Roadblocks to Startup Success
The Street drew from a recent Kauffman report in an article published yesterday titled 3 Roadblocks to Success as a Startup. Start-ups add an average of 3 million jobs to the economy every year, so it is important to examine whether our economy is maximizing this benefit. The article outlined three big obstructions to creating new firms.
First, there is the issue of access to credit. It is incrediblydifficult for small business owners to get a loan. From the second quarter of2008 to the first quarter of 2010, bank loans to small businesses dropped from $710billion to $670 billion. Though the Small Business Association does subsidizeloans to many who wouldn’t otherwise receive them, this has become less commondue to lack of stimulus money and hesitancy from applicants to put up largeassets like a house or 401(k) as collateral.
Second, though many brightforeign-born students come to the U.S. to study or do research, it is hard forthem to stay here and start businesses once their education visas expire. Thisis a shame, because foreign talent and entrepreneurship is a largely untappedsource of potential new jobs. Kauffman Foundation studies have revealed that between 1995 and 2006, 25% of all technologystartups had at least one foreign-born founder. During the same time period,immigrants founded 7,000 technology companies. The number of startups byimmigrants could be even higher with an immigration policy that is favorable toentrepreneurs.
Third, while angel investors, once wealthy individuals willing to take some risks when investing in startups, are now more inclined to pool resources into group funds, which "decreases the variety of investments."
All of these factors make itmore difficult for entrepreneurs to start businesses, and present a threat toreal economic recovery. According to Kauffman director of entrepreneurship TomRuhe, "If you really want to have a jobs agenda, then put money intoexpanding capital for startups. Without dispute, that is the job-creationengine in this country."