A lot of people ask me if I love my job and enjoy what I do. And most of the time I do. But while I love the GAN Community, my colleagues, and the fact I get to invest in startups, the main reason I get up every morning is the data behind this chart…
I first saw it posted by the Kauffman Foundation in 2012, and they have been updating it ever since. I’ve used it in countless presentations and talks.
What it’s looking at is where net new job creation is coming from. And since 1988, Kauffman shared that “new businesses account for nearly all net new job creation and almost 20% of gross job creation, whereas small businesses do not have a significant impact on job growth when age is accounted for.”
Said simply, startups are creating all of the net new jobs in the United States.
And even during the downturn between 2006 and 2009, the only companies who created net new jobs were the ones who were under five years old. Not the Fortune 500 companies. Or even the design firm down the street with 10 employees that’s been around for 15 years.
It’s the startup who launched two years ago and is growing their company. They’re the net new job makers.
Feeling bad for what I do…
I was in line going through security at the San Francisco airport earlier this week and met a really nice couple in their 70’s on their way to Cambodia. They asked what I did for work, and I said that I invest in tech companies and run a community of these things called tech accelerators, corporate partners, and other investors.
And I had this moment of feeling bad for what I did because of the backlash that tech firms are getting now. For a moment, I felt like I had to apologize to this nice couple for contributing to a problem of creating the next wave of tech companies because of all the negative press you hear about them in the news.
So I spent a lot of this morning thinking through this and being reminded of something I’ve talked about to numerous people: The accelerators in the GAN Community and the partners we come alongside are working with exactly who this Kauffman report is talking about. For instance, each startup that has gone through a GAN Accelerator has created seven jobs that didn’t exist before. And with 5,300 startups in and around the GAN Community, that translates into about 35,000 net new jobs that weren’t around five years ago.
Why this is important for all of us whether you are an entrepreneur or not…
Unfortunately, the number of new businesses being created in the States is declining. According to the U.S. Census, new firms accounted for 16% of all firms in the 1970s. Today, that number has reduced to just 8%. And, though startups are the only ones in the last 20 years to create net new jobs, there are still fewer new jobs per company than in the past. The gross number of jobs created by new firms fell by more than two million between 2005 and 2010. So we’re fighting a losing battle unless we support the next wave of new startups to help make up for that decline.
There are a few ways you can help do this:
- Pay attention to tax policy and support laws that encourage startups to form everywhere. There’s a ton of talk about taxes in the States with much focus on what’s going to happen to the taxes related to large corporates. But we should also focus on tax policy for startups if we truly believe that they are the net new job creators.
- Participate in local entrepreneurship activities. There is already something going on today in your town that helps create a startup, and there is already some way you can get involved. A startup is looking for your mentorship, for you to join their company, or for your investment. GAN Accelerators are in over 130 cities around the world, and I would love to connect you with one of them (just email firstname.lastname@example.org if you want an intro).
- Support immigration. I promise I’m not being political here. The data simply shows that immigrants are two times more likely than native-born citizens to start a new business, and 29% of all new entrepreneurs were immigrants. If we believe they are helpful to our cities and country, then how can we create policies to help them get here?
- Invest. Startups need your capital. I know that not everyone has capital at this point in their life, but if you have the resources to support startups, you have a huge opportunity to change your community, create jobs, and potentially get a large return because of it. If you need help getting connected to some options in your community, just shoot me an email.