The US startup is disappearing

Can you elaborate? I am genuinely interested in the backstory and/or more detail and the scenario.

that does sound like US companies that contract out their cleaning services to an independent company. here the motives are a bit different (reduce employee headcount and thereby eliminate unemployment insurance and benefit costs and reduce other liabilities. possible other advantages depending upon workforce eligibility to work legally in the US.)

There is a declining intersection of people with the capital with the the people who have the inclination to make a start on a venture. Both in the trait within s single individuals, and as social mixing.

The number of plain small business starts have also been on a long decline for much the same reasons.

That's why loans can be a trap; you have to pay them back eventually regardless of outcome. I remember Mark Cuban saying it's foolish to take out a loan to start a business, and while I do think there's a time and a place to do that, there's a nugget of truth to what he said.

A lot of people such as myself have nothing to lose in starting a business, that is besides the debt which has become further and further normalized in our society.

Loans are great and I've used them for a variety of things, but it's fascinating when there are unintended and perhaps unintuitive consequences.

> One big confounding factor could be the cost of student debt.

Student debt has increased, but not that much. Only a few thousand dollars over the last 25 years.

> One big confounding factor could be the cost of student debt. You can't tell your student loan company to defer payments until your business gets off the ground.

But how many prospective tech start-up founders are saddled with student debt?

Granted I went to school (public university) 10 years ago, but in my experience the majority of the students in the CS program all come from the following cohorts:

* professional parents paying for school

* Students receiving massive amounts of grant money, with minimal loans needed

* Students able to get top internships/TA positions during the school year, which more than offset school cost.

I agree loan debt is a problem in general, but among the population that has produced VC-funded startups, it feels minimal.

(The actual "problem" I see is that opportunity cost of a start-up is now higher for these would-be founders because large companies pay so much.)

The youngest boomers are currently 54. Perhaps they are starting to think about retirement now, but what money did they have in 1990 (when they were 26 years old) to invest in a 25 year old?

The criteria is "a small company with at least 10 employees." Uber drivers would not count, neither would other independent contractors who run their own design or development businesses.

I honestly think you have hit the nail on the head with this.

It is an unfortunate consequence of a modern education system that is set up to produce worker bees.

I can attest to this. I'm currently working my way through the college application pipeline, and my peers are laser focused on what it takes to get into a good college. Rather than pursuing what interests them, many choose challenging courses just to have a favorable transcript, and standardized test stress is an epidemic. Anxiety about "getting in" to a good school supersedes any dreams of starting a venture or pursuing an option that isn't a 4-year prestigious university.

The disappearance of new ventures can be attributed in some way to this new way of thinking. I've been told that college anxiety didn't exist 20 years ago -- maybe it's time to go back to those days. High school, in my mind, is a time to experiment and find what actually interests you: not to manifest into a homework bot that's dominated by stress.

This isn't always the case, though. The 25-year-old with life experience and a past of experimentation still exists, it's just not the norm anymore.

This is an excellent point at the lower end of this age range. I do still think there is something in the fact that today's tech companies have very high profit-per-employee numbers. This allows them to pay higher skilled workers more money and those people become less likely to leave and start something on their own (a financially risky choice). It's possible that golden handcuffs (equity, etc.) are pushing this number down as well.

Yes, it is probably, "modern kids," who are conditioned to do what they're told. I think you've solved it. Also, they're immature and haven't even lived in the real world until at least 28.

No. I think it's more that the mythos of the startup has been busted. Most of us probably know someone (or had it happen to them) that joined a startup, and got completely fucked on equity while getting paid peanuts and being worked 80-90 hours a week. Why would they want to go work for a startup, or give most of their startup to VCs, when they can work in a much lower stress environment for far more money, and actually get to go home at the end of the day?

I have no idea if the data support this, but it intuitively rings true for me.

My background - I failed out of college in 2003 due to clinical depression, and spent a few years getting my life together and learning how to function. I'd met my wife at 14 years old and we've been together since, which has been a huge factor in my life. Both she and I describe ourselves as "hustlers" - meaning that we pretty much always have at least one side hustle going on to generate income, and usually have several.

It as 2007 before I was really able to function as an adult and got a "real job" with an actual career path. By that time I'd been: an electrician, a photographer, a photo technician, an assistant on a dairy farm, a web designer, a PC technician, and a retail clerk. My wife had been a hair and makeup artist, a dance teacher, a graphic designer, a videographer... you get the idea.

