16 ms·

America's Startup Scene Is Looking Anemic

147 points by petethomas 8y ago

DGCA 8y ago
Non-AMP Link: https://www.bloomberg.com/view/articles/2018-06-07/america-s-startup-scene-is-looking-anemic https://www.bloomberg.com/view/articles/2018-06-07/america-s...
- gregoriol 8y ago
  Thanks so much, I was wondering why the page looked that much broken!
- throwawayqdhd 8y ago
  I'm yet to find a single AMP page that I didn't hate. Don't know why Google keeps pushing it on me. At least in my country, data is ridiculously cheap - I can't spend a few MBs on a page if I want to read it
  - hamandcheese 8y ago
    Damned if you do, damned if you don’t.
- sctb 8y ago
  Thanks! Updated.
0xB31B1B 8y ago
The data stops in 2013, There was huge growth in tech startups in 2013 - 2015 I agree we have an issue with anticompetitive behaviors and monopolistic practices though.
- daok 8y ago
  Even if the data does not stretch to 2015, the data start way back in the 70' which is enough to see a trend.
whistlerbrk 8y ago
> The source of the decline in startup dynamism isn’t yet known Please... massive redistribution of wealth to the already wealthy strangles both potential entrepreneurship and the customer base it would have attracted since they don't have disposable income. Let's not play stupid here.
- fnwx17 8y ago
  brilliant comment. I literally just hit the reply button to tell you that
- zappo2938 8y ago
  Yes. The concentration of wealth is like a virus killing its host.
- weeksie 8y ago
  The fact that we have any activity at all shows the indomitable spirit of American entrepreneurialism. Further, the fact that so many Americans ever start businesses without the safety net of healthcare goes to show that we are a nation of optimistic maniacs. The wasted potential economic energy in this country is a tragedy of colossal proportions.
  - brightball 8y ago
    Startups supported my married couples are generally the path to success, assuming investors are absent. One of you works a job that provides income and benefits for both of you, while the other works on a startup. Assuming most of what you need is a time investment, this is an approach that works for a lot of households to bootstrap. Higher startup costs make it tougher though.
    - fma 8y ago
      Can confirm...wife started a franchise with a brick and mortar presence. I hold down the stable income. Also have the help of parents to look after our baby, as sometimes I need to help her on nights/weekends. The same is true for other franchisee's we've met (1 remains the breadwinner). If you bought into an existing one that already generates revenue, then sometimes both spouses work there full time. But that means you need to have had $$$ in the first place. We know of one franchisee who's wife is a stay at home mom. He quit his job to start one...less than a year with slow growth, he closed the center and went back to a traditional salaried job. He didn't pick a good location for exponential growth, but IMHO he had enough steady growth and would have been profitable if he could stick around for another few months.
jdavis703 8y ago
If you view the graph for number of "high tech" startups the performance has been relatively flat for decades, save for the dot-com bubble. It is concerning that one of the principal drivers of wealth is floundering, but in terms of the impact on the tech scene, this article is more sensational than scary.
pyb 8y ago
Relatedly : a rarefaction of unicorns ? https://avc.com/2018/05/a-changing-of-the-guard/ https://avc.com/2018/05/a-changing-of-the-guard/
- atomical 8y ago
  Most of them will be deemed securities and the SEC will take action.
exelius 8y ago
Maybe because it doesn’t take a company to test product/market fit anymore? A single developer can build an entire app on something like Heroku or AWS Serverless and use that to test the market, rather than needing to build a whole company to get to MVP. That said, the fact we need far fewer people to build tech products means that most of the economic gains those companies would have distributed to workers just go to the platforms...
ddtaylor 8y ago
One problem we are facing is that it's very hard to compete in online advertising with a small budget. I feel we did a really good job at building the software with a small team that would cost a large established company at least $600,000 to develop but I don't know a good way to do a similar thing with advertising and growing yo 10k users.
- chatmasta 8y ago
  Why can’t you raise funding? If you truly have a great product with product/market fit, and established LTV greater than CAC, then you are a perfect investment for a VC who just needs to pour some gas on the fire. This is exactly the kind of problem a Series A is meant to solve. On the other hand, if the problem is your competitors are VC funded and are spending more than LTV on CAC, then (1) that sucks, but eventually they will burn out, and (2) you need to find ways to compete with more finely targeted ads that result in higher CTR to outweigh the bid differentials. Or, you need to raise the price of your product to increase LTV in line with the inflated CAC.
  - ddtaylor 8y ago
    Our attempts to raise funding essentially investors want us to grow to 10k users. With our limited budget we have seen pretty good customer acquisition cost. I can't share exact numbers but lower than $10 for targeted ads. We spent our money already on development and it looks like it could be $80,000 or more to reach the goals to get investors interested. We are trying WeFunfer currently as well. We have no competitors right now. Everyone else is doing screen time management with rigid controls etc. Our innovation is the integration with learning sites and rewarding the child/student with Internet access after they meet goals. Thanks for giving me a quick marketing 101 we are not good at this part of things.
    - beauzero 8y ago
