How America can create jobs
The nation's entrepreneurial prowess may be the best hope to stem 9.7 percent unemployment. Companies from a laser-tech firm to a baby-sitting network are harnessing new ideas – and helping reinvent the economy.
(Page 5 of 6)
True, in official pronouncements, Washington authorities and some pundits suggest that the credit crisis has been easing over the past year. But don't tell that to John Joyce.Skip to next paragraph
Subscribe Today to the Monitor
"I'm not seeing credit freeing up," says Mr. Joyce, who runs the Small Biz Nest, which helps young companies with marketing strategies. "The consensus is that this is the toughest [business climate] they've seen."
He sees the evidence right in the business park where he works in Shirley, Mass.: the printing firm that's profitable but was turned down for a loan to buy equipment; the painter whose American Express limit was cut back, removing a cushion that had helped him bridge gaps between revenues and payroll costs.
Some start-ups simply aren't getting started. Others are building their businesses more slowly than might otherwise be the case. In New York City, Vinicius Vacanti and Jim Moran are launching an e-mail-based service that sends consumers a customized bargain alert each week, tailored to their preferences for anything from stiletto heels to sit-down dinners. Launching in a recession, they aren't rolling in seed money for their firm, Yipit.com. "We practiced the lean start-up methodology," says Mr. Vacanti.
That means no employees right now (aside from one intern) and a focus on proving their business concept in just New York first. And they count themselves among the fortunate start-ups, having a friends-and-family network that has provided early funding.
Venture capital firms, in a recent survey, say they expect 2010 to be better for their industry than 2009 was. But that's not saying much. The survey, by the National Venture Capital Association, also found firms expecting a protracted weak environment.
"Venture capitalists will have to do more with less," Mark Heesen, president of the association, said in releasing the results in December.
Uncertainty about the policy landscape also poses challenges for new companies and small businesses. While proponents of the Obama administration's healthcare reforms argue that they will ultimately help the nation's economy, if passed, the bills would also impose new mandates on employers to pay for health coverage.
Another problem facing start-ups is the "brain drain" to other nations. America continues to educate and attract many highly skilled immigrants, who are among the most likely to help launch high-growth firms. But many others are now going elsewhere to study or returning home after attending college in the US.
Despite all the challenges, the US enjoys considerable strengths in its innovation economy. First, as the world's premier bastion of consumerism, there is no better place to give new products a try. Columbia University economist Amar Bhide believes traditional theories of economic growth overestimate the role of scientific research and underestimate the role of "venturesome" consumers, people who take risks alongside the entrepreneurs by trying new products.