting 20 teams from the existing network of 700 venture capital companies.

    The national catalyst group of companies would be the integrator of SBA, bank loans, angel investors, private equity and traditional venture capital. We must not delay in taking advantage of this unique strategy to dramatically impact job creation in America.

  4. Cherelle Woolley Says:

    I came here from bing. After reading Your ideas is very good om your Blog. I bookmark it.

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