Startups, entrepreneurs, and small businesses have been the focal point of discussions about how the U.S. and Colorado will fully recover from the 2007 recession. As part of this dialogue, there is a wealth of information and misinformation about the importance of these businesses to the economy.
So what do the numbers say?
The first step in analyzing the growth of startups is to define them. The second step is to find a data set that tracks changes based on that definition.
There are many ways to define an entrepreneurial business venture or a startup company that include:
• No formal structure.
• Type – Sole proprietorships or LLCs.
• Funding – Microenterprises.
• Size – A company with 1-4 employees.
• Age – A company less than 1 year in age with employees.
For purposes of this discussion, startups will be defined as firms less than one-year in age that have employees. By definition, sole proprietorships, microenterprises, or LLCs may be included if they meet these criteria. The Bureau of Labor Statistics produces data about startups defined in this manner. BLS reports the number of firms and employees based on a year ending on March 31. For example, 1994 data includes startups for the period April 1993 through March 1994.
A review of the data shows the number of jobs created at startups has increased at a declining rate since 1999 for both Colorado and the U.S.
In 1999, 94,100 jobs were created at Colorado startups. That number decreased every year through 2010. That year the new group of startups created only 47,100 jobs. A slight increase was posted in 2011.
A similar pattern occurred at the national level. In 1999, 4,703,000 employees worked at U.S. companies started that year. By 2010, the number of employees working at companies that began operations that year had fallen to 2,457,000. A slight increase was recorded in 2011.
Colorado has a track record for having world renowned startups. Clearly good things have come from Colorado entrepreneurs and startup companies; however, by this definition, Colorado may not be the entrepreneurial Mecca that we are led to believe.
For additional information on startups and job creation go to https://cber.co/ or the report “Where Are All the Startups?”
©Copyright 2011 by CBER.