      Have you written documentation/POCs specifically targeting ERate funding? More specifics... https://www.fcc.gov/general/e-rate-schools-libraries-usf-program https://www.fcc.gov/general/e-rate-schools-libraries-usf-pro... ERate has a 5 year cycle for rural school districts. The problem you are solving is a very real one. Also I would look to people like LightSpeed (produce Rocket appliances) for bundling. Possibly see if you can provide a "service" on Clover as well. Good luck. I took a look at your site. I would also recommend a chrome extension with easy management in G Suite. 10k customers is one rural school district for you. Many, many of them don't do Apple but use G Suite, since it's free, along with Chromebooks.
frgtpsswrdlame 8y ago
I don't think their chart is very convincing. So there's less high-tech startups than in the 1999-2001 era, why is that a problem? I'd be a bit worried if we did have that same spike. And it seems to me that tech giants are bad for a lot of reasons but I'm not sure how they disincentivize startup formation. They do lots of competitor buyouts so they probably do reduce the average lifespan of startups but I would think that just slightly moves the risk/reward of creating a startup down. To me the chart reads that the problem with startups is in every sector except for tech. In that case perhaps we should look at economy-wide reasons for a slowdown in entrepreneurship. Considering the number one predictive factor for entrepreneurship is receiving an inheritance or gift maybe we should look at whether we're placing people in too precarious of a position to take on the risk required in starting out on your own.
Alex3917 8y ago
The current low cost of capital favors legacy companies and fewer, overfunded startups. Once the next recession hits there will be a premium on efficiency again.
matte_black 8y ago
Can’t say I’m surprised. When the mobile app market began and cloud computing was becoming a thing and social media was connecting more people than ever, it seemed like everyone suddenly had an idea for a hot new app. I remember fielding calls from people who wanted mobile apps developed when they had no business being in this industry. Many of them seemed like the types who would be easily swayed by stories of people becoming overnight millionaires off of one simple app. I remember Startup Weekend events were blowing up all across the country and people would go to these events and take them very seriously, no matter how ridiculous or derivative the ideas pitched were. I remember reading articles hypothesizing about where “The Next Silicon Valley” would be, and people trying very hard to host “events” to make their hometowns into that. Of course, Silicon Valley itself had become nothing more than a cesspool of startups with ideas built on short term thinking and fastest possible growth. A startup scene built on hype like this is not sustainable, at least not without a major pullback at some point.
strongmoneypac 8y ago
Poorly designed securities regulation prevents private capital formation except by giving up your ideas or company to accredited investors or getting funded through a bank which is impossible unless you are already wealthy. Accredited investor laws need to be abolished and the funding portals need to go up to 10 million and need to be exempted from state regulation.
DrNuke 8y ago
If mighty Apple centres its main event on emoticons and ways to take better selfies, there is a big big big problem with the direction of capitalism (and mankind) for sure.
- sus_007 8y ago
  I also had the same thought about Apple's recent WWDC, but at the same time, there are complex techs being implemented behind those fancy graphics too. I don't know what to make of it. But, what is it ? Are people going out of innovative ideas that can actually do something meaningful for the society ?
- Clubber 8y ago
  There is so much wrong with that statement, I don't even know where to begin.
- briandear 8y ago
  If people have limited vision and all they got out of that keynote was “emoticons” and “selfies,” then there is a big problem with the direction of people. You do realize that a large number of computing advances were created to support the playing of games right? Still other advances were the result of trying to make kids movies. For years, gamers drove the video card industry. Now look at what GPUs are doing for machine learning and other important areas. People like you are frustrating because they seem to lack any vision or imagination. They’d see the original iMac as a colored gimmick; failing to recognize at the time the implications to society (suddenly everyone wants a computer in their kitchen or living room because it’s so “cute.”) Or the touchscreen; I am sure you were one of those who failed to see the advantages over a hardware keyboard. And the pattern repeats: “emoji and selfies.” And, with that, you reveal a complete failure to understand how the future happens.
sonnyblarney 8y ago
This is misleading. A 'startup' is a high growth type business, typically funded by VC (or something like that) and has nothing to do with the regular kinds of 'small companies' which are things like restaurants, cafes, contractors, small businesses etc.. The vast majority of new, small businesses in America are not very closely related to our modern view of 'startups'. It's not healthy to equate the two - as the 'startup' scene in America is actually very vibrant, while there may be an issue with small business formation. As for the later - it's not necessarily bad. While I was at an F50 handset maker - we noticed that Spain and S. Europe countries opted for 'individual' service package, while UK, France, Germany opted for 'business' packages. Our research revealed something interesting: Spain and S. European countries just had large numbers of people 'self employed' or employed in small businesses, while W. Europe had many more people employed in large businesses. There are substantial advantages in having many large businesses as there things that one cannot do unless one is at a certain scale. Think: airplanes, automobiles etc. etc.. The S. European economies suffer from a lack of ability to compete on this basis: the ability for people to work together in large teams to develop sophisticated products at scale. Vast numbers of people don't even recognize the kind of professionalism and specialization required to work in these organizations - and I means even simple things like product management, product marketing, a bunch of basic financial ops roles etc... Of course there are concerns about big corps with all the market power snuffing out smaller competition, and the lack of real innovation in bigger firms ... there's a host of issues there ... But to compare 'small business' with 'startup' is not very useful, and to assume that 'small business' = 'good' across the board is not necessarily helpful either. The subject requires a little bit of nuance. ie from the article: "Tech businesses, unlike corner stores, tend to be high-growth businesses that employ lots of people." Uhh, no. Car manufacturers (and other manufacturers) 'employ a lot of people'. Tech employs very few in relative terms, for example.
