Less Startups, More Worries?

Ever since the 2008 financial crisis (aka Great Recession), US startups have faced hard times. According to recent startup failure rate statistics published by Small Business Trends, less than 50% of startups survive their fourth birthday.

Out of those that do, the most successful companies are finance, real estate, or insurance startups.

However, other statistics paint a different picture. While retail seems to be slowing, the general state of the US economy is not bad. The rate of unemployment is low and stable at 3.9%, while economic growth hit 4.2% in the second quarter of 2018.

Small Business Statistics

Startups seem to have it harder than small businesses in general. According to the US Small Business Administration’s most recent Quarterly Bulletin, all small business indicators show grounds for optimism.

The number of small businesses is slowly rising, and ever since 2010, the amount of failing businesses has always been beneath the number of newly founded ones.

Business lending is on the rise as well, since small businesses have now access to alternative funding sources with higher approval rates and faster service.

All in all, everything seems to be just peachy.

So Why The Declining Number of Startups?

It’s an oddity that while everyone else seems to be doing well, startups are still struggling. What’s happening? Nobody knows for sure, but there are several explanations for this phenomenon.

Competition from big entreprises is a serious problem for budding new entrepreneurs. From manufacturing to distribution and retail, big businesses have many advantages over startups.

Generally speaking, with size comes increased economies of scale, a wider reach, and a bigger budget. No wonder why startups struggle to keep pace across many industries.

And competition isn’t limited to the US. With global trade comes global competition, and a steady influx of potentially cheaper international products into the US.

The only way to catch up to that is going global yourself. But many startups fear such a big leap when they can barely keep their business afloat.

Last but not least, another factor that contributes to the diminishing number of startups is — paradoxically — the success of some of their peers. Those that flourish may grow so big so fast that they’re not considered small businesses anymore, creating a false statistic of disappearing startups.

Quality over Quantity

At the end of the day, it doesn’t really matter how many startups are in the US, as long as the ones that are there do a phenomenal job. And finally, here’s startup data that looks really promising.

Innovation based, high-growth startups are doing very well. Companies that revolutionize their segment of industry have always been, and always will be successful in the US.

According to the report published by the Information Technology & Innovation Foundation, the number of technology-based startups rose by 47% over the last decade.

This means that the US economy wants and needs innovative startups that solve age-old problems. Whether climate change, business payments, health care, or any other serious issue, high-tech startups celebrate American entrepreneurship and form an essential part of our economy.

And that is not a cause for worry. In fact, it’s something to be proud of.