No start-ups, no jobs, no money

November 22, 2010

According to Dow Jones VentureSource, venture financing is up 10% in the past year – which is encouraging news for job creation.  Less encouraging however (also from DJ Venture Source) is that it’s still down 27% compared to two years ago.

We’ve written previously about the slight misconception concerning job growth in the economy:  jobs are created mostly by new businesses, which start out small, as opposed to the more common short-hand of “small businesses.”  The Wall Street Journal reported on the subject a few days ago, with a sobering graph, in Few Businesses Sprout, With Even Fewer Jobs.

The entrepreneurs interviewed for the piece claim they’ve “never seen seed capital so low” and are “alarmed” by what is actually a one-two combination of unavailable capital and deep uncertainty about the overall business environment:

Some entrepreneurs say it’s not all about financing, though. They express concern about taxes, health-care costs and the impact that wrangling in Washington over the federal budget deficit will have on them. “I can’t determine what the cost of providing health care for employees would be,” says Kevin Berman, 47, who is starting a local-produce company in Orion Township, Mich., called Harvest Michigan. Starting a company “is harder than it was at any time I can remember.”

We are hopeful that in the months and years ahead our economy will improve at a more rapid rate.  But we also know that for even an improving economy to produce high quality jobs in substantial numbers, our government will need to focus on restoring a favorable and predictable business environment that provides the right incentives for new business formation.  That is the only approach that will allow for the unleashing of the entrepreneurial “animal spirits” that fuel robust periods of economic growth and impressive job creation.

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