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Kauffman Analyzes the Ups and Outs of Startup Job Growth and Mortality

April 08, 2009

Growth is most noticeable in dogs, cats and humans when they are puppies, kittens and infants. A new analysis by the Kauffman Foundation looking at the Census Bureau's Business Dynamics Statistics reveals the same phenomenon in businesses: growth, as measured by net employment, is most significant for younger companies compared to their more mature counterparts.  Infant mortality of young firms is very high, though - nearly 20 percent of all jobs at very young startups are lost due to the businesses failing within the first year.

Nevertheless, net employment growth in the firms that survive their first birthday is 15 percent. The net employment growth gradually tapers off as firms mature, but so, too, does the risk of failure and closing.  The Kauffman Foundation terms this an "up or out" pattern.

The findings suggest TBED policies and investments that help to increase the survivability of young startups can lead to sustained employment growth, although at a lower incremental rate. Another possible implication for TBED programs could be to influence the importance of metrics that look at jobs sustained as much as annual job creation by client firms as they mature.

High Growth and Failure of Young Firms is available at: http://www.kauffman.org/newsroom/young-businesses-that-survive-grow-faster-than-older-businesses.aspx

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