37 ms·

The US startup is disappearing

180 points by bhuga 8y ago

lando2319 8y ago
Regulations are the problem, imagine wanting to build something and finding out you'll need to spend $20K on lawyers to go through thousands of pages of GDRP. That's even before hiring a developer to actually build an MVP. ... And people laughed when Trump said he wanted to eliminate two regulations for every one being added.
- moorhosj 8y ago
  How do you connect GDPR, a European policy, with American regulations? Not everything is politics.
  - pintxo 8y ago
    Also GDPR is more like 90 pages and it took me about 2 days to work it through an to come up with an assessment of how it will impact our business. You want to do business? Make your homework.
- lovich 8y ago
  Imagined you bought a meal and had to go to the hospital because they cut corners on food safety? Regulation is a balancing act between compet in forces not just a Boolean good/bad
  - lando2319 8y ago
    maybe not everything needs to be as heavily regulated as food safety.
    - lovich 8y ago
      I agree, but that's why its a balance and not {regulation} ⊆ {bad things}
  - TangoTrotFox 8y ago
    There's a strange thing about that. I enjoy traveling and living in developing nations. Food safety organizations and inspections are basically nonexistent. And in a decade I've gotten food poisoning exactly once - no hospital visit even then. It's anecdotal, but it's also very typical among other expats. People that make their living selling food generally know how to cook and enjoy it! And they also know full well what happens when they serve bad food. Think about the places you eat at. There's going to be a handful of places you eat at, over and over again. And this is also typical. Serve bad food just once, and a business stands to lose immensely. They're going to not only permanently lose that customer but also deal with all the terrible word of mouth that they will spread. And in the end the biggest risk of food poisoning is often not from the food itself, but from unclean handling of the food. And all the FDA rules and regulations in the world don't mean a thing when a disinterested minimum wage worker chooses to not wash her hands after a bathroom visit, or just keeps on prepping after sneezing on the produce. The one time I got food poisoning was not from one of the literally thousands of dishes I've ordered from street vendors, but from a western-targeted chain restaurant. Instead of having the business owner being the person prepping the food, it was our low wage disinterested worker -- same story as the times I've gotten food poisoning in the US. This video [1] just makes our whole system of food safety regulation seem so backwards, at Berkeley no less. Not an appeal to pathos, but an appeal to logos. We're treating people like shit and deterring entrepreneurship for the sake of enforcing these rules and regulations which don't really have such a major benefit as we might believe. It's an undesirable cost:reward ratio. [1] - https://www.youtube.com/watch?v=2_TvG_ZNvQo https://www.youtube.com/watch?v=2_TvG_ZNvQo
    - lovich 8y ago
      Instead of theoretical ideas about what would happen to the food industry or your anecdote about being fine when eating food that was unregulated I am going to point you to "Jungle" by Upton Sinclair.
      - pitaj 8y ago
        The Jungle is fiction. Only 12 pages of the novel concerned anything close to food safety, and at the time there were already food inspections. https://www.zeroaggressionproject.org/uncategorized/upton-sinclairs-the-jungle/ https://www.zeroaggressionproject.org/uncategorized/upton-si...
- joejerryronnie 8y ago
  Whoa, whoa, whoa - you can't just say "Trump" on HN! That's like yelling "fire" in a crowded theater!
  - dang 8y ago
    Please don't do this here.
moorhosj 8y ago
Very interesting chart in this article that shows more educated people (masters, bachelor's, some college) are less entrepreneurial than they were 25 years ago. On the flip side, less educated folks (high school graduates and non-high school graduates) have seen an increase in entrepreneurship. "In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%." Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?
- rb808 8y ago
  A big difference is that modern kids are conditioned to do what they're told, work hard and choose a safe path in life. To get into a good school now you have to spend your time studying hard to pass the standardized tests. Previously kids playing around, got bored, chasing girls/boys, leaving home as soon as possible, maybe joined the army, married young. So a 25 year old already had a lot of life experience. Able to take the responsibility to follow dreams and start up a new firm. Today's kids at 25 are just leaving school and still dont really know much about the real world. Great candidates to get a safe job in a company, not so great at starting a firm.
  - c12 8y ago
    I honestly think you have hit the nail on the head with this. It is an unfortunate consequence of a modern education system that is set up to produce worker bees.
    - hnisgroupthink 8y ago
      They aren't bees. They are indentured servants ripped from their communities to make money for oligarchs.
  - rmshea 8y ago
    I can attest to this. I'm currently working my way through the college application pipeline, and my peers are laser focused on what it takes to get into a good college. Rather than pursuing what interests them, many choose challenging courses just to have a favorable transcript, and standardized test stress is an epidemic. Anxiety about "getting in" to a good school supersedes any dreams of starting a venture or pursuing an option that isn't a 4-year prestigious university. The disappearance of new ventures can be attributed in some way to this new way of thinking. I've been told that college anxiety didn't exist 20 years ago -- maybe it's time to go back to those days. High school, in my mind, is a time to experiment and find what actually interests you: not to manifest into a homework bot that's dominated by stress. This isn't always the case, though. The 25-year-old with life experience and a past of experimentation still exists, it's just not the norm anymore.
devilshaircut 8y ago
The author of the article uses "start up" to refer to a business less than 2 years old - fair enough. As someone who runs a business which falls into this category, it certainly is frustrating to know how heavily our government subsidizes well-funded, monied large corporations (whereas small business owners have very little government-supplied - or otherwise - financial incentive to fuel their endeavor). I don't suppose I would want them to stop subsidizing certain deals in the private sector with corporate America. A lot of that seems to be smart business to me. But I certainly would like to see the government to place a higher value on small business innovation. Starting something from nothing is already hard enough.
- dv_dt 8y ago
  Have you looked at the SBA? There's actually a fair amount of support there, including preferential treatment for bidding on set aside gov't contracts, including SBIR - Small Business Innovation Research contracts. Is it dollar and lobbying wise the same, no, but it is there.
nemo44x 8y ago