- jeffreyrogers 8y ago
  I think it's more troubling that small business formation is declining than you think. Small businesses provide a way for smart and hard-working people to improve their financial situation when they don't have other options available to them. Startups mainly help people who could have gotten a 6 figure job to potentially make even more. I'm not trying to criticize startups, but I think it's clear that a society where people can move out of poverty is a better one than a society where people remain in poverty but can move from the middle to the upper class.
criddell 8y ago
> Tech businesses, unlike corner stores, tend to be high-growth businesses that employ lots of people. I always thought the key characteristic of a startup is of scale. For example, Instagram had less than 20 employees when Facebook bought them. Those 20 people played a role in the (inevitable) destruction of Kodak and the loss of 20,000 jobs. An angle this article didn't cover is the change in how the rest of America sees Silicon Valley entrepreneurs. It's usually not positive anymore and that affects how high school aged kids think about their future..
- lr4444lr 8y ago
  Perhaps what they meant is on a per company, not per revenue basis. But I agree - a significant portion of the productivity value of a startup is job destruction of in traditional industries. Small companies have higher marginal utility from each employee. It's an uncomfortable truth that the article seems to ignore.
WhompingWindows 8y ago
Coming at this from the data science/healthcare research field, I see a number of factors reducing the number of startups. First, healthcare has a number of barriers to entry for technological innovation, including very large bureaucracies in the VA, medicare, medicaid, insurance companies, and many other large, slow-moving entities. It's possible to entrench yourself in one of these bureaucracies and do great changes, but there is a maddeningly slow pace of uptake of changes. Second, you have a vast amount of talent and capability being locked up in guild-like systems, where MD students with brilliant minds are being closeted to study the highly specific anatomical structures they will probably never use, for a massive bill to boot. What if we reduced all of our training programs by 50% in time (and cost to the student), in favor of a leaner, more practical approach to clinical work? Again, the massive bureaucracy of healthcare is slowing down innovation. So, where DO we see innovation for healthcare? Primarily, it's coming from the labs of academic researchers or its coming from big biotech companies like Pharma, biomedical device firms, etc. Yet, these academics or biotech companies are fundamentally linked with the massive bureaucracies of healthcare, their clients and customer-base. On top of all of that, keep in mind in healthcare, we have very tight restrictions on use of protected healthcare information. It's hard to study anything, you need very detailed analysis plans and IRB approval before you can even begin to gather/pull the data. What's the way out for healthcare start-ups/innovators? It's a tricky question, I think we need more open-source work, we need streamlining of bureaucracy, and much more of the talent in this sphere needs to be put to work on the issues that matter. If universal healthcare is ever passed, we will need massive levels of talent reallocation to innovate and drive costs down. What a time to be in healthcare. We have the best science we've ever had, we have the best diagnostics and treatments and tests we've ever had, and yet we also have arguably the greatest challenges and the most potential for improvement we've ever seen in healthcare. Anyone reading this who is interested in tech, I'd encourage you to join this 1/6th of the economy which is ever-present and only set to increase in prominence with the aging of our western societies.
- beauzero 8y ago
  Publishing prices would be nice too. If I could shop minor medical procedures it would free me up significantly.
nautilus12 8y ago
Ive wanted to start a company for years on various projects but have failed to find the sales network to help me put any of them forth into motion. That in combination with the fact that bigger players are more well funded and I dont have the realistic means or support to bootstrap my idea. Maybe everyone else feels the same way.
arzt 8y ago
There is no reason to stab in the dark re: a cause. Wealth concentration is the cause. Break up the big 4 and you will cause a massive wealth redistribution by the unleashing competition that has been stifled in tech.
- briandear 8y ago
  Any actual data to support this?
Vino21 8y ago
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rm_-rf_slash 8y ago
