Where Are The Startups?

A lot of people, including me, have accused the administration (and the Congress, when Democrats were in charge) of waging a war on business, but it’s really a war on small business and startups:

…what’s to blame for this change? A lot of things, probably. One reason, I suspect, for a job market that looks more like Europe is a regulatory and legal environment that looks more like Europe’s. High regulatory loads — the product of ObamaCare and numerous other laws — systematically harm small businesses, which can’t afford the personnel needed for compliance, to the benefit of large corporations, which can.

Likewise, higher taxes reduce the rewards for success, making people less likely to invest their money (or time) into new businesses. And local regulatory bodies, too, make starting new businesses harder.

But I wonder if the biggest problem isn’t cultural. Since 2008, this country hasn’t celebrated achievement or entrepreneurialism. Instead, we’ve heard talk about the evils of the “1%” ” about the rapaciousness of capitalism, and the importance of spreading the wealth around. We’ve even heard that work in the public sector is somehow nobler than work in the private sector.

Countries where those attitudes prevail tend not to produce as much entrepreneurialism, so it’s perhaps no surprise that as those attitudes have gained ascendance among America’s political class and media elite, we’ve seen less entrepreneurialism here.

It doesn’t bode well for the future.

27 thoughts on “Where Are The Startups?

    1. wodun

      So that is supposed to be a defense? Obama is so bad the socialist hellholes are creating more new businesses than us?

      1. Chris Gerrib

        No, more like “we’ve been behind for years in creating small businesses.” Things like having to keep a job for the health care can really inhibit small business formation.

        1. Leland

          So that defense is better? Texas didn’t sign up for Obamacare and business is booming. I’m with wodun, you seem to be stuck with a stupid argument.

          1. Leland

            Hey Godzilla,

            I guess you knew Texas’s public sector per capita is 1.22% compared to California’s 1.07% (FTEs).

            But did you know that most of this is because Texas has more Higher Education employees per capita than California? Actually Texas has more professors than California.

            Yet, California’s public sector payroll is 20% higher per capita than Texas. Funny how that is considering California has nearly 4 times as many public sector Financial Administrators than Texas.

  1. Joe

    Being a startup is hard enough. Getting any kind of publicity is harder and harder as media have downsized. It is easier to copy a news article from another paper than to create an original story so the number of media mentions for small firms is way down. Getting any kind of funding (crowdsourcing still needs work) is almost impossible unless you are an internet company in one of the hot spots in the nation. If you are trying to start a traditional business, the odds are stacked against you like never before. But there are some of us who choose the freedom of business ownership despite the fight.

  2. Der Schtumpy

    I agree that the prevailing wind is blowing away from start ups. But there’s another generation that IS looking at owning businesses.

    My son is graduating from community college this month after studying auto mechanics. He has the background but employers want that paper. Many of the guys in his class are in their early 20′s, but some, like my son, are in school because they lost jobs during the down turn over the last 6 years. Almost all of them want their own shops in the future. A couple of them are taking classes after this for auto body / machine shop / business admin so that they will be able to run businesses.

    He has also taken welding classes over there and it was the same way in those classes. Most of those guys are aiming at working for themselves or opening a metal shop and employing others.

    I see a bunch of people 40 and under, who have busted their @$$es to get through college, or the military and then college, who got pushed out of their jobs over the last few years, who do NOT trust companies, corporations or government jobs.

    Many of the guys he’s in school with have been doing side work in their respective trades. The instructors at school are teaching that they’ll be better off working for themselves too. All of the instructors have worked for themselves and dealerships, companies doing fleet service, so they’ve seen the good and bad of working various situations. They are big on starting and owning businesses.

    I seriously doubt that any of the non-trades classes are putting out that entrepreneurial attitude.

    I know from my experience, and my wife’s at this same school, that the computer engineering and business programs were ALL pushing working for various corp’s / industrial giants in the Research Triangle Park, the area universities or the state government.