Every nascent industry is dominated by startups and little guys becoming big guys. It happened with oil, the auto industry, electronics, and among many, many others. Although I believe we're only in the midst of the information revolution it would make sense that over time as the industry matures it becomes more and more difficult to break into it. The big guys have leverage and lawyers and I think what we see today with many startups being built to get bought rather than as new enterprises that will stand on their own is evidence of this new phase shift.
mlthoughts2018 8y ago
I don’t have enough broad economic insight to know if this should be worrying generally or possibly even be seen as good. But what I do know is that work conditions, pay, and equity risk characteristics in start-up jobs are miserable, not to mention that work life balance is often poor and the start-up management is often deluded about the scope and importance of the business. I would be happy if entrepreneurs believed they needed a far greater amount of initial capital before starting a business, and viewed it as essentially mandatory to provide market rate salaries, comprehensive insurance, and seriously professional work life balance and workplace behavior, all before even hiring the first employee, and also even after accounting for early stage equity. If it was something of a cultural norm that you are a shyster, suspicious “entrepreneur” if you attempt to convince people to work for you without already having the capital arranged to invest that significantly in giving them good jobs from day one, I think this would be a great thing for the labor market generally, and would greatly deter a bunch of hype-driven nonsense startups that essentially allow already wealthy people to treat it like lottery tickets at the expense of employees.
sjbase 8y ago
I'm not sure "the startup is disappearing" is the only explanation for this data. Isn't it possible that companies are just lasting longer than 2 years? What if there was a larger percentage of age 0-2 companies '85 because back then, so few were making it past 2? Maybe easier access to capital has increased survival rate (or at least slowed down dissolution by a few years). This explanation also fits better with the massive influx of cash into VC over the last ~10 years.
- redbeard0x0a 8y ago
  Also, the cost associated with running a company is a lot lower now than it was in the past. So it is also easier to last longer than 2 years.
- jimbofisher1 8y ago
  Startups lasting longer would have nothing to do with this? 0-2 Years represents "New" startups, so the number of new startups is declining.
  - sjbase 8y ago
    That would be true if this was actually a number, not a percentage. To take a hyperbolic example, there could be 100x more startups at 0-2 years right now than in '85 and 100,000x aged 2-4 years; you'd still see a percentage decline in the former and we'd be pretty far from "the startup disappearing."
yohann305 8y ago
I would love to see if there is a correlation between the quantity of startups VS new major innovation waves. Yes, there are less new startups today but if you come to think of it, we don't have a major innovation at the moment that's easy to jump into. Look at the late 90s, we had the INTERNET, anyone could make a website with frontpage or a little html tag understanding. Then in the late 2000s we had the MOBILE PHONES... I have an idea for an app! (everyone did!) At the moment, we have AI/ML but my opinion is that it's not ripe for an average person to start an ML company. Another major upcoming branch is blockchain but it's also not mature enough for this major innovation to trickle down a leaf tree of startups. What do you think? Oh, almost forgot to mention AR/VR! Not there yet!!
- HillaryBriss 8y ago
  i also wonder about the funding mechanism and landscape. could it be that the VC firms have come to dominate and guide the funding process in such a way that starting a firm is a lot less attractive now?
  - umeshunni 8y ago
    Well, for one, they have ensured that joining a startup is financially less attractive than working at a large company/FANG.
- scient 8y ago
  Blockchain as "major upcoming"? Like after all these startups have not managed to produce any substantial success stories and there are no real validations of a technological fit besides crypto-currency? Where IBM is desperate as hell in selling their blockchain crap to corporations and isnt really seeing success? Yeah, don't think the blockchain revolution you are waiting for is happening any time soon, if ever. ML and AI are sadly also more of a buzzword right now outside of a couple or large players, but at least its applicable in different areas.
- rpedela 8y ago
  To me, blockchain is equivalent to PageRank in terms of impact. An amazing algorithm with extremely limited use cases. Maybe one company can create significant value like Google did with PageRank, but that is probably it.
thisisit 8y ago
I am curious about the methodology to count startups. One of things is sure that we are now in a consolidation phase. We are seeing a glut of M&A deals. In that vein many startups are disappearing because they are getting acquired by larger companies. No one wants to be the next Yahoo refusing to buy a company which might become their next chief competitor. And the cheap credit environment is making this easier.
adreamingsoul 8y ago
As a self-educated software engineer, entrepreneur, and business owner I cringe whenever data statistics of ”educated” people are only represented by individuals who have a masters, Ph.D., or doctorate. I have studied at universities, but unfortunately, the education system in the USA is not suitable for Autism. From an early age I had to teach myself because 99% of my teachers and professors didn’t have the resources or time to help me. Does anyone here have a similar experience?
- amarkov 8y ago
  That's generally exactly what they're trying to measure: statistics about people who follow the standard path society lays out for education. If something about getting an advanced degree is discouraging people from doing startups, that's important to know, whether or not some population of smart autodidacts also exists.
- noobiemcfoob 8y ago
  I see your point and am in a similar situation, but I have to suspect that truly educated people who haven't achieved a higher degree are a relatively low number for the purposes of aggregate statistics.
- quite_there_77 8y ago
  I'm not sure that I have a learning disability that could be diagnosed, and I did (barely) finish an undergrad degree, but I feel exactly the same way. Higher education is (mostly) a market response to social stigma / conventions. Degrees are as much about asserting social class as they are about career prep or the passing on of knowledge. Anecdotally, I have a number of friends with graduate degrees, some full PhDs. I make more money than any of them and am arguably more successful (by their standards). Everything I learned in life was self guided. I too am a software engineer (doing some relatively hardcore stuff) and have started more than one successful company. I can't fix the system, but I will tell my son that higher education is optional and help him get a start on his own (and not just wrt money) if he decides to skip it. And to more directly address your post, I do consider myself educated and an expert in a couple things. I encountered exactly zero teacher along the way that made a meaningful contribution to that.
pnathan 8y ago
