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Number of US Start-ups Falling?- Don't think so Fareed

Fareed published an article a couple weeks back regarding a perceived drop in the creation of startups in the US.

"It is by now well documented that start-up activity has been slowing down in the United States for about three decades, dropping sharply over the past 10 years. Even as American culture has turned entrepreneurs into rock stars, the U.S. economy is producing fewer and fewer of them....There are many different ways to measure the growth and success of start-ups, but they all point to a similar conclusion. The Kauffman Foundation reports that the percentage of adults owning a business has been declining since the 1990s, when the foundation first began to track that number. At the Brookings Institution, Ian Hathaway and Robert Litan found that the start-up rate (the number of new companies as a percentage of all firms) has fallen by nearly half since 1978."

The cost of starting a technology company has dropped dramatically over the last two decades. This cost reduction has come from the increased speed of being able to get a product to market and the resources required. Meaning, to get a product to market you need less employees and less hardware than before. This has meant that many companies are able to get much farther before they ever have to get funding. And for the most part this is great for the entrepreneur resulting in less dilution and more control. It is also good for VCs as they are able to gauge risk better by entering at a later stage in the process meaning (hopefully) more consistent pay outs.

Not all is good with this drastic of a reduction of costs. Since more founders have been able to get to a release candidate by bootstrapping, this frugality has meant some items have had to go that were afforded with funding at an earlier stage. The one component I see consistently omitted that has had a negative impact is a lack of dedicated Marketing and PR in the early stage.

Too many ideas are being taken all the way from beer coasters to production ready with little market testing, messaging crafting, and buy-in or input from market influencers, analysts, and potential customers. All items that would be performed by a dedicated PR and Marketing team.

Another blog is in the works that will look more deeply on how a startup can get the needed lost work and at what point in the process.

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