My two cents: The 90s and 00s were a very unique time in business and tech history. With just a computer, internet connection, and knowledge of a few programming languages, anybody could start a site or an app. Because they were among the first to do it, they got rich. Nowadays, although the cost of computing is way down (more people have computers/mobiles and cloud computing is dirt cheap compared to the on-site hosting a decade or two ago), the necessary complexity for a novel IT product is way, way up. For example, social networks are pretty much complete. You have the big one (FB), the lightweight (TW), the pictures (IG), the secret (SNAP), and so on. Go ahead and try to make your own social network. Your costs are next to nothing but you will probably not become the next Facebook Snapchat. However, there is a lot of opportunity in the ML/AI spaces as well as with electronics and IoT. That requires a further investment in education/training as well as capital expenses (GPU/TPU/cloud for ML, hardware costs for electronics). So the barriers to the weekend coder are much higher, even though the opportunity exists. Likewise, working in higher education with a close relationship to the state has revealed enormous opportunities, but they require extensive knowledge of grant writing, local codes, etc. More barriers to entry, but nothing insurmountable. In short, there’s still gold in them hills. But mining ain’t what it used to be.
- TimJYoung 8y ago
  I would say you're pretty close to the truth here, but the issue I have with this picture is that there are still tons of issues with the existing software that dominates various industries. So, why can't an upstart software company cause issues for the existing players ? To me, that's the real issue here: we have dominant players, but they aren't necessarily producing the best solutions. This indicates that the dominant players are building walls that are preventing competition.
  - rm_-rf_slash 8y ago
    I think that ties into the example from the article where the writer hypothesizes a software service that could be replicated by a FAANG, and the resulting discouragement prevents the service from being either created or replicated. Just out of curiosity, what services would you consider insufficiently provided by the big tech companies?
TimJYoung 8y ago
Having been a software developer since the 80s, and an ISV in developer tools for a large portion of that, here's what I'm seeing: - Very few companies want to take a chance on software products coming from smaller ISVs. There's been a great deal of consolidation, and companies are scared to use anything that doesn't already have serious backing and market penetration. Reasons cited often include not being able to hire developers or other IT people to manage the software, or concerns about the longevity of the ISV. In contrast, back in the 80s you had products like FoxPro being created by tiny Fox Software in Perrysburg, Ohio that went on to become some of the biggest developer tools for PCs. This attitude of not wanting to use something because of some other tangential factor was simply not in play. If you could solve someone's problem well, you had a customer. - Somebody touched on advertising in one of the comments, and this cannot be understated. There is simply no reliable way to find your audience today that doesn't involve "spray and pray" with one's (already-limited) advertising budget. Advertising used to be a great way for smaller ISVs to become known and announce to the world that they were the "real deal". You would start out in the back of a popular magazine that targeted your potential customers with a B&W 1/4 page ad, and then move up as sales increased. It's just very, very hard to get your product in front of the right people that are making the purchasing decisions, and even when you do, the first issue above still comes into play. - There were options like shareware for ISVs that were just getting started and didn't have any money at all for advertising or promotion. Many great applications started out as shareware and went on to become commercial successes. The key difference with open source here is the expectation that you were supposed to pay for the product if you used it, as well as, obviously, a lack of source code. Of course, all of this is a giant feedback loop that accelerates over time, and here we are with a few software companies completely dominating various spaces. It could be that this is where all industries eventually end up, but it certainly is not ideal for small business creation. The part I find the most disheartening is that I'm not even sure if this is something that is specific to the software industry, in which case we're dealing with macro issues and software developers are really lacking any tools to buck the trends or change course.
- milesskorpen 8y ago
  How much of point 1 is because there's been a shift to hosted software? When the norm is hosted software + regular updates/on-going development, then the backing company is a lot more important vs. buy-once-and-go software off the shelf
nimish 8y ago
Of course it is. More and more markets are becoming oligopolies with high barriers to entry and high costs to consumers. We need a new trustbusting government to clear out the cruft.
deleted 8y ago
[deleted]
aluminussoma 8y ago
The most recent assortment of high-flying tech unicorns were mostly started during the 2008-2011 period. Great startups tend to get their start in the depths of a recession, where perhaps economic conditions force founders to take risks and practice uncommon business creativity. We haven't had a recession in a while; I wonder if the talent that would oridinarily start a startup has chosen the relative comforts of existing large businesses.
s2g 8y ago
> That’s worrisome, because small business was traditionally one of the main gateways to the middle class. Without the option of starting a corner store, Americans without high skills or advanced degrees will find it that much harder to maintain comfortable lifestyles. Instead, many will have to seek jobs from large corporations, depriving them of personal autonomy and possibly driving down wages due to the increased competition for jobs. oh please. > But it’s also possible that the high-tech sector is becoming dominated by a few big players, leaving less room for innovators to break in. Tech titans like Amazon, Facebook Inc., Apple Inc., Alphabet (Google) and Microsoft have grown to staggering size Bingo. Conglomeration is just awful. > regulators might take a second look at options to reduce the dominance of the big players. Nope. After Microsoft the big tech companies learned to pay their bribes like everyone else. Too much lobbying now.