I paid out $100,000 to pay off my wife & my own student loan debt early. Student loan debt can not be discharged by bankruptcy; it's always waiting for you. This implies several things immediately: - You have to take a job which can make payments on the debt. - You have to choose stable jobs which will not suddenly fold under you. There's also a somewhat hard to define aspect to the problem where you have to ensure that your local system is fiscally stable. Anyway, non-1% Americans graduated from college not taking risks in their first 10 years out? Totally predictable, just from the debt perspective. Then, at 32, 34, a lot of people are married and/or have a kid on the way. Welp, there's your high levels of downside again. Add in to all this the fact that housing prices are effectively tethered to the availability of cash provided to the "highly paid" market (inequality increases).... ... so if your startup fails, you'll lose your place to live, and remote jobs are very rare, so you're in trouble in the big city with now-unaffordable costs of living. the solution, in part, has a simple policy component: declare jubilee on all federally-originated student debt; free college for all students who maintain adequate gpas, no more federal loans. impose cost controls on universities that take federal money. that effectively derisks an entire generation and opens up new options. housing costs are less directly tractable and more politically problematic: the effective solution is to federally strip single family zoning from all land, and mandating density minimums and other supply-increasing zoning. (I assure you, the housing market is an interstate commerce system. :) ). But that only staunches the wound, it doesn't bring down housing prices into line with the median American's income. Wait, this is about startups? Ha! No. That's a third order consequence caused by increasing early-career & mid-career risk, which in turn is increased by the planning & zoning codes and governmental defunding of education.
- SketchySeaBeast 8y ago
  And once (or while) the student loan debt clears up you then get a mortgage and start a family - both of which now make you crave a stable paycheck while you get a hang of this house ownership thing and to take care of your loved ones. It's hard to take that gamble when you feel like the world is riding on your shoulders.
  - leesalminen 8y ago
molteanu 8y ago
From the article: Startups are struggling in this era of rising market concentration. In most industries, since the 1980s, the share of all sales going to the top firms is increasing. Startups may have a hard time competing with these mega firms, which can out pay them for the best talent and sometimes attempt to drive them out of the industry. Previous Brookings research found there are fewer startups in states where a smaller number of companies dominate the market From Lenin, "Imperialism, the highest stage of capitalism" (1916): This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy.
baron816 8y ago
Are mom and pop stores included in the data? What about law firms, doctors offices, mutual funds? I don’t think we’d consider those new businesses to be start ups.
quadcore 8y ago
Another factor could be that before, big companies kinda sucked for the employee. Today's big companies like Google and Facebook are wonderful place to work for. In the grand scale of things, the new management styles are considerably more comfortable for the employee, the decision making and the promotion methods are significantly more efficient, interesting and smart. Not saying they are perfect, there is definitely room for improvement but 30 years ago, it was all wage slavery.
- HillaryBriss 8y ago
  i like your idea, but Google and Facebook are very far from typical.
  - quadcore 8y ago
    I guess you may be right. Is there still big companies which would fire you because you're late 2 minutes 3 times this year? Where everybody have to be there at 8am? And stuff.
    - phil248 8y ago
      I've always assumed the laid back approach of employers here was a West Coast thing.
  - deleted 8y ago
    [deleted]
HillaryBriss 8y ago
the paper seems to be talking about "startups" as firms less than 2 years old. i guess this includes startups in plumbing as well as startups in software. maybe the reason a young plumber doesn't go out and start their own new firm is different from the reason a young software engineer doesn't go out and start their own new firm.
pascalxus 8y ago
They always want to equate disappearing startups with lack of labor supply. That just seems completely ridiculous. Lack of labor in startups is a result/effect, not a cause. Labor, as a general rule of thumb, always follows the money. If Startups were more successful, they'd get more investment and more labor. If you doubt this, just remember what happened when facebook opened up it's app store. Just like that, overnight, thousands of developers and start ups appeared out of no-where. As soon as people smell the money, they'll leave their cushy jobs at google or anywhere else in a heartbeat. It all comes down to opportunity. I mean, just look at the ycombinator and other investor's acceptance rates. They're that low because there's only so many opportunities. When there's too many people chasing too few opportunities, this is the result. The real reasons why start ups are far fewer, is much more complicated: an it has to do with fewer opportunities. Some opportunities are limited legally, some due to market barriers and some are just due to what's currently possible. The solution is to look at all those barriers and see what govt can do to reduce or get rid of the barriers. Look at the industries in most dire need of innovation: transportation, housing, and health insurance (where need is measured by $ opportunity) ~ and all the downstream industries that support these - like manufacturing, raw materials, etc. How many start ups are addressing these needs, and why is it so low?
- toomuchtodo 8y ago
  You were on the right track and then veered off course at the end. The problem is startups don’t pay enough for the risk you have to take, and there are few easy problems left to disrupt. There will always be small businesses and sole proprietors, but there are few winner take all startup opportunities that require little capital to start. Also, after seeing what happens when startups flout regulation (Uber, Airbnb, Theranos), I prefer government regulation stay intact or more of it. The less startups abusing the commons, the better.
magd 8y ago
In my experience, only the founders of startups make any money. If the startup is successful, then the founders walk away with millions. Everyone else would be financially better off if they worked for a large company instead. Also, the executives of the startups take free trips and expense everything on the company's dollar. While the employees receive low pay. I don't think the large companies are winning. The startups are killing themselves.
- usaar333 8y ago
  > Everyone else would be financially better off if they worked for a large company instead. To be fair a lot of the change is because large companies are paying people so much these days. Barring large amounts of funding, a Series A- startup (based on the company being 0-2 years old definition of the article) simply can't compete with salaries. Perhaps startups should start offering far more equity to early employees (I'm surprised you don't see more seed stage firms offering ~5% to senior devs) to compensate for the cash loss.
