Economics at Colorado State UniversityDenver Startup Week

Even Colorado’s failing companies help create jobs in the long-term

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Denver Startup Week is underway, an annual celebration of entrepreneurship in the area, and a study released today finds Colorado continues to be a national leader when it comes to start-up businesses. That’s partly because the state is home to a large number of companies that fail, according to the study’s author, CSU economist Stephan Weiler. “In Colorado, the pace of new business creation is especially high, but so is the rate of closure,” the report finds. But, Weiler says, “it hasn’t hurt Colorado in the ways that you might think.”   Weiler’s team looked beyond Colorado, through the United States, and found that places with a lot of openings and closings lead to more job growth long-term. “What we think is happening is that businesses learn from each other,” Weiler says. “The fact that one app didn’t work, but everybody knew what the app looked like, and so other followers can take a look at the app… So the idea is that, you have entrepreneurial pioneers, and even if they fail, and maybe especially if they fail, others can follow.”   And Weiler isn’t talking just about Internet-based start-ups. “Entrepreneurship is really wide, really broad across all the sectors,” he says. “The restaurant industry, for instance — food carts have become a remarkably innovative, creative part of a restaurant scene.”   Overall, the contribution of start-up businesses to the economy is much more substantial than most people realize, Weiler says. “Not the IBMs, not the Googles of the world. It is, in fact, these tiny companies that are sprinting and starting up that are responsible for a huge portion of the job creation,” Weiler says, putting the figure at about 40 percent. The Innovation Report also found one major reason to question whether Colorado’s position as an innovation hub will last long-term. There’s a coming talent shortage, he says, which could affect not just whether there are enough skilled workers for entrepreneurs to hire, but also whether the state will continue to be such a fertile breeding ground for smart new companies.

Right now Colorado has a significant advantage over other states when it comes to the share of the population with at least a bachelor’s degree. But as the older generation retires, “the education advantage has become progressively smaller,” the report states.

“[Colorado] imported a lot of the talent… There was a particular boom in the 1990s.”

Now, he says, many talented people are being lost to retirement: “and so we need to replace them. But the problem is, we aren’t doing a great job of educating our own, so the cohorts that have to replace these folks aren’t nearly as talented as the people that they’re replacing.”

So, he adds, “Colorado may look a lot more average than the position we’re used to.”


Listen to the CPR interview with Dr. Weiler here: