Last fall, around the time Facebook announced it was buying WhatsApp for $19 billion, a flurry of studies offered a startling revelation: The U.S. startup rate has been falling for decades.
The Kauffman Foundation, citing its own research and drawing on U.S. Census data, concluded that the number of companies less than a year old had declined as a share of all businesses by nearly 44 percent between 1978 and 2012. And those declines swept across industries, including tech. Meanwhile, the Brookings Institution, also using census data, established that the number of new businesses is down across the country and that more businesses are dying than are being born. All this at a time when entrepreneurship had reached its cultural apex and was widely viewed as the sole sizzling ember in an otherwise cooling economy. The business and academic worlds were left slack-jawed: How could this be?
Understanding why something isn’t happening is tougher than understanding why it is. Is this just a statistical anomaly? Or has the state of American entrepreneurship fundamentally changed? Experts speculate that a host of factors may have contributed to the decline in ways large and small. The data points to four likely explanations.
It’s a generational problem
Steve Jobs was a boomer. So is Richard Branson. Also Bill Gates. And Oprah Winfrey. And Ben. And Jerry.
The Boomers are a startup-happy bunch — over the past decade, the portion of founders in their 50s and 60s has increased, according to Kauffman data. By contrast, the portion of 20- and 30-year-old entrepreneurs has declined. In 1996, young people launched 35 percent of startups. By 2014, it was 18 percent. “We’re now past the peak demographic bulge we got from the boomers,” says Dane Stangler, Kauffman’s vice president of research and policy. The millennials, meanwhile aren’t expected to start launching companies en masse for five to seven years.