  - foepys 8y ago
    Nobody will give a senior developer 5% equity when even VCs only take 7% for the first investment that also includes access to professional networking events.
    - s73v3r_ 8y ago
      Then maybe those companies don't deserve a senior developer?
- rpedela 8y ago
  I think this partially the law's fault and partially example bias. I worked for a company who was acquired and I did very well especially considering I was a relatively new employee when the company was acquired. In other words, I think you tend to only hear about the bad stories because employees are pissed. In addition, the 90-day rule for stock options means early employees are rarely able to participate in an exit. I think if the law was changed to remove this 90-day exercise limitation, then a lot more employees would benefit from their shares/options.
lcfcjs 8y ago
Thanks Trump.
laser 8y ago
https://www.theatlas.com/charts/Syh34PDZm https://www.theatlas.com/charts/Syh34PDZm That graph is fascinating. The decreasing value of formal higher education to becoming a successful entrepreneur is being accelerated from so many angles. The cost of collegiate education itself has risen dramatically, while at the same time the cost of access to collegiate educational materials has plunged to zero due to the internet and open publishing. If this trend continues, I wonder if motivated, aspiring entrepreneurs will be better off skipping formal higher education altogether. Could that already be true today? If someone can decide that the college path is not for them at a young enough age with a high enough level of maturity, then they can unschool and skip the bull-shit college-admittance optimization altogether, and instead focus on actually becoming an educated, masterful individual in domains that will help them create new value that they, and society, care about. Of course, there's so many confounding factors feeding into this one simple graph that I may have over-extrapolated to this particular thrust, but I think it's a perspective completely absent from the article that should be articulated.
- usaar333 8y ago
  That's one conclusion you could make. An alternative conclusion is that educated would-be entrepreneurs are now receiving higher wages in industry, resulting in the group shifting to industry. Less educated would-be entrepreneurs see wages lowering/stagnant in corporations and thus shift to entrepreneurship. Income source: https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective https://www.advisorperspectives.com/dshort/updates/2017/09/1...
  - laser 8y ago
    Right, that's definitely a huge component, and one that is focused on in the original article. I bring up these other factors because they're not mentioned, including the fact that the rate of entrepreneurship has actually increased among the least formally educated.
- aksss 8y ago
  Work ethic is still the determining factor. Some people are better suited to institutional learning like some people need "fat camp" because they can't discipline themselves to adopt a healthy lifestyle. My advice to young folks - education has INCREDIBLE value, but err towards buying low. It's a racket industry and you must navigate the options to find best long-term value for the money you spend, including having a strategy for how the investment will pay for itself. Even kids who know they have the entrepreneur bug can benefit from the creds of a formal education. Just be smart about it.
arcaster 8y ago
Oh please... People are just realizing that startups aren't all that glamorous and at times attract a special breed of shitty egotistical workaholics. By the merits of this article we should wait to see Paris or some other benign socialist hell-hole become "the next startup hub". I can assure you that won't be happening anytime soon. Silicon Valley is an incredibly un-sustainable incestuous bubble. The future of startups will be distributed, not in one place.
shmerl 8y ago
> Startups are struggling in this era of rising market concentration. To rephrase it, current anti-trust is often too toothless.
tsenkov 8y ago
If startups fail (test bad ideas) 5x faster than in the 80's and 90's and if most founders quit entrepreneurship after their 1st failure, even if 2x more people are founding companies, then it's probably normal that, overall, less man-years would be spent in startups every year in the US.
solarkraft 8y ago
What I always thought the economic system would naturally come to is actually happening now. It's interesting why it's only happening now, likely because of the new growth dynamics of data companies.
inetknght 8y ago
> This means that, contrary to popular belief, jobs in the US are far more secure than they were in previous decades. This is a fallacy. Your job is not secure if you're not able to speak up about injustices because there's no competitors to hire you if you were to get fired about speaking up about something that's immoral but not illegal.
whatthesmack 8y ago
I'm surprised nobody's mentioned it, but the bureaucracy of licensing, taxes, and now national sales tax collection is unhelpful to the startup. Not that it's a startup, but I just jumped through all the hoops required to legally hire a nanny in the US state of Washington: - obtain Federal EIN number - obtain state business license & UBI number (still waiting on this, and I need childcare now) - file with state employment security department - pay state labor & industries insurance - pay state employment security taxes - pay my portion of income taxes for the nanny - pay payroll company to deal with all the tax payouts and paychecks Oh, and actually pay the nanny. All of this to just have a nanny and be above board. And what I do for my startup is way more complicated than this.
- ChristianBundy 8y ago
  I'm confused, to legally hire a nanny you need to start a legal entity and hire the nanny as a contractor/employee? It seems to me that this would be the nanny's responsibility to start a business and charge the customer (you) money for their service. I'm sure you're much more familiar than me, can you help me correct my intuition?
- tchock23 8y ago
  Over the past 4 years I have advised startups at an incubator in a mid-size US city. During that time I have only seen 2 startups run into issues around licensing and taxes that caused significant hurdles to their startup. However, in both cases I think the entrepreneur was largely using bureaucracy as an excuse for lacking product/market fit and personal sales skills... In my experience the issue of fewer startups being created is multi-faceted and has to do with lack of affordable healthcare options/healthcare tied to employment, changing attitudes toward risk across generations, student loan and housing debt, lack of awareness of entrepreneurship as a viable career path (and more).
- Gibbon1 8y ago
  I worked at a smallish company in the 1980's. None of the above is new in any way.
ummonk 8y ago
Small local businesses / startups get squeezed out by larger brands with name recognition. No one looks for stuff in the yellow pages anymore - they go to the most successful brand off the internet. Additionally, the risks of starting a business / startup are much higher when the cost of housing and healthcare is so much higher. And on top of that you have student debt.

