Start-ups: Fewer launches, less hiring, declining importance?

The pace of startups, which include companies such as Pinterest, may be on the decline, according to a new report.

By Tiffany Hsu

May 4, 2012 8:18 AM PT

The birthrate for new businesses in the U.S. is sliding, down to an anemic 8% in recent years from 13% in the heady 1980s.

That’s the lowest point on record, according to a Census Bureau analysis released this week, partially funded by the Ewing Marion Kauffman Foundation.

Young companies less than 5 years old made up just 35% of all companies in 2010, compared to half of the pool 30 years ago – and the recession didn’t help, according to the report.

Instead of creating 20% of all new jobs, as they used to do, new businesses are now responsible for just 12%. That’s even though the 394,000 companies that emerged in 2010 generated 2.3 million jobs while older businesses struggled to keep hiring.

The decline, according the report, has occurred across all states, especially in the South, Southwest and West. And it may be continuing, according to recent data showing venture capital fund-raising plummeting 35% in the first quarter of 2012.

It could be that the startup landscape is getting top-heavy. A World Economic Forum report this fall found that 44% of all start-up revenue internationally and 40% of jobs are centralized in the 1% of firms at the apex of the new-company heap. The top 5% of young businesses claim 72% of revenue and 67% of jobs.

California, though recently voted the worst place in the country to do business, remains a haven for startups. The state attracts by far the most venture capital and is home to entrepreneur development groups and hubs such as Tech Coast Angels and Silicon Beach.

But there may be some wariness in the industry, according to jobs database StartUpHire and the National Venture Capital Assn. In March, the two organizations said that applicants for software engineering and sales positions at startups were trailing available jobs.

The career site said that the number of new positions offered by young companies spiked 23% last year, including 500 executive-level posts. California, Massachusetts, New York and Texas had the most open startup job slots.

“The startup economy is our country’s best kept secret,” said StartUpHire Chief Executive Steve Roberson in a statement. “This is the where the job growth is, and the industry needs to raise awareness about the opportunities that exist in order to help young companies capitalize on their tremendous promise.”

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