2000’s Hot Economy, Dot-Coms Fuel Boom for Calif. Start-Ups
2000 was a banner year for start-ups in California, a burst of entrepreneurship unlikely to repeat itself in today’s slower, “dot-gone” economy.
The number of business incorporations rose 31.8%, according to the secretary of state’s office, far outpacing recent year-to-year gains, which have ranged from 6.6% to 8.5% since 1995.
Economists attributed the increase to a healthy economy and a strong case of dot-com mania during the first half of 2000.
“California was quite strong in 2000 and the dot-coms and Internet companies were white-hot at the end of 1999 and the beginning of 2000,” said Nancy Sidhu, senior economist at the Los Angeles County Economic Development Corp.
Today’s would-be entrepreneur faces an e-commerce shakeout and a deepening energy crisis, along with a slower economy.
“I think we have seen the peak of the cycle,” said Tom Lieser, author of UCLA’s economic forecast, which predicts a moderate slowdown for California in 2001.
The secretary of state’s office said new business incorporations totaled 96,072 last year, up from 72,871 in 1999. The figures have climbed steadily from a low of 40,900 in 1991, a recession year.
The state compiled the figures at the request of The Times.
National business incorporation data are hard to come by. But statistics compiled by Dunn & Bradstreet through Nov. 3 show that business starts nationally were down 14.1% from 1999. State-by-state data aren’t available.
The contrast between California and the nation supports conjecture that Internet companies drove much of the growth in a state that boasts high-tech centers around San Jose, Los Angeles and San Diego. Incorporation data aren’t organized by county, month or industry, a spokesman for the secretary of state said.
Economists speculated that some newly hatched Internet businesses have already disappeared, along with such better known firms as Pets.com and Eve.com, neither of which generated enough business to turn a profit.
“In the period of euphoria, for every good, solid business we could have had two or three that were more volatile,” said Brad Williams, senior economist in the state legislative analyst’s office.
Economists said other fast-growing industries probably shared in the new business expansion. Lieser cited the service industry, where firms provide temporary workers, programmers, data processors and other business services.
Although service firms aren’t immune to a slower economy, entrepreneurial optimism doesn’t die easily.
After months of preparation, former medical researcher Swaraj Kaur, 45, plans in March to open the Glendale beauty business she incorporated last year. Back then, Kaur said, “the economy was doing really well; everything was booming.” Leaving her employer of 13 years seemed a safe bet.
Now, Kaur isn’t sure how a modest slowdown might affect demand for body-sculpting treatments that cost as much as $150 each. “I don’t see an impact, a major impact, right now,” she said.
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The Year of Dot-Inc.
Business incorporations soared in California last year as entrepreneurs entered the dot-com lottery.
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Year-to-year increase in business incorporations
2000: 31.8%
Source: California secretary of state’s office