180 points by bhuga 8y ago

Regulations are the problem, imagine wanting to build something and finding out you'll need to spend $20K on lawyers to go through thousands of pages of GDRP. That's even before hiring a developer to actually build an MVP. ... And people laughed when Trump said he wanted to eliminate two regulations for every one being added.

moorhosj 8y ago
How do you connect GDPR, a European policy, with American regulations? Not everything is politics.
- pintxo 8y ago
  Also GDPR is more like 90 pages and it took me about 2 days to work it through an to come up with an assessment of how it will impact our business. You want to do business? Make your homework.
lovich 8y ago
Imagined you bought a meal and had to go to the hospital because they cut corners on food safety? Regulation is a balancing act between compet in forces not just a Boolean good/bad
- lando2319 8y ago
  maybe not everything needs to be as heavily regulated as food safety.
  - lovich 8y ago
    I agree, but that's why its a balance and not {regulation} ⊆ {bad things}
- TangoTrotFox 8y ago
  There's a strange thing about that. I enjoy traveling and living in developing nations. Food safety organizations and inspections are basically nonexistent. And in a decade I've gotten food poisoning exactly once - no hospital visit even then. It's anecdotal, but it's also very typical among other expats. People that make their living selling food generally know how to cook and enjoy it! And they also know full well what happens when they serve bad food. Think about the places you eat at. There's going to be a handful of places you eat at, over and over again. And this is also typical. Serve bad food just once, and a business stands to lose immensely. They're going to not only permanently lose that customer but also deal with all the terrible word of mouth that they will spread. And in the end the biggest risk of food poisoning is often not from the food itself, but from unclean handling of the food. And all the FDA rules and regulations in the world don't mean a thing when a disinterested minimum wage worker chooses to not wash her hands after a bathroom visit, or just keeps on prepping after sneezing on the produce. The one time I got food poisoning was not from one of the literally thousands of dishes I've ordered from street vendors, but from a western-targeted chain restaurant. Instead of having the business owner being the person prepping the food, it was our low wage disinterested worker -- same story as the times I've gotten food poisoning in the US. This video [1] just makes our whole system of food safety regulation seem so backwards, at Berkeley no less. Not an appeal to pathos, but an appeal to logos. We're treating people like shit and deterring entrepreneurship for the sake of enforcing these rules and regulations which don't really have such a major benefit as we might believe. It's an undesirable cost:reward ratio. [1] - https://www.youtube.com/watch?v=2_TvG_ZNvQo https://www.youtube.com/watch?v=2_TvG_ZNvQo
  - lovich 8y ago
    Instead of theoretical ideas about what would happen to the food industry or your anecdote about being fine when eating food that was unregulated I am going to point you to "Jungle" by Upton Sinclair.
    - pitaj 8y ago
      The Jungle is fiction. Only 12 pages of the novel concerned anything close to food safety, and at the time there were already food inspections. https://www.zeroaggressionproject.org/uncategorized/upton-sinclairs-the-jungle/ https://www.zeroaggressionproject.org/uncategorized/upton-si...
joejerryronnie 8y ago
Whoa, whoa, whoa - you can't just say "Trump" on HN! That's like yelling "fire" in a crowded theater!
- dang 8y ago
  Please don't do this here.

moorhosj 8y ago

Very interesting chart in this article that shows more educated people (masters, bachelor's, some college) are less entrepreneurial than they were 25 years ago. On the flip side, less educated folks (high school graduates and non-high school graduates) have seen an increase in entrepreneurship. "In 1992, 4% of 25-54 year olds with a master’s degree or PhD owned a small company with at least 10 employees. In 2017, this was true of only 2.2%." Could it be that the cost barrier is lower today than in the past, but there is much more money to be made as an educated employee today than 25 years ago?

rb808 8y ago
A big difference is that modern kids are conditioned to do what they're told, work hard and choose a safe path in life. To get into a good school now you have to spend your time studying hard to pass the standardized tests. Previously kids playing around, got bored, chasing girls/boys, leaving home as soon as possible, maybe joined the army, married young. So a 25 year old already had a lot of life experience. Able to take the responsibility to follow dreams and start up a new firm. Today's kids at 25 are just leaving school and still dont really know much about the real world. Great candidates to get a safe job in a company, not so great at starting a firm.
- c12 8y ago
  I honestly think you have hit the nail on the head with this. It is an unfortunate consequence of a modern education system that is set up to produce worker bees.
  - hnisgroupthink 8y ago
    They aren't bees. They are indentured servants ripped from their communities to make money for oligarchs.
- rmshea 8y ago
  I can attest to this. I'm currently working my way through the college application pipeline, and my peers are laser focused on what it takes to get into a good college. Rather than pursuing what interests them, many choose challenging courses just to have a favorable transcript, and standardized test stress is an epidemic. Anxiety about "getting in" to a good school supersedes any dreams of starting a venture or pursuing an option that isn't a 4-year prestigious university. The disappearance of new ventures can be attributed in some way to this new way of thinking. I've been told that college anxiety didn't exist 20 years ago -- maybe it's time to go back to those days. High school, in my mind, is a time to experiment and find what actually interests you: not to manifest into a homework bot that's dominated by stress. This isn't always the case, though. The 25-year-old with life experience and a past of experimentation still exists, it's just not the norm anymore.

devilshaircut 8y ago

The author of the article uses "start up" to refer to a business less than 2 years old - fair enough. As someone who runs a business which falls into this category, it certainly is frustrating to know how heavily our government subsidizes well-funded, monied large corporations (whereas small business owners have very little government-supplied - or otherwise - financial incentive to fuel their endeavor). I don't suppose I would want them to stop subsidizing certain deals in the private sector with corporate America. A lot of that seems to be smart business to me. But I certainly would like to see the government to place a higher value on small business innovation. Starting something from nothing is already hard enough.

dv_dt 8y ago
Have you looked at the SBA? There's actually a fair amount of support there, including preferential treatment for bidding on set aside gov't contracts, including SBIR - Small Business Innovation Research contracts. Is it dollar and lobbying wise the same, no, but it is there.

