June 8, 2011

The role that new businesses play in the success of our economy cannot be overstated. According to a recent study by the Kauffman Foundation, job growth in the U.S. is entirely driven by new companies. Using data from the Business Dynamics Statistics, a dataset compiled by the U.S. Census Bureau, the Kauffman Foundation analyzed both new companies—defined as those in business less than a year—and existing companies from 1977 through 2005. In all but seven of those 28 years, existing companies destroyed jobs while new companies created jobs. In aggregate and on average, existing companies eliminated 1 million jobs annually while new companies created 3 million jobs annually.

As companies age, they also tend to produce less jobs. Companies in business ten years produce on average only 300,000 jobs in aggregate during their tenth year in business. The policy implications of this study are enormous. Municipalities around the country, as well as state and federal governments, should focus on creating new companies instead of luring existing businesses from other parts of the country or world.

Startup Open recognizes new business success. In order to recognize the important role of new companies in economic growth, the Kauffman Foundation sponsored the Startup Open competition. The purpose of Startup Open is to recognize 50 innovative, new companies and reward them with training and access to leading entrepreneurs. Last year’s grand prize winner had the opportunity to spend a day with Richard Branson on Necker Island. Opportunities like that simply can’t be bought. I would even go as far as to say that spending one full day of quality time with Richard Branson could easily save you a year of learning by other means while trying to grow your business. Branson is by far one of the most prolific and successful entrepreneurs of his generation and he is a fellow contributor on OPEN Forum.

Runner-ups were awarded training programs at the Kauffmann Labs for Enterprise Creation (where I am currently finishing a fellowship).

Startup Open is part of Global Entrepreneurship Week which is being celebrated this year from November 14-20. In order to apply for Startup Open, companies must submit applications by September 15 with the winners being announced one month later. The criteria for qualification are somewhat flexible. The idea is that your company has completed some type of “startup” event between last year’s Global Entrepreneurship Week and this year's event. A startup event includes registering an LLC, incorporating, closing your first contract, completing your first sale, securing angel investment, negotiating a round of venture capital financing or some other formative event that communicates your company is now “open for business”.

One restriction is that your business cannot have been legally formed (incorporated) more than 18 months prior to applying. At that point it isn’t considered a “new” business.

For an idea of the type of companies that one last year, take a look at these company summaries. Last year’s grand prize winner was Olivier Ceberio, founder of Boston-based Resolute Marine Energy which develops “wave-based desalination systems”. Olivier wrote about his experience with Richard Branson here.

Applications are accepted only on the iStartup platform. If you qualify, consider applying today.

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Mike Periu, Article, jobs growth, startups, Kauffman Foundation, Richard Branson