147 points by petethomas 8y ago

DGCA 8y ago

Non-AMP Link: https://www.bloomberg.com/view/articles/2018-06-07/america-s-startup-scene-is-looking-anemic https://www.bloomberg.com/view/articles/2018-06-07/america-s...

gregoriol 8y ago
Thanks so much, I was wondering why the page looked that much broken!
throwawayqdhd 8y ago
I'm yet to find a single AMP page that I didn't hate. Don't know why Google keeps pushing it on me. At least in my country, data is ridiculously cheap - I can't spend a few MBs on a page if I want to read it
- hamandcheese 8y ago
  Damned if you do, damned if you don’t.
sctb 8y ago
Thanks! Updated.

0xB31B1B 8y ago

The data stops in 2013, There was huge growth in tech startups in 2013 - 2015 I agree we have an issue with anticompetitive behaviors and monopolistic practices though.

daok 8y ago
Even if the data does not stretch to 2015, the data start way back in the 70' which is enough to see a trend.

whistlerbrk 8y ago

> The source of the decline in startup dynamism isn’t yet known Please... massive redistribution of wealth to the already wealthy strangles both potential entrepreneurship and the customer base it would have attracted since they don't have disposable income. Let's not play stupid here.

fnwx17 8y ago
brilliant comment. I literally just hit the reply button to tell you that
zappo2938 8y ago
Yes. The concentration of wealth is like a virus killing its host.
weeksie 8y ago
The fact that we have any activity at all shows the indomitable spirit of American entrepreneurialism. Further, the fact that so many Americans ever start businesses without the safety net of healthcare goes to show that we are a nation of optimistic maniacs. The wasted potential economic energy in this country is a tragedy of colossal proportions.
- brightball 8y ago
  Startups supported my married couples are generally the path to success, assuming investors are absent. One of you works a job that provides income and benefits for both of you, while the other works on a startup. Assuming most of what you need is a time investment, this is an approach that works for a lot of households to bootstrap. Higher startup costs make it tougher though.
  - fma 8y ago
    Can confirm...wife started a franchise with a brick and mortar presence. I hold down the stable income. Also have the help of parents to look after our baby, as sometimes I need to help her on nights/weekends. The same is true for other franchisee's we've met (1 remains the breadwinner). If you bought into an existing one that already generates revenue, then sometimes both spouses work there full time. But that means you need to have had $$$ in the first place. We know of one franchisee who's wife is a stay at home mom. He quit his job to start one...less than a year with slow growth, he closed the center and went back to a traditional salaried job. He didn't pick a good location for exponential growth, but IMHO he had enough steady growth and would have been profitable if he could stick around for another few months.

jdavis703 8y ago

If you view the graph for number of "high tech" startups the performance has been relatively flat for decades, save for the dot-com bubble. It is concerning that one of the principal drivers of wealth is floundering, but in terms of the impact on the tech scene, this article is more sensational than scary.

pyb 8y ago

Relatedly : a rarefaction of unicorns ? https://avc.com/2018/05/a-changing-of-the-guard/ https://avc.com/2018/05/a-changing-of-the-guard/

atomical 8y ago
Most of them will be deemed securities and the SEC will take action.

exelius 8y ago

Maybe because it doesn’t take a company to test product/market fit anymore? A single developer can build an entire app on something like Heroku or AWS Serverless and use that to test the market, rather than needing to build a whole company to get to MVP. That said, the fact we need far fewer people to build tech products means that most of the economic gains those companies would have distributed to workers just go to the platforms...

ddtaylor 8y ago

One problem we are facing is that it's very hard to compete in online advertising with a small budget. I feel we did a really good job at building the software with a small team that would cost a large established company at least $600,000 to develop but I don't know a good way to do a similar thing with advertising and growing yo 10k users.

chatmasta 8y ago
Why can’t you raise funding? If you truly have a great product with product/market fit, and established LTV greater than CAC, then you are a perfect investment for a VC who just needs to pour some gas on the fire. This is exactly the kind of problem a Series A is meant to solve. On the other hand, if the problem is your competitors are VC funded and are spending more than LTV on CAC, then (1) that sucks, but eventually they will burn out, and (2) you need to find ways to compete with more finely targeted ads that result in higher CTR to outweigh the bid differentials. Or, you need to raise the price of your product to increase LTV in line with the inflated CAC.
- ddtaylor 8y ago
  Our attempts to raise funding essentially investors want us to grow to 10k users. With our limited budget we have seen pretty good customer acquisition cost. I can't share exact numbers but lower than $10 for targeted ads. We spent our money already on development and it looks like it could be $80,000 or more to reach the goals to get investors interested. We are trying WeFunfer currently as well. We have no competitors right now. Everyone else is doing screen time management with rigid controls etc. Our innovation is the integration with learning sites and rewarding the child/student with Internet access after they meet goals. Thanks for giving me a quick marketing 101 we are not good at this part of things.
  - beauzero 8y ago
    Have you written documentation/POCs specifically targeting ERate funding? More specifics... https://www.fcc.gov/general/e-rate-schools-libraries-usf-program https://www.fcc.gov/general/e-rate-schools-libraries-usf-pro... ERate has a 5 year cycle for rural school districts. The problem you are solving is a very real one. Also I would look to people like LightSpeed (produce Rocket appliances) for bundling. Possibly see if you can provide a "service" on Clover as well. Good luck. I took a look at your site. I would also recommend a chrome extension with easy management in G Suite. 10k customers is one rural school district for you. Many, many of them don't do Apple but use G Suite, since it's free, along with Chromebooks.