nemo44x 8y ago

Every nascent industry is dominated by startups and little guys becoming big guys. It happened with oil, the auto industry, electronics, and among many, many others. Although I believe we're only in the midst of the information revolution it would make sense that over time as the industry matures it becomes more and more difficult to break into it. The big guys have leverage and lawyers and I think what we see today with many startups being built to get bought rather than as new enterprises that will stand on their own is evidence of this new phase shift.

mlthoughts2018 8y ago

I don’t have enough broad economic insight to know if this should be worrying generally or possibly even be seen as good. But what I do know is that work conditions, pay, and equity risk characteristics in start-up jobs are miserable, not to mention that work life balance is often poor and the start-up management is often deluded about the scope and importance of the business. I would be happy if entrepreneurs believed they needed a far greater amount of initial capital before starting a business, and viewed it as essentially mandatory to provide market rate salaries, comprehensive insurance, and seriously professional work life balance and workplace behavior, all before even hiring the first employee, and also even after accounting for early stage equity. If it was something of a cultural norm that you are a shyster, suspicious “entrepreneur” if you attempt to convince people to work for you without already having the capital arranged to invest that significantly in giving them good jobs from day one, I think this would be a great thing for the labor market generally, and would greatly deter a bunch of hype-driven nonsense startups that essentially allow already wealthy people to treat it like lottery tickets at the expense of employees.

sjbase 8y ago

I'm not sure "the startup is disappearing" is the only explanation for this data. Isn't it possible that companies are just lasting longer than 2 years? What if there was a larger percentage of age 0-2 companies '85 because back then, so few were making it past 2? Maybe easier access to capital has increased survival rate (or at least slowed down dissolution by a few years). This explanation also fits better with the massive influx of cash into VC over the last ~10 years.

redbeard0x0a 8y ago
Also, the cost associated with running a company is a lot lower now than it was in the past. So it is also easier to last longer than 2 years.
jimbofisher1 8y ago
Startups lasting longer would have nothing to do with this? 0-2 Years represents "New" startups, so the number of new startups is declining.
- sjbase 8y ago
  That would be true if this was actually a number, not a percentage. To take a hyperbolic example, there could be 100x more startups at 0-2 years right now than in '85 and 100,000x aged 2-4 years; you'd still see a percentage decline in the former and we'd be pretty far from "the startup disappearing."

yohann305 8y ago

I would love to see if there is a correlation between the quantity of startups VS new major innovation waves. Yes, there are less new startups today but if you come to think of it, we don't have a major innovation at the moment that's easy to jump into. Look at the late 90s, we had the INTERNET, anyone could make a website with frontpage or a little html tag understanding. Then in the late 2000s we had the MOBILE PHONES... I have an idea for an app! (everyone did!) At the moment, we have AI/ML but my opinion is that it's not ripe for an average person to start an ML company. Another major upcoming branch is blockchain but it's also not mature enough for this major innovation to trickle down a leaf tree of startups. What do you think? Oh, almost forgot to mention AR/VR! Not there yet!!

HillaryBriss 8y ago
i also wonder about the funding mechanism and landscape. could it be that the VC firms have come to dominate and guide the funding process in such a way that starting a firm is a lot less attractive now?
- umeshunni 8y ago
  Well, for one, they have ensured that joining a startup is financially less attractive than working at a large company/FANG.
scient 8y ago
Blockchain as "major upcoming"? Like after all these startups have not managed to produce any substantial success stories and there are no real validations of a technological fit besides crypto-currency? Where IBM is desperate as hell in selling their blockchain crap to corporations and isnt really seeing success? Yeah, don't think the blockchain revolution you are waiting for is happening any time soon, if ever. ML and AI are sadly also more of a buzzword right now outside of a couple or large players, but at least its applicable in different areas.
rpedela 8y ago
To me, blockchain is equivalent to PageRank in terms of impact. An amazing algorithm with extremely limited use cases. Maybe one company can create significant value like Google did with PageRank, but that is probably it.

thisisit 8y ago

I am curious about the methodology to count startups. One of things is sure that we are now in a consolidation phase. We are seeing a glut of M&A deals. In that vein many startups are disappearing because they are getting acquired by larger companies. No one wants to be the next Yahoo refusing to buy a company which might become their next chief competitor. And the cheap credit environment is making this easier.

adreamingsoul 8y ago

As a self-educated software engineer, entrepreneur, and business owner I cringe whenever data statistics of ”educated” people are only represented by individuals who have a masters, Ph.D., or doctorate. I have studied at universities, but unfortunately, the education system in the USA is not suitable for Autism. From an early age I had to teach myself because 99% of my teachers and professors didn’t have the resources or time to help me. Does anyone here have a similar experience?

amarkov 8y ago
That's generally exactly what they're trying to measure: statistics about people who follow the standard path society lays out for education. If something about getting an advanced degree is discouraging people from doing startups, that's important to know, whether or not some population of smart autodidacts also exists.
noobiemcfoob 8y ago
I see your point and am in a similar situation, but I have to suspect that truly educated people who haven't achieved a higher degree are a relatively low number for the purposes of aggregate statistics.
quite_there_77 8y ago
I'm not sure that I have a learning disability that could be diagnosed, and I did (barely) finish an undergrad degree, but I feel exactly the same way. Higher education is (mostly) a market response to social stigma / conventions. Degrees are as much about asserting social class as they are about career prep or the passing on of knowledge. Anecdotally, I have a number of friends with graduate degrees, some full PhDs. I make more money than any of them and am arguably more successful (by their standards). Everything I learned in life was self guided. I too am a software engineer (doing some relatively hardcore stuff) and have started more than one successful company. I can't fix the system, but I will tell my son that higher education is optional and help him get a start on his own (and not just wrt money) if he decides to skip it. And to more directly address your post, I do consider myself educated and an expert in a couple things. I encountered exactly zero teacher along the way that made a meaningful contribution to that.

