Starting a new business is risky. So risky, in fact, that most fail within the first few years of conception. While startup failure rates may be high, startups nevertheless provide hope and jobs for many. So what is the state of U.S. startups?
According to an article in the Orange County Register (via the Census Bureau), startups were over 13% of all U.S. companies in the 1980s. While clearly not an overwhelming proportion of businesses, this was not an insubstantial number. However, by 2006, that percentage had fallen to 11%. Mid way through the “great recession”, startups are less than 8% of U.S. businesses.
Why is this so? Access to capital may be the biggest factor. But, increasingly complex paths to the customer are the hidden startup killer. Markets seem to emerge, mature, and decline in just a few months. A single product startup can choose the wrong category or vertical and end up out of business quickly. More pre-launch market research may be the best antidote.
This has led some to question whether the United States is becoming less entrepreneurial. This impacts the job market, since startups provide jobs that simply wouldn’t have existed before. It is true that California has suffered mightily following the current recession; yet, it is among a few states (also including Arizona) that may be rebounding, according to a report by the Kaufman Foundation.
Looking to create or invest in a start-up? Consider the industries listed by Inc.com as the best industries to start a business in. An increased focus on health and personal growth means there’s huge potential for industries like yoga products and services and self-improvement (like weight loss). Changing demographics means home healthcare (for aging baby boomers) is a hot industry. The great recession means that people want to make themselves feel better but for less money; this new found frugality is fueling a bull market in cheap alcohol and candy.
Other top industries to start a business in are iPhone apps, healthcare technology, technical and trade schools, software as a service, fast-casual dining (think Panera Bread), green construction, niche consulting, education technology, temporary staffing firms, government services, accounting services, and solar energy.
John Bradley Jackson
Director, Center for Entrepreneurship