frgtpsswrdlame 8y ago

I don't think their chart is very convincing. So there's less high-tech startups than in the 1999-2001 era, why is that a problem? I'd be a bit worried if we did have that same spike. And it seems to me that tech giants are bad for a lot of reasons but I'm not sure how they disincentivize startup formation. They do lots of competitor buyouts so they probably do reduce the average lifespan of startups but I would think that just slightly moves the risk/reward of creating a startup down. To me the chart reads that the problem with startups is in every sector except for tech. In that case perhaps we should look at economy-wide reasons for a slowdown in entrepreneurship. Considering the number one predictive factor for entrepreneurship is receiving an inheritance or gift maybe we should look at whether we're placing people in too precarious of a position to take on the risk required in starting out on your own.

Alex3917 8y ago

The current low cost of capital favors legacy companies and fewer, overfunded startups. Once the next recession hits there will be a premium on efficiency again.

matte_black 8y ago

Can’t say I’m surprised. When the mobile app market began and cloud computing was becoming a thing and social media was connecting more people than ever, it seemed like everyone suddenly had an idea for a hot new app. I remember fielding calls from people who wanted mobile apps developed when they had no business being in this industry. Many of them seemed like the types who would be easily swayed by stories of people becoming overnight millionaires off of one simple app. I remember Startup Weekend events were blowing up all across the country and people would go to these events and take them very seriously, no matter how ridiculous or derivative the ideas pitched were. I remember reading articles hypothesizing about where “The Next Silicon Valley” would be, and people trying very hard to host “events” to make their hometowns into that. Of course, Silicon Valley itself had become nothing more than a cesspool of startups with ideas built on short term thinking and fastest possible growth. A startup scene built on hype like this is not sustainable, at least not without a major pullback at some point.

strongmoneypac 8y ago

Poorly designed securities regulation prevents private capital formation except by giving up your ideas or company to accredited investors or getting funded through a bank which is impossible unless you are already wealthy. Accredited investor laws need to be abolished and the funding portals need to go up to 10 million and need to be exempted from state regulation.

DrNuke 8y ago

If mighty Apple centres its main event on emoticons and ways to take better selfies, there is a big big big problem with the direction of capitalism (and mankind) for sure.

sus_007 8y ago
I also had the same thought about Apple's recent WWDC, but at the same time, there are complex techs being implemented behind those fancy graphics too. I don't know what to make of it. But, what is it ? Are people going out of innovative ideas that can actually do something meaningful for the society ?
Clubber 8y ago
There is so much wrong with that statement, I don't even know where to begin.
briandear 8y ago
If people have limited vision and all they got out of that keynote was “emoticons” and “selfies,” then there is a big problem with the direction of people. You do realize that a large number of computing advances were created to support the playing of games right? Still other advances were the result of trying to make kids movies. For years, gamers drove the video card industry. Now look at what GPUs are doing for machine learning and other important areas. People like you are frustrating because they seem to lack any vision or imagination. They’d see the original iMac as a colored gimmick; failing to recognize at the time the implications to society (suddenly everyone wants a computer in their kitchen or living room because it’s so “cute.”) Or the touchscreen; I am sure you were one of those who failed to see the advantages over a hardware keyboard. And the pattern repeats: “emoji and selfies.” And, with that, you reveal a complete failure to understand how the future happens.