pnathan 8y ago

I paid out $100,000 to pay off my wife & my own student loan debt early. Student loan debt can not be discharged by bankruptcy; it's always waiting for you. This implies several things immediately: - You have to take a job which can make payments on the debt. - You have to choose stable jobs which will not suddenly fold under you. There's also a somewhat hard to define aspect to the problem where you have to ensure that your local system is fiscally stable. Anyway, non-1% Americans graduated from college not taking risks in their first 10 years out? Totally predictable, just from the debt perspective. Then, at 32, 34, a lot of people are married and/or have a kid on the way. Welp, there's your high levels of downside again. Add in to all this the fact that housing prices are effectively tethered to the availability of cash provided to the "highly paid" market (inequality increases).... ... so if your startup fails, you'll lose your place to live, and remote jobs are very rare, so you're in trouble in the big city with now-unaffordable costs of living. the solution, in part, has a simple policy component: declare jubilee on all federally-originated student debt; free college for all students who maintain adequate gpas, no more federal loans. impose cost controls on universities that take federal money. that effectively derisks an entire generation and opens up new options. housing costs are less directly tractable and more politically problematic: the effective solution is to federally strip single family zoning from all land, and mandating density minimums and other supply-increasing zoning. (I assure you, the housing market is an interstate commerce system. :) ). But that only staunches the wound, it doesn't bring down housing prices into line with the median American's income. Wait, this is about startups? Ha! No. That's a third order consequence caused by increasing early-career & mid-career risk, which in turn is increased by the planning & zoning codes and governmental defunding of education.

SketchySeaBeast 8y ago
And once (or while) the student loan debt clears up you then get a mortgage and start a family - both of which now make you crave a stable paycheck while you get a hang of this house ownership thing and to take care of your loved ones. It's hard to take that gamble when you feel like the world is riding on your shoulders.
- leesalminen 8y ago

molteanu 8y ago

From the article: Startups are struggling in this era of rising market concentration. In most industries, since the 1980s, the share of all sales going to the top firms is increasing. Startups may have a hard time competing with these mega firms, which can out pay them for the best talent and sometimes attempt to drive them out of the industry. Previous Brookings research found there are fewer startups in states where a smaller number of companies dominate the market From Lenin, "Imperialism, the highest stage of capitalism" (1916): This transformation of competition into monopoly is one of the most important — if not the most important — phenomena of modern capitalist economy.

baron816 8y ago

Are mom and pop stores included in the data? What about law firms, doctors offices, mutual funds? I don’t think we’d consider those new businesses to be start ups.

quadcore 8y ago

Another factor could be that before, big companies kinda sucked for the employee. Today's big companies like Google and Facebook are wonderful place to work for. In the grand scale of things, the new management styles are considerably more comfortable for the employee, the decision making and the promotion methods are significantly more efficient, interesting and smart. Not saying they are perfect, there is definitely room for improvement but 30 years ago, it was all wage slavery.

HillaryBriss 8y ago
i like your idea, but Google and Facebook are very far from typical.
- quadcore 8y ago
  I guess you may be right. Is there still big companies which would fire you because you're late 2 minutes 3 times this year? Where everybody have to be there at 8am? And stuff.
  - phil248 8y ago
    I've always assumed the laid back approach of employers here was a West Coast thing.
- deleted 8y ago
  [deleted]

HillaryBriss 8y ago

the paper seems to be talking about "startups" as firms less than 2 years old. i guess this includes startups in plumbing as well as startups in software. maybe the reason a young plumber doesn't go out and start their own new firm is different from the reason a young software engineer doesn't go out and start their own new firm.

pascalxus 8y ago

They always want to equate disappearing startups with lack of labor supply. That just seems completely ridiculous. Lack of labor in startups is a result/effect, not a cause. Labor, as a general rule of thumb, always follows the money. If Startups were more successful, they'd get more investment and more labor. If you doubt this, just remember what happened when facebook opened up it's app store. Just like that, overnight, thousands of developers and start ups appeared out of no-where. As soon as people smell the money, they'll leave their cushy jobs at google or anywhere else in a heartbeat. It all comes down to opportunity. I mean, just look at the ycombinator and other investor's acceptance rates. They're that low because there's only so many opportunities. When there's too many people chasing too few opportunities, this is the result. The real reasons why start ups are far fewer, is much more complicated: an it has to do with fewer opportunities. Some opportunities are limited legally, some due to market barriers and some are just due to what's currently possible. The solution is to look at all those barriers and see what govt can do to reduce or get rid of the barriers. Look at the industries in most dire need of innovation: transportation, housing, and health insurance (where need is measured by $ opportunity) ~ and all the downstream industries that support these - like manufacturing, raw materials, etc. How many start ups are addressing these needs, and why is it so low?

toomuchtodo 8y ago
You were on the right track and then veered off course at the end. The problem is startups don’t pay enough for the risk you have to take, and there are few easy problems left to disrupt. There will always be small businesses and sole proprietors, but there are few winner take all startup opportunities that require little capital to start. Also, after seeing what happens when startups flout regulation (Uber, Airbnb, Theranos), I prefer government regulation stay intact or more of it. The less startups abusing the commons, the better.

magd 8y ago

In my experience, only the founders of startups make any money. If the startup is successful, then the founders walk away with millions. Everyone else would be financially better off if they worked for a large company instead. Also, the executives of the startups take free trips and expense everything on the company's dollar. While the employees receive low pay. I don't think the large companies are winning. The startups are killing themselves.

