So to start, we need startups right?
We need ventures to be created.
And so we have entrepreneurs.
Founding entities with ideas and those ideas, those founding teams,
ultimately will need some funding, so Venture Capital is providing
funding to many startups that have high growth potential.
Likewise for established firms that are focusing on startups with particular
products or services that may be complimentary to what they're providing.
In addition to this flow of money toward ideas, we also see another sort of flow.
So while the money is represented by green arrows, the red arrow is used to represent
the flow of people from established firms to the startup context, right?
We discussed in another module how established firms can be inertial
in the face of innovation.
So professionals who are at these firms can feel circumscribed by these inertial
pressures, they'll want to pursue these technologies and so
this winds up causing some of them to want to leave and found their own firms or
join entities that are able to pursue these sorts of technologies.
And certainly this happens an awful lot in tech.
The traditional example here is that a Fairchild Semiconductors in
Silicon Valley.
Fairchild gave birth to many well known semiconductor firms
as the members of their organization left and founded newer firms.
So one baby from Fairchild is of course intel,
which has been extraordinarily successful in that space, but there are quite a few.
And that's another history worth looking up.
It's not only that this happens in high tech firms, but much of the value that's
created in the startup context is in the tech sector, which we'll see shortly.
But there are other examples of contexts where people will leave established firms.
So for example, professional services firms, legal services,
accounting firms, consultancies, and the like.
Again partners at these firms may leave and found additional firms,
so the same sort of idea of established firms spawning offspring occurs.
So, lets talk about what's happening in this context where new products and
services are being created, value is being created,
investment is being made, and the like.
Let's focus first of all on the value that's created
just by the fact that new enterprises or small businesses exist.
Let's talk about the enterprises themself and
the jobs that are created within these enterprises.
According to the Kauffman Foundation,
0.3% of US adults were entrepreneurs in 2014.
Let's put that in context.
3 out of every 1,000 US adults were self-employed
in 2014, had some sort of enterprise.
So it sounds like a very small number, but there's an awful lot of US adults.
There are more than 28 million enterprises in the United States.
And over 99% of these are small businesses.
And small businesses are defined by the Small Business Administration as less
than 250 employees.
According to the Small Business Association, 67% of all
private sector jobs created in the US occur in small businesses.
In high tech, this number is lower.
It's not 67%, it's 37%.
And this makes sense because the overall set of ventures includes lots of self
employment where there are virtually no employees or a very small number,
the food trucks, the dry cleaners, and the like.
In high tech, of course we have many firms that become very, very large.
And so even with that, small businesses high tech start ups still account for
37% of all private sector jobs created in the US,
so a lot of employment is happening as a result of venture creation.