sonnyblarney 8y ago

This is misleading. A 'startup' is a high growth type business, typically funded by VC (or something like that) and has nothing to do with the regular kinds of 'small companies' which are things like restaurants, cafes, contractors, small businesses etc.. The vast majority of new, small businesses in America are not very closely related to our modern view of 'startups'. It's not healthy to equate the two - as the 'startup' scene in America is actually very vibrant, while there may be an issue with small business formation. As for the later - it's not necessarily bad. While I was at an F50 handset maker - we noticed that Spain and S. Europe countries opted for 'individual' service package, while UK, France, Germany opted for 'business' packages. Our research revealed something interesting: Spain and S. European countries just had large numbers of people 'self employed' or employed in small businesses, while W. Europe had many more people employed in large businesses. There are substantial advantages in having many large businesses as there things that one cannot do unless one is at a certain scale. Think: airplanes, automobiles etc. etc.. The S. European economies suffer from a lack of ability to compete on this basis: the ability for people to work together in large teams to develop sophisticated products at scale. Vast numbers of people don't even recognize the kind of professionalism and specialization required to work in these organizations - and I means even simple things like product management, product marketing, a bunch of basic financial ops roles etc... Of course there are concerns about big corps with all the market power snuffing out smaller competition, and the lack of real innovation in bigger firms ... there's a host of issues there ... But to compare 'small business' with 'startup' is not very useful, and to assume that 'small business' = 'good' across the board is not necessarily helpful either. The subject requires a little bit of nuance. ie from the article: "Tech businesses, unlike corner stores, tend to be high-growth businesses that employ lots of people." Uhh, no. Car manufacturers (and other manufacturers) 'employ a lot of people'. Tech employs very few in relative terms, for example.

jeffreyrogers 8y ago
I think it's more troubling that small business formation is declining than you think. Small businesses provide a way for smart and hard-working people to improve their financial situation when they don't have other options available to them. Startups mainly help people who could have gotten a 6 figure job to potentially make even more. I'm not trying to criticize startups, but I think it's clear that a society where people can move out of poverty is a better one than a society where people remain in poverty but can move from the middle to the upper class.

criddell 8y ago

> Tech businesses, unlike corner stores, tend to be high-growth businesses that employ lots of people. I always thought the key characteristic of a startup is of scale. For example, Instagram had less than 20 employees when Facebook bought them. Those 20 people played a role in the (inevitable) destruction of Kodak and the loss of 20,000 jobs. An angle this article didn't cover is the change in how the rest of America sees Silicon Valley entrepreneurs. It's usually not positive anymore and that affects how high school aged kids think about their future..

lr4444lr 8y ago
Perhaps what they meant is on a per company, not per revenue basis. But I agree - a significant portion of the productivity value of a startup is job destruction of in traditional industries. Small companies have higher marginal utility from each employee. It's an uncomfortable truth that the article seems to ignore.

WhompingWindows 8y ago

Coming at this from the data science/healthcare research field, I see a number of factors reducing the number of startups. First, healthcare has a number of barriers to entry for technological innovation, including very large bureaucracies in the VA, medicare, medicaid, insurance companies, and many other large, slow-moving entities. It's possible to entrench yourself in one of these bureaucracies and do great changes, but there is a maddeningly slow pace of uptake of changes. Second, you have a vast amount of talent and capability being locked up in guild-like systems, where MD students with brilliant minds are being closeted to study the highly specific anatomical structures they will probably never use, for a massive bill to boot. What if we reduced all of our training programs by 50% in time (and cost to the student), in favor of a leaner, more practical approach to clinical work? Again, the massive bureaucracy of healthcare is slowing down innovation. So, where DO we see innovation for healthcare? Primarily, it's coming from the labs of academic researchers or its coming from big biotech companies like Pharma, biomedical device firms, etc. Yet, these academics or biotech companies are fundamentally linked with the massive bureaucracies of healthcare, their clients and customer-base. On top of all of that, keep in mind in healthcare, we have very tight restrictions on use of protected healthcare information. It's hard to study anything, you need very detailed analysis plans and IRB approval before you can even begin to gather/pull the data. What's the way out for healthcare start-ups/innovators? It's a tricky question, I think we need more open-source work, we need streamlining of bureaucracy, and much more of the talent in this sphere needs to be put to work on the issues that matter. If universal healthcare is ever passed, we will need massive levels of talent reallocation to innovate and drive costs down. What a time to be in healthcare. We have the best science we've ever had, we have the best diagnostics and treatments and tests we've ever had, and yet we also have arguably the greatest challenges and the most potential for improvement we've ever seen in healthcare. Anyone reading this who is interested in tech, I'd encourage you to join this 1/6th of the economy which is ever-present and only set to increase in prominence with the aging of our western societies.

beauzero 8y ago
Publishing prices would be nice too. If I could shop minor medical procedures it would free me up significantly.

nautilus12 8y ago

Ive wanted to start a company for years on various projects but have failed to find the sales network to help me put any of them forth into motion. That in combination with the fact that bigger players are more well funded and I dont have the realistic means or support to bootstrap my idea. Maybe everyone else feels the same way.

arzt 8y ago

There is no reason to stab in the dark re: a cause. Wealth concentration is the cause. Break up the big 4 and you will cause a massive wealth redistribution by the unleashing competition that has been stifled in tech.

briandear 8y ago
Any actual data to support this?