    1. ken anthony

      This is one of the most important educational issues… how are government and big business connected and what does it do to the overall economy?

      All people are sinners. They all have less than perfect motives. This includes every business owner, big or small. Almost all of them would like a monopoly which is only possibly by outlawing their potential competition by some manner that always includes government (the source of laws and regulations.) One of the worst examples was the communications act of 1934. They had to help farmers by getting rid of all those little phone companies.

      Free competition is the only thing that keeps these sinners in check.

      If you don’t like the word sinners, go with the nature of man (PC: humans.)

    2. Larry J

      While I wish your son and the others every success, there’s this from the InstaPundit:

      But reader Jeffrey Levin offers a different theory:

      I enjoyed reading your column on missing startups at USA today. I would however like to point out that you completely missed the real reason why all those start-ups are missing. As a CPA with 20+ years of experience, I have a pretty decent idea of why. The idea of companies being started up in garages by 20 year old whiz kids, while fun, are totally and completely not representative of the vast majority of start-ups. When you think those are the real start up stories, its why you miss the boat on why we have not seen any for the past 5 years.

      Prior to the past 5 years, I will give you an idea of what a real start up was like. 35-40 year old Joe cannot stand working for the large company he has worked for since graduating college and knows that with the recession he will have to (a) kiss some serious ass towards a superior he cannot stand or (b) knows his pink slip is coming down the pike. He decides he no longer wants to work at large company (or is shown the door) and decides instead of doing the same old again, decides to start up his own business. He has some cash in the bank but doesn’t want to use that right off the bat, so he goes to his local bank and asks for a loan. The community bank loan officer’s first question is what collateral do you have.

      This is where this recession diverges from all modern recession for the past 50 years. You see, in past recessions, the bank officer would kindly ask about the house Joe has lived in and owned for the past 10 years and the ability to take a second or HELOC to use to start up that new business. This recession, the bank officer asks how much cash in the bank Joe is willing to deposit (or securities in a brokerage account) and doesn’t bother asking about home equity, knowing that it is highly unlikely he has any.

      If you dig around and research start-ups you will find that the majority of start-ups are funded by second mortgages or HELOC draws. Due to the housing crash, that equity is just not there for the vast majority of people looking to start up a new business. Its one of the large reasons why commercial credit expansion has been so moribund. Without getting off the ground from seconds or HELOC’s all those startups that would have made it past year 1 and then been able to obtain standard commercial business loan never got off the ground and thus never graduated to commercial loan financing. You have to walk first before you can run. Startups don’t start in the commercial loan department (at least most of them don’t).

      1. Der Schtumpy

        I think he’s talking about the 20 year old BILL GATES type whiz kids, working out of a garage. Not literally, 20 year old mechanics RUNNING a garage. And I don’t know of any of these guys coming out of school with my son, striking out tomorrow to start their businesses.

        My son and his partner are planning on sucking up all the shop time they can under someone’s roof for the next two years at least. They want their own shops, but they aren’t fools enough to think they’re ready now.

        As far as equipment outlays, we’ve already started looking for used lifts and that’s really all they’ll need. We’ve found those in good condition, used, for as little as $1K. As mechanic students many of them have already invested thousands of $$$ for hand tools and scan tools, just to get through school.

        After that, it’s about a building and some cheap office furniture.

        Luckily we’ve all run businesses for other people, and for ourselves. So we aren’t walking into this blind.

        1. Larry J

          It’s great that they see the benefit of gaining more experience before starting of their own. In the old days, it didn’t cost a lot of money to open an auto repair shop. That’s less the case today. Depending on what kind of services they hope to offer, they could have to buy a lot of expensive tools and diagnostic equipment that, in most cases, is only good for one line of cars. They’ll need a substancial amount of start-up capital. As the InstaPundit’s commenter noted, it’s harder today to get that capital. For one thing, they need enough money to survive while they put most of their income into building the business.

