I don’t get it. I believe it, but I still don’t get it. John Tozzi posted “Startup Activity at Record Low” today on his New Entrepreneur blog on BusinessWeek, quoting outplacement firm Challenger, Gray & Christmas. Here’s his summary:
Challenger says just 3.7 percent of job seekers leaving its outplacement program are going into business for themselves in the first half of 2010, compared to an average of 8.6 percent in the full-year 2009.
I found this note particularly fascinating. John quotes Challenger:
Startup activity tends to drop at the beginning of a recession, spike at the end when unemployment is highest, and drop when hiring resumes.
This shows up clearly in this fascinating chart, startup rate vs. unemployment. What bothers me about it, however, is that I thought I remembered the great recession of 2008-2009 fairly clearly, and I don’t remember a big spike in startups as shown here. I remember a credit crunch, a drop in SBA loans and a drop in startups.
But I don’t mean to imply that I don’t believe the data here. I do. I guess what happens is we all react to these trends at different points in the cycle. We get behind sometimes. We see the startup rate shoot up as the unemployment rate shot up; and then it goes down.
What does make sense here is the phrase “pushed entrepreneurs,” as in pushed off a cliff. People who go out on their own because they have to. We heard a lot about pushed entrepreneurs as the green line above shot up in 2009. And some of them make it and stay in business, and some don’t. And the turn back downward in startups isn’t (presumably) those same people making it or not making it; it’s fewer startups happening because more people find jobs.
How does this affect you and your startup? It doesn’t. Macroeconomics doesn’t drive startups. You do. You’ll start your business, or not, because it’s right for you. You have plans, customers, resources and the will to do it. Or not.
It reminds me of this quote I picked up from Fred Wilson, on his blog, which actually originated in Twitter:
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.
