Nearly all jobs created in the most successful startups

By April 21, 2011 5 Comments

I’ve written before about how the UK government has worked out that the majority of jobs created in the UK are created by startups and that as a result they are working hard to make life easier for entrepreneurs.  Perhaps the most visible parts of that policy are tax incentives, support for venture capital funds and support for the east London tech cluster (aka Silicon Roundabout).

New research out from the World Economic Forum supports that policy and throws some light onto which startups should be favoured in order to maximise job creation.  Their research into 380,000 startups across ten countries found:

  • The top 1% of startups created 40% of total jobs and contributed 44% of total revenue (percentages are of total contribution from startups)
  • The top 5% created 67% of total jobs and 72% of total revenue

The implication is that government policy should focus on identifying and supporting the very best startups.

Additionally, they identify eight strategies for early stage companies:

  • creating and riding a new business growth wave
  • new product in a new category
  • new product in an existing category
  • redesign of business value chain
  • research or discovery of knowledge
  • rollup (aggregation) of existing players
  • governmental, regulatory or political change
  • idea transfer or transplant.

The upshot of this is that as well as all the helpful tax incentives the government should also focus on ways to assist the very best startups.  I haven’t seen an analysis of how the top 1% or 5% breaks down between venture backed companies and non-venture backed companies, but I would guess a pretty high proportion of the have taken VC.  It is in my own interest to say this, but the implication being that the government is right to focus on supporting VC funds and VC backed companies as a way of helping the top 1-5% of startups where all the jobs are created.  The other implication is that easing visa applications for entrepreneurs who want to come to the UK and/or talented people who want to come from abroad to work for UK startups as I’m guessing that both of these categories of immigrant will be over-represented in the top group of startups.

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