People says it’s unfair to attack the messenger, but in the case of the recent announcement from The Brookings Institution that boldly declared the death of entrepreneurship, perhaps some pushback is in order. In case you didn’t see the article here on OPEN Forum, the Washington, DC-based think tank issued a report in early May claiming that startups are in steady decline, from the late 1970s all the way through 2011.
The study concludes, “Whatever the reason, older and larger businesses are doing better relative to younger and smaller ones. Firms and individuals appear to be more risk averse … and fewer people are launching firms.”
All this led to headlines like, “America’s entrepreneurial spirit is dying.” Really? Are entrepreneurs headed the way of the dinosaurs? Hardly!
Dispelling the Myth
Shahab Kaviani, the co-founder and CEO of CoFoundersLab, a matchmaking service for entrepreneurs, finds the Brookings stats “very surprising and hard to believe.” He cites the high number of students studying entrepreneurship at the nation’s colleges and universities as a more reliable measure of entrepreneurial interest.
Kaviani has started two businesses in the past 11 years (CoFoundersLab was launched in 2011) and notes that the cost of starting a business now is a fraction of what it was when he started his first business in 2003, making it a lot easier to get started. From the vantage point of his current business, Kaviani says, “When we see a few thousand entrepreneurs joining our community each month, [it] suggests Americans are more courageous and better equipped [for startup] than ever before.”
Amy Millman, president of Springboard Enterprises, also questions the report's findings. “There’s no shortage of entrepreneurial energy from my perspective,” she says, “and no data to assess, except for census data, which tells you nothing. [It's] time for new data sources."
In fact, almost everyone I interviewed questioned the data and its source. Jennifer Kushell, CEO of YSN (Your Success Now), says she believes that “when people struggle in the traditional economy, more people opt for entrepreneurship. I’d like to see the data on that.”
Kushell is skeptical about the tracking of startup rates. “Most businesses are started on such a small scale, so under the radar,” she says, “there’s no way to accurately count them. This emerging generation is constantly launching projects and exploring innovations but not always registering them with any formal entity as a ‘business,’ so they remain off the radar.”
Serial entrepreneur and academician Steve Blank believes the “good news” in the Brookings data is the irrelevancy of its source. “The Census Bureau data is irrelevant for tracking entrepreneurial data in the 21st century,” Blank says. “It was great for measuring businesses that opened in the 1950s, but not for measuring scalable startups that erupt in clusters. Using Census Bureau data to measure businesses today is like using a ruler to measure the temperature. We don’t have good metrics to measure what we do.”
The Silver Lining
Unlike the doom and gloom embedded in the Brookings report, everyone I talked to is optimistic about our entrepreneurial futures. Ken Yancey, CEO of SCORE, believes as the economy improves, we'll see more startups.
Kushell agrees. “Startup communities—areas where entrepreneurial ecosystems are starting to gel and become dense with activity, action, resources and ambition—are growing rapidly," she says.
So is the real problem, as Brookings suggests, that we’re simply more risk-averse? Yancey says no but thinks entrepreneurs are smarter about risk because they know that "a challenging economy magnifies poor decisions.”
Clate Mask, co-founder and CEO of Infusionsoft, agrees, adding, “You can start a business with much less risk today.”
And that’s just what Jared Hecht did. Hecht, the CEO and co-founder of Fundera, never hesitated when launching his startup this year. “The fact that we started in a ‘downturn’ didn’t even cross our minds,” says Hecht, who started his business with seven partners. “Collectively, people may be more risk-averse, but entrepreneurs will be entrepreneurs—there's no stopping that.”
It Takes a Village
Of course it’s not all rosy: Entrepreneurs could use some help. Mast thinks there’s plenty we can do to encourage startups. He offers a list:
- Teach entrepreneurship in high school, and make it a core requirement in college.
- Make government compliance easier for startups.
- Give payroll and employment tax credits to small businesses for the first three years they're in business.
- Lighten employment taxes for smaller businesses that have fewer than 10 employees.
As for the report's contention that “older and larger businesses are doing better relative to younger and smaller ones,” Mast doesn’t think it’s surprising that established businesses are doing better. As he explains, “The survival of the fittest is also the survival of the oldest. Once a business gets to a certain stage of growth, its likelihood of success goes up dramatically.” But, he argues, “the bigger a business gets, the harder it becomes to pivot and adjust to market conditions. Small businesses are more agile and can adjust to market opportunities faster.”
And you can’t measure entrepreneurship without talking about attitude. Entrepreneurs just aren’t like other people. “America’s entrepreneurial drive remains strong,” Yancey believes.
And Kushell says, “There are so many [examples] suggesting real business success is very possible, even without a lot of experience, money or staff. Think about all the coding of new websites and apps being developed in bedrooms and dorm rooms. Development has become democratized, and true entrepreneurs never give up.”
Hecht agrees. “There's no right time to start a business," he says. "Good businesses weather upturns and downturns. It comes down to when an entrepreneur feels comfortable taking the plunge and going for it. The right time to start a business is right before you feel confident about your decision to start a business. Entrepreneurs are always swimming against the tide.”
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