usaar333 8y ago
> Everyone else would be financially better off if they worked for a large company instead. To be fair a lot of the change is because large companies are paying people so much these days. Barring large amounts of funding, a Series A- startup (based on the company being 0-2 years old definition of the article) simply can't compete with salaries. Perhaps startups should start offering far more equity to early employees (I'm surprised you don't see more seed stage firms offering ~5% to senior devs) to compensate for the cash loss.
- foepys 8y ago
  Nobody will give a senior developer 5% equity when even VCs only take 7% for the first investment that also includes access to professional networking events.
  - s73v3r_ 8y ago
    Then maybe those companies don't deserve a senior developer?
rpedela 8y ago
I think this partially the law's fault and partially example bias. I worked for a company who was acquired and I did very well especially considering I was a relatively new employee when the company was acquired. In other words, I think you tend to only hear about the bad stories because employees are pissed. In addition, the 90-day rule for stock options means early employees are rarely able to participate in an exit. I think if the law was changed to remove this 90-day exercise limitation, then a lot more employees would benefit from their shares/options.

lcfcjs 8y ago

Thanks Trump.

laser 8y ago

https://www.theatlas.com/charts/Syh34PDZm https://www.theatlas.com/charts/Syh34PDZm That graph is fascinating. The decreasing value of formal higher education to becoming a successful entrepreneur is being accelerated from so many angles. The cost of collegiate education itself has risen dramatically, while at the same time the cost of access to collegiate educational materials has plunged to zero due to the internet and open publishing. If this trend continues, I wonder if motivated, aspiring entrepreneurs will be better off skipping formal higher education altogether. Could that already be true today? If someone can decide that the college path is not for them at a young enough age with a high enough level of maturity, then they can unschool and skip the bull-shit college-admittance optimization altogether, and instead focus on actually becoming an educated, masterful individual in domains that will help them create new value that they, and society, care about. Of course, there's so many confounding factors feeding into this one simple graph that I may have over-extrapolated to this particular thrust, but I think it's a perspective completely absent from the article that should be articulated.

usaar333 8y ago
That's one conclusion you could make. An alternative conclusion is that educated would-be entrepreneurs are now receiving higher wages in industry, resulting in the group shifting to industry. Less educated would-be entrepreneurs see wages lowering/stagnant in corporations and thus shift to entrepreneurship. Income source: https://www.advisorperspectives.com/dshort/updates/2017/09/19/u-s-household-incomes-a-50-year-perspective https://www.advisorperspectives.com/dshort/updates/2017/09/1...
- laser 8y ago
  Right, that's definitely a huge component, and one that is focused on in the original article. I bring up these other factors because they're not mentioned, including the fact that the rate of entrepreneurship has actually increased among the least formally educated.
aksss 8y ago
Work ethic is still the determining factor. Some people are better suited to institutional learning like some people need "fat camp" because they can't discipline themselves to adopt a healthy lifestyle. My advice to young folks - education has INCREDIBLE value, but err towards buying low. It's a racket industry and you must navigate the options to find best long-term value for the money you spend, including having a strategy for how the investment will pay for itself. Even kids who know they have the entrepreneur bug can benefit from the creds of a formal education. Just be smart about it.

arcaster 8y ago

Oh please... People are just realizing that startups aren't all that glamorous and at times attract a special breed of shitty egotistical workaholics. By the merits of this article we should wait to see Paris or some other benign socialist hell-hole become "the next startup hub". I can assure you that won't be happening anytime soon. Silicon Valley is an incredibly un-sustainable incestuous bubble. The future of startups will be distributed, not in one place.

shmerl 8y ago

> Startups are struggling in this era of rising market concentration. To rephrase it, current anti-trust is often too toothless.

tsenkov 8y ago

If startups fail (test bad ideas) 5x faster than in the 80's and 90's and if most founders quit entrepreneurship after their 1st failure, even if 2x more people are founding companies, then it's probably normal that, overall, less man-years would be spent in startups every year in the US.

solarkraft 8y ago

What I always thought the economic system would naturally come to is actually happening now. It's interesting why it's only happening now, likely because of the new growth dynamics of data companies.

inetknght 8y ago

> This means that, contrary to popular belief, jobs in the US are far more secure than they were in previous decades. This is a fallacy. Your job is not secure if you're not able to speak up about injustices because there's no competitors to hire you if you were to get fired about speaking up about something that's immoral but not illegal.

whatthesmack 8y ago

I'm surprised nobody's mentioned it, but the bureaucracy of licensing, taxes, and now national sales tax collection is unhelpful to the startup. Not that it's a startup, but I just jumped through all the hoops required to legally hire a nanny in the US state of Washington: - obtain Federal EIN number - obtain state business license & UBI number (still waiting on this, and I need childcare now) - file with state employment security department - pay state labor & industries insurance - pay state employment security taxes - pay my portion of income taxes for the nanny - pay payroll company to deal with all the tax payouts and paychecks Oh, and actually pay the nanny. All of this to just have a nanny and be above board. And what I do for my startup is way more complicated than this.

ChristianBundy 8y ago
I'm confused, to legally hire a nanny you need to start a legal entity and hire the nanny as a contractor/employee? It seems to me that this would be the nanny's responsibility to start a business and charge the customer (you) money for their service. I'm sure you're much more familiar than me, can you help me correct my intuition?
tchock23 8y ago
Over the past 4 years I have advised startups at an incubator in a mid-size US city. During that time I have only seen 2 startups run into issues around licensing and taxes that caused significant hurdles to their startup. However, in both cases I think the entrepreneur was largely using bureaucracy as an excuse for lacking product/market fit and personal sales skills... In my experience the issue of fewer startups being created is multi-faceted and has to do with lack of affordable healthcare options/healthcare tied to employment, changing attitudes toward risk across generations, student loan and housing debt, lack of awareness of entrepreneurship as a viable career path (and more).
Gibbon1 8y ago
I worked at a smallish company in the 1980's. None of the above is new in any way.

ummonk 8y ago

Small local businesses / startups get squeezed out by larger brands with name recognition. No one looks for stuff in the yellow pages anymore - they go to the most successful brand off the internet. Additionally, the risks of starting a business / startup are much higher when the cost of housing and healthcare is so much higher. And on top of that you have student debt.