Cold Fury

Harshing your mellow since 9/01

Startup Nation no more

Coincidence? Or just “bad luck“?

If you look at what’s happened in big cities around the U.S. in recent years, it’s easy to think we’re living in Startup Nation. Thanks to the plummeting cost and increased availability of digital tools, as well as greater access to early-stage funding, we’ve seen what the Economist has called a “Cambrian moment,” with digital startups “bubbling up in an astonishing variety of services and products.” The number of companies in Silicon Valley that got seed funding from investors, for instance, more than doubled between 2007 and 2012. Venture capital funding in the U.S. over the last five years has totaled a remarkable $238 billion, and 200 companies today are so-called unicorns, privately valued at more than a billion dollars each.

Meanwhile, though, a host of economic researchers have been telling a much bleaker story: American entrepreneurship is actually on the decline, and has been for decades. As the economists Ian Hathaway and Robert Litan documented in a 2014 Brookings Institution paper, the percentage of U.S. firms that were less than a year old fell by almost half between 1978 and 2011, declining precipitously during the recession of 2007-’09 with only a slow recovery after. According to the Commerce Department, the number of new businesses started by Americans has fallen sharply since 2000, and so too has the percentage of American workers working for companies that are less than a year old. Indeed, in 2013 Americans started fewer businesses than they did in 1980, when the country’s population was much smaller. This decline isn’t just due to the aging of the U.S. population—Americans of all ages just seem less likely to open new businesses than they once were. And, as Hathaway and Litan put it, the decline “has been documented across a broad range of sectors in the U.S. economy, even in high-tech.”

Strangling regulation, punitive taxation and fees, and a metastasizing and ever more voracious Leviathan State can’t possibly have anything to do with this, can it? Vox says it’s easy enough to figure out, and he’s right as rain:

Speaking as a successful entrepreneur who left the country, who is the son of a very successful entrepreneur who is presently in prison, it’s not exactly difficult to understand why Americans are considerably less inclined and less able to start businesses than they were 36 years ago.

  1. The rapacious and criminal tax agencies. You would probably not believe the shenanigans and outright lies these agents habitually engage in if you did not see it in black-and-white documents right in front of you. Even those who think my father merited an amount of jail time for his actions are aghast when they find out what actually happened, and how absurdly egregious the behavior of the various agencies was.
  2. The increasing regulatory and reporting burden. Why go to the effort of building up a company when doing so is the equivalent of painting a big red target on your chest? As one of my entrepreneurial friends said after shutting down his company and taking a job for a big tech firm, “it’s so nice not having to deal with all that shit anymore.” In the USA, self-employment often feels more like working for the government as a paper-pusher. Just trying to get your head around why part-time external contractors who are clearly not your employees must be treated as employees for various compliance purposes is enough to give anyone a headache.

He has more, all of which rings perfectly true to me. His concluding prophesy—or warning, or wish— is right on the money too.

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"America is at that awkward stage. It's too late to work within the system, but too early to shoot the bastards." – Claire Wolfe, 101 Things to Do 'Til the Revolution

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