At a time where the stories of startups surround us, American entrepreneurialism is actually on a decades-old downward trajectory. Fewer start up and more fall down: The failure rate for new businesses has increased in the last 20 years and more people are working for established firms, according to a recent Brookings Institution report. A recent Fed study shows that business ownership rates among American families are at a 25-year low. The U.S. Census bureau is reporting that for the first time in three decades, business deaths outnumber business births.
It’s an especially worrying trend following a recession, since many economists say new businesses are critical to economic growth because they create the most new jobs. (Apple and Microsoft, to name the most obvious examples, were created just after the recession of the mid-’70s.) Tech startups continue to flourish today, even if they can’t escape the overall downward trend, the best ones—nurtured in incubators and then blessed with investors—go on to employee thousands of people.
Businesses with under 50 employees make up the majority of American firms. And most of those are small local operations that political candidates evoke as “the backbone of our economy” and VCs ignore.
Our focus on startups has shifted from building small business to building disruptive, scaleable businesses. If it doesn’t have the potential to be a Billion dollar business, shut it down and move on to something else.