Tech startups are more likely than other new businesses to create jobs, according to a new report from the Kauffman Foundation.
In 2011, the most recent year with data available, high-tech companies between one and five years old created a net 16,700 positions. In other sectors, new businesses lost an overall 513,700 jobs.
While about half of all new companies fail within the first five years, tech companies tend to either fail quickly, before creating many jobs, or expand quickly, creating sustainable jobs, the report says.
The STEM-based high-tech sector was 23 percent more likely than the economy as a whole to create new businesses in 2011. The information and communications technology sector was 48 percent more likely. (ICT includes businesses involved in computer and communications equipment, semiconductors, systems design, software, Internet services and digital publishing.)
In addition, the high-tech companies that survive grow much faster than other startups. And these startups are springing up in some surprising places. They were especially prominent in Colorado — Boulder, Fort Collins, Loveland and Grand Junction – as well as Corvallis and Bend, Ore., and Cheyenne, Wyo. In those smaller cities, the report says, these businesses play a prominent role in the local economies.
For example, a study of startups in the Cleveland area concluded that the 127 such companies there contributed more than $200 million to the regional economy in 2012. They also created about 850 direct jobs and paid $12 million in state and local taxes.
“The understanding that new high-growth, high-tech [companies] hold the most promise for creating jobs is certainly the premise under which the Northeast Ohio community came together to create [the non-profit accelerator] JumpStart nearly 10 years ago,” said Ray Leach, the organization’s founding CEO. The Cleveland-based venture-focused organization has invested in 76 tech-based area startups, and provided business assistance to 400 more. “Many parts of the country have lost industry in recent years. It’s these new jobs and new opportunities that have regions across the country increasingly interested in tapping into their entrepreneurial potential.”