The State of Entrepreneurship
Entrepreneurship is at a 40-year low.
You read that correctly. According to census data, 614,024 new firms were started in 2006. Only 452,835 were created in 2014. While this reflects an upswing from the lowest points of the Great Recession, these numbers look bleak — except, of course, for those interested in pursuing entrepreneurship.
Opportunities for growth
There are a number of reasons for this sharp decline in entrepreneurship: an uncertain job market discourages those entering the workforce from venturing out on their own; mom and pop shops are more easily broken by economic downturn; and in any economic environment, entrepreneurship is riskier than traditional employment.
As the economy and job market have improved, though, entrepreneurship has not rebounded to pre-recession levels. This presents an opportunity for those looking to start new businesses. Large firms are picking up on this too — startups are becoming more common within legacy companies and other goliath corporations. Think: Area120 at Google, encouraging employees to build startups; HearstLab, which supports women-led startups; and GEVentures, the four-year-old venture capital subsidiary of 125-year-old General Electric.
According to Paypal co-founder Peter Thiel, new ventures are the key to sustained economic stability and growth:
“Unless they invest in the difficult task of creating new things,” Thiel writes in his 2014 book Zero to One, “American companies will fail in the future no matter how big their profits remain today. What happens when we’ve gained everything to be had from fine-tuning the old lines of business that we’ve inherited? Unlikely as it sounds, the answer threatens to be far worse than the crisis of 2008. Today’s ‘best practices’ lead to dead ends; the best paths are new and untried.”
Perhaps this is why large companies have cut jobs and tightened spending in other areas: to reallocate funds from the “legacy” portions of their businesses to growth opportunities like startups and venture capital. This is important for people considering a jump toward entrepreneurship, especially those with a background that would have led them to large legacy corporations in more stable times. Whether it’s full-time or a side hustle, investing in a growth company is still risky, but could offer some protection from the uncertainty of corporate employment.
Build by any means necessary
I came across a short thread on Twitter the other day. The poster was making a point about how much entrepreneurship is “pushed” on young people. Most importantly, she seemed to feel this was illogical: entrepreneurship isn’t for everyone, and if everyone were their own boss, companies would have no one to hire.
I find it annoying how much entrepreneurship is pushed on millennials. Everyone is not meant to run a business.
— Destinee (@ChasingDestinee) May 5, 2017
— Destinee (@ChasingDestinee) May 5, 2017
— Danielle Deavens (@danielledeavens) May 5, 2017
She’s not wrong in her reasoning. Not everyone is or should be interested in creating a company, but someone has to do it. Our job market depends on it. According to McKinsey Quarterly, U.S. “companies with fewer than 500 employees account for almost two-thirds of all net new job creation.”
So no, not everyone can be their own boss, but the numbers show that most people don’t want to, and those who do should do so outside the confines of large corporations in order to have the greatest economic impact.
Without growth companies and new ventures within legacy companies, this country cannot continue to build. In that way, entrepreneurship is a task someone must take on, preferably those who are appropriately ambitious, intelligent and ready to work harder than they ever have before. It certainly is not an easy choice, given that most who are qualified are also used to excelling in established institutions. But in the current economic climate, job growth relies on small businesses and growth companies.
Entrepreneurship is not as popular as it once was. And it’s not as glamorous as some might think. But when it results in a successful company, the impact is positive for everyone.