The Latest US Government Statistics on Startups

By Adriaan Brits Tuesday, June 23, 2020

The US government has started investing less into startups as the economy declines, but is this a mistake? Many argue yes — small businesses bring a lot into the economy, and deserve to be funded more than they are receiving. According to one study, 33% of startups are funded with less than $10,000, which is terribly hard to make a business with.

According to the US Census Bureau, the highest five-year survival rate for new businesses is 51.3%, and founders who have had a previously successful business have a 30% success rate with their next business venture. More than 80% of successful business owners admit that they have the right qualifications and backed up experience to run a company — even with limited cash.

Why So Many Startups Fail

A whopping 14% of startups fail because people do not completely listen to their customers’ needs. Small businesses fail for many reasons - it could be because they struggled to generate business, they lacked capital, or they could not make their inventory meet the demand. 

The most common reasons for failure have to do with cash flow, lack of demand, and poor management skills. Generally, small businesses have found the most success with alternative lenders, rather than traditional banks. 

However, if you look at the statistics of those that are failing, it appears that having a startup is hard, and it is even harder to make it into a business. On the other hand, there are many more statistics that show small businesses in the US do work out well sometimes.

Women-Owned and Minority-Owned Startups

Women-owned and minority-owned small businesses are on the rise. A study shows that female entrepreneurship grew by 114% between 1997 and 2017. The fact that women-owned businesses consistently outlast male-owned ones shows that female entrepreneurs have strength and perseverance. Small women-owned businesses, as of 2017, generated $1.7 trillion.

In the case of minority-owned businesses, a study by the Minority Business Development Agency reports the number of minority-owned firms in the US increased by 38% between 2007 and 2016. There was also a 34% increase in the number of black-owned firms and a 46% growth of Hispanic-owned businesses.

While there is still plenty of room for these numbers to grow, the obviously increasing percentages signal the rise in diversity among startups in the US.

Should the Government Invest in Startups?

Small businesses make up most of the economy. In the US they comprise 99% of the country’s firms and 33.6% of known export value. Small businesses are a huge deal in the economy, so any business is vital. However, the US government is not widely known for investing a lot in its startups, and ideally, it could be doing more. 33% of startup capital for employer firms is less than $10,000. 

Given recent events, it does seem likely that the government will invest more. After all, small businesses employed 56.8 million people in 2013 (the equivalent of 48% of the private sector) and accounted for 63% of new net jobs in the US. Now more than ever, having new jobs is important to get the economy booming again.

More Startups Are Opening Rather Than Closing

A few small business stats show that, for the first time since the recession, small businesses are opening at a faster rate than they are closing. This brings even more good news for job creation in the US. One report shows that about 1% of startups evolve into what is called a “unicorn” startup — unicorn because it is so rare and seemingly mythical. These types of startups include Airbnb, Uber, and Slack.

While it may be frustrating to look at such negative figures, the latter ones show that more small businesses are opening. Hope is never lost as long as you have direction, determination, and willpower.

About the Author

Headshot for author Adriaan Brits
As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media.

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