A couple of years ago my wife was doing volunteer work as a member of our local Junior League, and the discussion turned toward career plans. Her peers in her age group (late 20s/early 30s) were in many cases either just graduating school after having achieved an advanced degree or were "paying their dues" working their first real jobs. Most of them were single and many had never had a serious relationship. That struck her as very odd - by 30, we had gone through a number of milestones for which her peers felt they still weren't prepared: careers, marriage, children, moving across the country, etc. By and large, they seemed to feel like they were finally wrapping up their education and "young adulthood", and were about to embark on their life.

I figure a lot of this was because of our backgrounds - my wife and I grew up in a poor area in Arkansas where it was extremely common to be married with children by twenty, and at the time we were living in central Virginia where the median family income was over 300% higher than where we grew up.

I do wonder though how much of it is simply generational. It seems like a lot of people I know in their twenties not only aren't yet fully responsible for themselves (financially and socially), but don't feel like they are expected to be yet. That's completely foreign to me, but it appears to be a common perspective.

I strongly disagree with this idea. And the romanticizing of of the "maybe joined the army, married young" path. For one, the world is a little different now than when this path was normal - things are mass produced and menial jobs are outsourced to third-world countries, work that doesn't require specialized training is being automated. You can't open a mom and pop retail store around the corner and expect to survive in the age of Amazon and Walmart. It's also more expensive than ever to start a business - healthcare costs are through the roof, and big businesses have managed to finagle tax breaks that you won't get. Also since OPs comment was referring to the businesses started by those with master's degrees and higher, factor in student loans which have skyrocketed (increasing the risk you're taking on). Also, factor in housing costs in cities, which is where you need to be if you want to start something niche and technical. The fact is economic incentives are set up so that it's just way way more beneficial for a 25 year old to join a big company than to start their own (and definitely more so than joining someone else's startup...which makes hiring for startups harder - and round and round it goes).

You can reply with polemics about the joys of working for yourself etc., but clearly there must be a point where the financial beating you take from doing so makes it not worth it. To me, this data indicates that we have reached that point.

I thought we had been dogging millenials for ages for bring dynamism to the workplace through not wanting to do what they are told? These kids can not do right, no matter what.

I would love to mount the Mr. Holland’s Opus defense here. Maybe the problem is not that kids are rule-followers / lemmings, but maybe through removing free time, attacking the arts, etc., we have raised one of the smartest generations without giving them opportunities to become impassioned about what they could make in this world.

I'll attest to that, at least anecdotally: we sell primarily to small software companies and have a lot of customers in the EU that tend to run the gamut in terms of makeup, whereas in the US almost all of the small companies are being tended to by older developers that started them in the 90s.

I've also noticed that in the EU (and other places outside of the US), developers are more likely to use non-mainstream languages and tools and aren't so hung up on the current trends.

But, again, this is all anecdotal and subject to my own biases.

That's awesome to hear. I'm thankful for your insight and feel encouraged to know that I'm not the only one. I'm starting to realize that it would be good for me to grow my local network with individuals such as yourself. Having people to talk who can better understand and appreciate my uniqueness is important for general mental health.

i once heard that most small business owners are either the children of small business owners or small family farmers.

if this is true, perhaps we're in a downward spiral, given historically smaller startup cohorts and the agglomeration of family farms into corporate farms.

Thank you for sharing your experiences and insight. I hope your oldest is able to find his way and pursues his passion.

Right, that's definitely a huge component, and one that is focused on in the original article. I bring up these other factors because they're not mentioned, including the fact that the rate of entrepreneurship has actually increased among the least formally educated.

Well, for one, they have ensured that joining a startup is financially less attractive than working at a large company/FANG.

That would be true if this was actually a number, not a percentage. To take a hyperbolic example, there could be 100x more startups at 0-2 years right now than in '85 and 100,000x aged 2-4 years; you'd still see a percentage decline in the former and we'd be pretty far from "the startup disappearing."

Nobody will give a senior developer 5% equity when even VCs only take 7% for the first investment that also includes access to professional networking events.

I guess you may be right. Is there still big companies which would fire you because you're late 2 minutes 3 times this year? Where everybody have to be there at 8am? And stuff.

If feeling like the world is riding on your shoulders changes your risk-adversity quotient maybe founding a startup isn't such a great idea. Instead of 1 mortgage (yours), you're now responsible for 20 (your employees').

> I believe student loans can be written off after 25 years. Not sure the exact details. I know med school loans can be paid off based on income and if your income is low enough (almost never happens) you don't have to pay anything.

I would frankly rather not have had 25 years of a ticking debt hanging over my head. I'd be almost 50. Maybe some people can see that far into the future and are comfortable with it, but I judged it an unacceptable risk.

Re the economies of scale, I don't think you're wrong per se, but third order effects have a lot of contributing causes.