Vino21 8y ago

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rm_-rf_slash 8y ago

My two cents: The 90s and 00s were a very unique time in business and tech history. With just a computer, internet connection, and knowledge of a few programming languages, anybody could start a site or an app. Because they were among the first to do it, they got rich. Nowadays, although the cost of computing is way down (more people have computers/mobiles and cloud computing is dirt cheap compared to the on-site hosting a decade or two ago), the necessary complexity for a novel IT product is way, way up. For example, social networks are pretty much complete. You have the big one (FB), the lightweight (TW), the pictures (IG), the secret (SNAP), and so on. Go ahead and try to make your own social network. Your costs are next to nothing but you will probably not become the next Facebook Snapchat. However, there is a lot of opportunity in the ML/AI spaces as well as with electronics and IoT. That requires a further investment in education/training as well as capital expenses (GPU/TPU/cloud for ML, hardware costs for electronics). So the barriers to the weekend coder are much higher, even though the opportunity exists. Likewise, working in higher education with a close relationship to the state has revealed enormous opportunities, but they require extensive knowledge of grant writing, local codes, etc. More barriers to entry, but nothing insurmountable. In short, there’s still gold in them hills. But mining ain’t what it used to be.

TimJYoung 8y ago
I would say you're pretty close to the truth here, but the issue I have with this picture is that there are still tons of issues with the existing software that dominates various industries. So, why can't an upstart software company cause issues for the existing players ? To me, that's the real issue here: we have dominant players, but they aren't necessarily producing the best solutions. This indicates that the dominant players are building walls that are preventing competition.
- rm_-rf_slash 8y ago
  I think that ties into the example from the article where the writer hypothesizes a software service that could be replicated by a FAANG, and the resulting discouragement prevents the service from being either created or replicated. Just out of curiosity, what services would you consider insufficiently provided by the big tech companies?

TimJYoung 8y ago

Having been a software developer since the 80s, and an ISV in developer tools for a large portion of that, here's what I'm seeing: - Very few companies want to take a chance on software products coming from smaller ISVs. There's been a great deal of consolidation, and companies are scared to use anything that doesn't already have serious backing and market penetration. Reasons cited often include not being able to hire developers or other IT people to manage the software, or concerns about the longevity of the ISV. In contrast, back in the 80s you had products like FoxPro being created by tiny Fox Software in Perrysburg, Ohio that went on to become some of the biggest developer tools for PCs. This attitude of not wanting to use something because of some other tangential factor was simply not in play. If you could solve someone's problem well, you had a customer. - Somebody touched on advertising in one of the comments, and this cannot be understated. There is simply no reliable way to find your audience today that doesn't involve "spray and pray" with one's (already-limited) advertising budget. Advertising used to be a great way for smaller ISVs to become known and announce to the world that they were the "real deal". You would start out in the back of a popular magazine that targeted your potential customers with a B&W 1/4 page ad, and then move up as sales increased. It's just very, very hard to get your product in front of the right people that are making the purchasing decisions, and even when you do, the first issue above still comes into play. - There were options like shareware for ISVs that were just getting started and didn't have any money at all for advertising or promotion. Many great applications started out as shareware and went on to become commercial successes. The key difference with open source here is the expectation that you were supposed to pay for the product if you used it, as well as, obviously, a lack of source code. Of course, all of this is a giant feedback loop that accelerates over time, and here we are with a few software companies completely dominating various spaces. It could be that this is where all industries eventually end up, but it certainly is not ideal for small business creation. The part I find the most disheartening is that I'm not even sure if this is something that is specific to the software industry, in which case we're dealing with macro issues and software developers are really lacking any tools to buck the trends or change course.

milesskorpen 8y ago
How much of point 1 is because there's been a shift to hosted software? When the norm is hosted software + regular updates/on-going development, then the backing company is a lot more important vs. buy-once-and-go software off the shelf

nimish 8y ago

Of course it is. More and more markets are becoming oligopolies with high barriers to entry and high costs to consumers. We need a new trustbusting government to clear out the cruft.

deleted 8y ago

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aluminussoma 8y ago

The most recent assortment of high-flying tech unicorns were mostly started during the 2008-2011 period. Great startups tend to get their start in the depths of a recession, where perhaps economic conditions force founders to take risks and practice uncommon business creativity. We haven't had a recession in a while; I wonder if the talent that would oridinarily start a startup has chosen the relative comforts of existing large businesses.

s2g 8y ago

> That’s worrisome, because small business was traditionally one of the main gateways to the middle class. Without the option of starting a corner store, Americans without high skills or advanced degrees will find it that much harder to maintain comfortable lifestyles. Instead, many will have to seek jobs from large corporations, depriving them of personal autonomy and possibly driving down wages due to the increased competition for jobs. oh please. > But it’s also possible that the high-tech sector is becoming dominated by a few big players, leaving less room for innovators to break in. Tech titans like Amazon, Facebook Inc., Apple Inc., Alphabet (Google) and Microsoft have grown to staggering size Bingo. Conglomeration is just awful. > regulators might take a second look at options to reduce the dominance of the big players. Nope. After Microsoft the big tech companies learned to pay their bribes like everyone else. Too much lobbying now.