The world of startups is a glitzy one of fast-growth, high-tech companies pounding in the heart of New York and San Francisco. That's what the hype would have us believe. But a new study by the National Commission on Entrepreneurship says it just ain't so: Only 4.5% of startups--and fewer than 1 in 20 of all businesses--are high-growth companies with an annual employment growth rate of 15%.
So, do the fast growers at least live up to their image as national players? Nope. The largest group among them, 44%, serves only local markets. And just 31% are found in the biggest cities. "We spend so much time talking about the Silicon Valleys of the world," says Patrick Von Bargen, the commission's executive director. "Now we find a serious concentration of growth companies in the Rust Belt." New myths die hard. Planning a big direct-mail campaign? You might want to reconsider. Postal rates went up by 1.5% to 5% on July 1--the second hike this year. Bob Wientzen, president of the Direct Marketing Assn., suggests using more targeted lists to mail smarter. And talk to your local post office to see if you qualify for any bulk discounts. From bankers to entrepreneurs, everyone seems to have a beef with the U.S. Small Business Administration. Now, add environmentalists to the list. Friends of the Earth and the Forest Conservation Council are suing the agency, alleging violations of the National Environmental Policy Act from 1997 to 2000. The groups charge that by backing $400 million in loans to businesses like gas stations and minimarts, the SBA contributed to sprawl in the Washington (D.C.) area. "It's the cumulative impact of hundreds and hundreds of these loans," says John Talberth, president of the Forest Conservation Council. The SBA counters that small business follows, rather than leads, urban development. "Small businesses go to places where there are customers for their goods," says Jane P. Butler, the SBA's associate administrator for financial assistance.
Settlement talks, which started in February, have reached a stalemate. Meanwhile, the enviros are analyzing SBA activity in Vermont and New York. It could turn out to be a sprawling battle. Saras Sarasvathy, entrepreneurship professor, University of Washington, on market research:
Your work shows that successful entrepreneurs don't rely on traditional market research. Why?
They don't believe in it. They have their own approach that's more hands-on. Instead of using focus groups to predict a market, they take the product or the idea out and try to sell it to one person. And then they generalize that into a customer segment.
It's still a form of product testing. How is this method different?
It's a completely different system of reasoning. The way you define the problem is different: You're not setting a goal and saying "how do I get there?" You're starting with who you know and what you know and looking at how you can use that.
What are the benefits of using this method?
It costs very little, so you're reducing your cost of failure. With market research, you're spending a lot of money, and things don't always work. And then, unexpected surprise markets come up when you don't start with "the market." Your business may be global, but your insurance probably isn't. That's a problem if the goods you ship fall victim to political unrest. Or if your employees traveling abroad are hit by crime. Or, worse still, if your product sample makes people sick. Now, the Hartford Steam Boiler Inspection & Insurance Co. (860 722-1866) offers a single product for small companies that covers all global risks, from travel accidents to kidnap and ransom. The OneSource policy works in 130 countries, but it isn't cheap. Annual premiums range from $2,500 to $40,000. Still, it could take some of the peril out of your global adventures. Women sales and marketing executives make less than their male counterparts. And the smaller the company, the larger the gap.
At companies with revenues of $1 billion-$10 billion, women earn 13% less than men
At companies with revenues of $10 million-$50 million, women earn 28% less than men
At companies with revenues of $1 million-$10 million, women earn 31% less than men
At companies with revenues of under $1 million, women earn 35% less than men
Data: Sales & Marketing Management Next Wave: Percentage rise in the number of minority-owned businesses from 1992 to 1997, vs. 7% for all companies: 30%
Data: Bureau of the Census