> Also, I believe their definition of startup is not what most people on HN think of when it comes to startups. It just means newly formed businesses, the vast majority of which are small, non-VC funded businesses.

Ah, the ones where you submit a business plan and get a bank loan that you have to pay back. ;-) IMO, that's riskier than VC work; you walk away with a fat pile of debt if the biz fails before a fully formed corporate veil is established. Recall that sole owners don't have veils, as they personally sign for the debt; after a certain point of size that doesn't happen.

The ability of the median person to survive if their venture explodes is, to me, the critical point in founding a venture.

There's probably a very useful economic history of small biz/startup failure for the past 200 years. I wonder if it's been written yet!

Small firms have always gone out of business or grown, or been bought up, its their creation rate that has dropped off causing the ration of small/large to change.

> I believe student loans can be written off after 25 years.

The forgiveness of student loans is considered taxable income. The WSJ ran an article a couple weeks ago, a dentist had over $1M in student loans and projected to have $2M when the forgiveness kicks in, at which point he would then owe $700K in taxes.

No, they only give those to banks when they destroy the economy and steal a bunch of people’s houses.

Personally, I would cut the military budget to ensure we have an educated society. It benefits us all in society.

Sure, just declare bankruptcy.

I paid off my student loans. Do I get that money back?

We are the richest nation on earth. There is zero reason why we shouldn't be able to do this.

Oh yes, that! This is much worse if you actually have to address health issues! I was considering the best case median-paid person and their calculations!

If you have real health issues in your family, your best bet IMO is to work your tail off and be a salaryperson at a longer-lived Fortune 500, as those tend to have good health insurance. The family gets to see a doctor without ya'll going bankrupt - also, it often pays well.

Wait, entrepreneurs have healthcare costs? News to this entrepreneur. Healthcare is completely unaffordable if you start a new business and find yourself on the individual market making even a modest profit (to disqualify you for subsidies). There are a variety of factors that conspire against small businesses. The lack of health care is definitely one of the risks you need to be comfortable with if you're going to go out and start a business. The hope is that you can grow quickly enough (in employee count and profit) to set up a group plan before shit goes wrong health-wise.

The degree to which this has weighed on entrepreneurship has got to be huge. I've put off efforts because of insurance, or because money had to go into healthcare. I know other people who've done it. I know someone who ran a great autoshop out of his house in off-hours for years... but needed a state full-time job because one of his kids had a condition that only a socialized risk pool had the depth to handle. Wonder what he could have done if the shop was his full-time job.

It seems obvious -- set up a socialized insurance system where if you happen to be one of society's big winners, you'll have to share more of that upside, and if/when you lose big, you get covered. That's what insurance is, socializing it just takes it to its logical conclusion, and even a guy like Hayek thought that maybe this was a place where it might be better socialized rather than private markets. In doing so you help with one of the most common risk factors and costs freeing up attention and small capital across the population.

Universal healthcare, akin to other developed countries, would be one of the greatest boons to entrepreneurship in the US.

Didn't the ACA take care of that?

Most of the startups I know were pushing people into the state exchanges for their healthcare needs to try and limit their overhead for providing health insurance.

I said to make college free: tuition, room, and board, so long as you keep adequate grades. Stop the loan system entirely. Sorry, I must have been unclear.

I would agree! I vaguely plan to shift to consulting out my experience and competence at age 60 or so, then do that on a part time basis until I topple over. No sense in vegging at home, and I expect have the time and network at that time to select roles I personally enjoy.

My parents have reached the same conclusion.

On a side note, I've had no small amount of schadenfreude watching them run head-long into the regulations they've spent the last 3 decades cramming into every nook and cranny of the economy. They thought it was funny irony when kids got visits from authorities for selling lemonade at the end of the driveway... now they've got a metaphorical truck-full of lemons, a squeezer, and a hefty reality check.

> I have had a hypothesis for awhile that the economy is going to see a lot more post-retirement startups.

I think you are overestimating the economic state of most retirees. Also, startups are risky. Old people do not like risk and venture capital isn't going to throw money at older people nearing the end of their life.

> I floated the idea of trying to start a business with one of her hobbies.

So self-employment rather than a traditional "startup".

> I know several retirees that have done something similar, most go into a consulting role/function helping newer companies since their knowledge and experience is their #1 asset.

So taking jobs from younger people? Don't see how good this is for society in general. You shouldn't be allowed to collect a pension/social security/etc and work. Just my opinion.

Consulting is not a start up.

I totally agree this is the root of the problem. You wouldn't be giving out 50k loans for degrees that are looking at making 30k a year.