  3. Jim

    As a small business owner I can’t wait for Obamacare to kick in. I cover one MA-based employee’s health insurance through the Romneycare exchange, and it’s great: lots of policy choices, affordable premiums. Traditional group policies, by contrast, are a nightmare for a small business — if you have one sick employee or employee’s dependent, your rates go through the roof.

    And then there’s the dysfunctional individual insurance market — last time I checked I couldn’t get Anthem to sell me a policy at any price. There are millions of people who wouldn’t dream of leaving a job with health benefits to pursue a startup opportunity, because they wouldn’t be assured of access to coverage on their own. That changes January 1.

    Since 2008, this country hasn’t celebrated achievement or entrepreneurialism

    What country is he talking about? The one I live in celebrates the Zuckerbergs and Instagrams and Elon Musks every day of the week.

    1. McGehee

      The one I live in celebrates the Zuckerbergs and Instagrams and Elon Musks every day of the week.

      And to whom do they make their campaign contributions?

      It’s not achievement that’s being celebrated if only Obama supporters gain from it.

      1. Jim

        It’s not achievement that’s being celebrated if only Obama supporters gain from it.

        Do you actually believe that if Elon Musk, say, makes a campaign contribution, then he hasn’t actually achieved anything? Never mind the multiple successful businesses he started to earn the money he contributed?

        More generally, I see articles celebrating all sorts of business success. A local gun maker is looking for sites for a new plant, because it can’t keep up with orders. Is that not achievement either?

        The author is severely deluded when he writes that 2008 suddenly ended the American love affair with business success.

        1. Gregg

          “A local gun maker is looking for sites for a new plant, because it can’t keep up with orders. Is that not achievement either?”

          Oh what gun maker is that? And is this gunmaker a startup? I bet not. In other words it doesn’t fit the discussion. Nice Obama dissembling there.

          Besides, you can thank Obama’s War on Law Abiding Gun Owners for jacking that industry waaaay up so that even Obama’s War on Small Businesses (in league with his crony Big Businessmen), can’t overwhelm some industries.

          In addition:

          The proposal to tax internet sales will destroy the small startup universe. It is yet again another back room deal between Obama and his Big Business Cronies.

    2. ken anthony

      Last time I checked I couldn’t get Anthem to sell me a policy at any price.

      [Jeopardy music] What has government policy done to private insurance companies?

    3. wodun

      Buying health insurance isn’t as hard as you make it out to be. The hard part is paying for a policy not finding one. An Obamacare exchange may mean less open browser tabs, maybe, but paying for it isn’t getting easier for 90% of the population.

      1. Jim

        Buying health insurance isn’t as hard as you make it out to be.

        I was just imagining the last dozen years of dealing with it for my business?

        paying for it isn’t getting easier for 90% of the population

        Starting in January, anyone with income up to 4x the poverty line ($94k for a family of 4) will be eligible for a subsidy to make it easier to pay for insurance. That’s a lot of people.

        1. Gregg

          “Starting in January, anyone with income up to 4x the poverty line ($94k for a family of 4) will be eligible for a subsidy to make it easier to pay for insurance. That’s a lot of people.”

          And that’s a lot of money.

          Just where do you think that money comes from?

          And what are the effects of all that money taken ou tof the economic system.

          Jim, go read Bastiat…many times. Over and over until you get it.

  4. Titus

    As a small business owner, I didn’t wait for Obamacare to kick in before getting out.

  5. wodun

    Barriers to entry are high even for the smallest of businesses. Larry J points to one of the biggest, funding, but the host of local, state, and federal regulations that must be met are an enormous burden.

    Before you can even sell a product, you will spend significant sums on compliance.

    1. Jim

      I don’t recall spending a dime on compliance before starting to sell my software product.

      1. Gregg

        What is your business’ name? Where is your web page? Let’s see some advertisement so that we may partake of the fruits of your effort.

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