Feeds

Tech startups, Silicon Valley, not all they're cracked up to be

Business think tank finds $100m companies more likely to emerge in other places, sectors

Mobile application security vulnerability report

Technology startups are not quite the growth engine they're assumed to be, according to a 30-year study by economic think-tank the Ewing Marion Kauffman Foundation.

The Kaufmann Foundation, to give the organisation its commonly-used short name, happily describes itself as “the world's largest foundation devoted to entrepreneurship.”

The study, titled “The Constant: Companies That Matter” (PDF) considers companies with the following three qualities:

  1. They must be scalable. They must, in other words, be able to grow to at least $100 million in revenues, and ideally, much larger.
  2. They must be disproportionate creators of jobs. They must be able to generate jobs quickly and broadly, even if they may not generate jobs in line with their revenue growth.
  3. They must be disproportionate creators of wealth. Both directly,through profits, salaries, and profit-sharing, and indirectly, through equity, options, and perhaps a public listing, they must put wealth back in the hands of the company’s ecosystem.

The study says it's worth considering such companies because they are constantly emerging and are therefore worthy of study. That such companies also “make up more than 95 percent of the market capitalization of major stock market indices” , “produce more than 90 percent of the returns for the venture capital industry” and through their acquisitive ways have become ”an important source of liquidity and wealth for other entrepreneurs” also makes them worthy of study.

Research for the study saw its author trawl through US financial data dating back to 1980, with any company that achieved $100m in sales included. That methodology produced a finding that “on average, fifteen to twenty technology companies founded per year in the United States … one day get to $100 million in revenues.” About four of those are founded in California, with that State's share of startups that matter falling over time.

The report also says that while technology companies' produce lots of “companies that matter”, but makes a point of waving a sharp object in the direction of the tech startup bubble by pointing out that “Unsurprisingly, but contrary to some rhetoric, while information technology is important, it is not the most important contributor in percentage terms to the $100-million firms in the United States on a founding cohort basis.

That honour goes “... in percentage terms, [to] consumer discretionary and industrials.” The former category includes cars, entertainment and clothes. Industrials are concerned with construction, manufacturing and services. The sectors produce so many companies that matter, the study says, because they are the largest sectors of the US economy after the government.

$100m startups by industry

$100m startups by industry, since 1930

The study's not entirely fair to technology companies, because it insists telecommunications outfits are a different category. The definition of “industrials” is also problematic, as many technology companies offer professional services. Consumer discretionary is also a tricky one: do punters really need a fondleslab at home? ®

The Power of One Brief: Top reasons to choose HP BladeSystem

More from The Register

next story
Stick a 4K in them: Super high-res TVs are DONE
4,000 pixels is niche now... Don't say we didn't warn you
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
Philip K Dick 'Nazi alternate reality' story to be made into TV series
Amazon Studios, Ridley Scott firm to produce The Man in the High Castle
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Bose says today is F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
Too many IT conferences to cover? MICROSOFT to the RESCUE!
Yet more word of cuts emerges from Redmond
prev story

Whitepapers

Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Top 8 considerations to enable and simplify mobility
In this whitepaper learn how to successfully add mobile capabilities simply and cost effectively.
Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.