I think the big problem with this approach is that it disproportionately effects poor people. If person A studies underwater basket weaving but their parents cosign and have great credit and income, that's much less of a risk than person B who is studying engineering but has no assistance. 18 year olds have very little credit history or net worth so you are mostly looking at their parents situation. If there is a way to overcome that aspect, I would totally support the ability to discharge loans.

Wait? What? You can't be serious? The market will sort "what is a worthwhile education"?

Why not let the market sort out legislation? Or court cases? Or child custody?

This is a pretty sad statement of your personal values if you're serious.

I believe this only applies to federal student loans.

What would keep someone from getting an economically valuable degree, declaring bankruptcy on graduating, and then just waiting until that had expired from their credit record?

To obtain some market-based grounding in reality, I'd rather the universities be required to collect their fee as a fixed percentage of the students' incomes for a fixed number of years after graduation. Poor students wouldn't be handicapped by not having the money to pay for college, because the college wouldn't be paid until the student got paid.

The "epic amount of fat to be trimmed" from the universities won't happen until the universities get off the guaranteed gov't money gravy train and have to adapt to a system where their success depends on their clients' success.

The kids of the better off have more debt because they can afford to take it on in the first place. Those from worse families financially are likely more avoidant of debt.

What other measure would you use to determine if education was being thoroughly and adequately transferred and learned? Space is limited in classes - a class with half of the students failing to grasp the material is of less benefit to society than a class where most of the students are grasping the material.

When I went to college you would need a GPA of 3.0 to keep scholarships. This was also the norm for nearly every scholarship.

My arbitrarily guesstimated number would be 2.0 on a 4.0 scale.

Students who scored under that at my alma mater (U of Idaho, go go State School!) really had issues of one kind or another, whether it be health, disinterest, family, etc. Over that, yes, issues occurred, but it didn't make me sideeye and wonder if they should withdraw and save themselves their time and effort.

I expect other people would adjust that number. I'd probably also cut the funding for a full-time undergrad after 6 years. That number is also debatable, and I acknowledge that one could come to different numbers with solid justifications.

I also would fully fund grad student tuition, room, and board, with somewhat adjusted numbers depending on the program.

Note that this isn't merit-based, but a eh, you're giving it the ole college try, we're not going to defund you, along with a low-pass filter to remove pure leech behavior.

IMO, one of the big issues with massive extraneous issues hitting a student is that if you withdraw without a degree, you still have the debt, but no degree to help you pay it off. The incentive is to stick around and squeeze out the degree somehow, anyhow. Which is a perverse incentive, since profs, employers, fellow students tend to prefer people who want to be there and do well. So when you drop out early, you end off in a worse financial state than if you'd not gone to college at all (modulo whatever learning you picked up).

n.b., my perspective is that education is a socially provided benefit to improve society. It should not be a market good like a house or car. We all benefit from a more educated populace (and one with less debt, too!). I recognize there are other perspectives, but I think they lead to worse systemic ends.

Also GDPR is more like 90 pages and it took me about 2 days to work it through an to come up with an assessment of how it will impact our business. You want to do business? Make your homework.

maybe not everything needs to be as heavily regulated as food safety.

There's a strange thing about that. I enjoy traveling and living in developing nations. Food safety organizations and inspections are basically nonexistent. And in a decade I've gotten food poisoning exactly once - no hospital visit even then. It's anecdotal, but it's also very typical among other expats. People that make their living selling food generally know how to cook and enjoy it! And they also know full well what happens when they serve bad food. Think about the places you eat at. There's going to be a handful of places you eat at, over and over again. And this is also typical. Serve bad food just once, and a business stands to lose immensely. They're going to not only permanently lose that customer but also deal with all the terrible word of mouth that they will spread.

And in the end the biggest risk of food poisoning is often not from the food itself, but from unclean handling of the food. And all the FDA rules and regulations in the world don't mean a thing when a disinterested minimum wage worker chooses to not wash her hands after a bathroom visit, or just keeps on prepping after sneezing on the produce. The one time I got food poisoning was not from one of the literally thousands of dishes I've ordered from street vendors, but from a western-targeted chain restaurant. Instead of having the business owner being the person prepping the food, it was our low wage disinterested worker -- same story as the times I've gotten food poisoning in the US.

This video [1] just makes our whole system of food safety regulation seem so backwards, at Berkeley no less. Not an appeal to pathos, but an appeal to logos. We're treating people like shit and deterring entrepreneurship for the sake of enforcing these rules and regulations which don't really have such a major benefit as we might believe. It's an undesirable cost:reward ratio.

[1] - https://www.youtube.com/watch?v=2_TvG_ZNvQo

Please don't do this here.