US new business creation rate slows

Global Business

There’s a new trend generating some concern among some economic observers: a drop in the number of U.S. businesses formed each year. Some call it a startup slump.

CGTN’s Hendrik Sybrandy reports.

In Denver, Colorado, SyncHR is on a roll. The company offers what it calls next generation human resources, payroll and benefits software to mid-sized firms. It has 130 employees now, and it’s growing.

“We’ve been on a really fast growth spurt,” said Charles Var, Chief Marketing Officer for SyncHR. “We’ve been doubling just about every year for the last three years which is good news.”

Var said they’re moving into bigger offices soon. He went on to say, “We just don’t have enough seats for bodies and so we found some different space that has more square feet.”

Businesses like SyncHR were celebrated recently at Denver Startup Week, an event dedicated to the entrepreneurial spirit.

“There’s no question Denver is a hotbed of individuals taking risk and starting companies, but it’s not the case across the whole country,” Tami Door, CEO for Downtown Denver Partnership said.

414,000 businesses were formed in the U.S. in 2015, according to the Census Bureau, a 25 percent drop from 2006. One in 12 companies in 2015 were a year old or less. That number has also been dropping. While the U.S. recession played a role, some argue big corporations have crowded out new challengers. Door, one of Startup Week’s organizers, said American students have also been taught to play it safe.

“I would say for the most part we haven’t put being an innovator and taking risk at the same level as following the rules and staying on track,” said Door.

Metropolitan State Univ. of Denver marketing professor Darrin Duber-Smith said, “I think there’s a lot of truth to that.”

Duber-Smith said baby boomers are aging out of prime business-starting years. He also thinks high corporate taxes, rising labor and health care costs and difficulty in accessing capital represent barriers to entry for startups.

He argues that, “Which means fewer new products, fewer new categories, fewer new industries, and ultimately it probably means less innovation.”

It could also be a less productive U.S. economy. But don’t tell that to these Startup Week attendees. 19,000 of them attended 350 events over five days.

Conor Swanson of Code Talent Partner said, “It’s a fascinating opportunity to learn from others, to be inspired by people, to take stories from different communities and apply them to your own.”

SyncHR wants to become a household name when it comes to payroll software. Var said the company wants to continue to grow. He’s even looking forward to the challenges of scaling.