By Rich Moore
Like he does time and again, Thomas Friedman has put a fine point on a single issue that could do more to revitalize growth and put more people back to work in this country than anything else in sight. By many millions of miles!
In a recent op-ed column in The New York Times, he concludes: good paying jobs don’t come from bailouts. They come from start-ups.
I love this guy!
He backs up the statement with facts from Robert Litan, vice president of research at the Kauffman Foundation, the highly respected Kansas City, Missouri-based group that promotes innovation and advocates entrepreneurship.
“Between 1980 and 2005, virtually all net new jobs created in the U.S. were created by firms that were five years old or less,” said Litan. “That is about 40 million jobs. That means the established firms created no new net jobs during that period.”
And, I love Mr. Friedman’s next comment: if we want to bring down unemployment in a sustainable way, neither rescuing General Motors nor funding more road construction will do it.
His opinion is spot on. But it also is running headlong into the hard fact that funding for startups has never been harder to find. According to the National Venture Capital Association (NVCA), 32 venture funds raised a total of $3.6 billion in Q1 2010, which is a decline of 31% in dollars and a 44% decline in number of deals from Q1 of 2009. The NVCA says that’s the slowest opening quarter in a decade.
And, that’s on top of 2009 when the venture industry raised a total of $15.7 billion, down nearly 50% from the $28.4 billion it raised in 2008. That’s a lot of billions of dollars not flowing into the formation of new companies.
The dollars may not being flowing as freely, but there’s no shortage of innovation. Just in our neighborhood here in downtown San Mateo, CA, we’ve seen over the past handful of years the formation of some of today’s most innovative and promising new companies. YouTube started down the street in a small suite of offices above Amici’s Pizza. AdMob was started and still resides (who knows for how much longer) a few doors east of us. Rock You started in the suite of offices literally above us. And that barely scratches the surface. There’s a whole new crop already in play just in our neighborhood.
But as Mr. Friedman points out, it’s not simply having a steady stream of risk-taking entrepreneurs and willing venture investors. Reform on many other fronts – healthcare, financial and education – is also urgently needed.
But most of all, he advocates for serious and urgent consideration of all the ‘ingredients that foster entrepreneurship.’
Sustaining the vitality of that precious mix is our fastest and most proven path forward.
I think we should make Thomas Friedman our country’s CEO of Entrepreneurial Leadership!
Tags: entrepreneurship, startups, venture capital