We need more startups

By Adam Lashinsky and Heather Clancy
March 18, 2016

Would it surprise you to know growth in startup companies in the U.S. not only has stagnated but has declined since 2000? Covering Silicon Valley as I do, it certainly surprised me. But that’s precisely what Fortune’s Geoffrey Colvin reports in the current issue of the magazine. In his article, “Startup Stagnation,” Colvin explains that headline-grabbing “unicorn” companies like Uber and Airbnb are the exceptions, not the rule.

The trend is disturbing. Startups exert a powerful influence on the economy because they generate a disproportionate number of jobs. Also, as Colvin writes, a decline in startup activity is “bad news because the rise of new companies is an important way in which capital and labor get reallocated from low-productivity uses to high-productivity uses.” One of the researchers Colvin cites recently gave a presentation called “Where Has All the Skewness Gone?” Clever, right?

A couple of other things surprised me about this report. The first is that Silicon Valley’s resilient startup scene doesn’t make that big of an impact on the macro-level numbers. The second is that the researchers don’t know what is causing the decline. That doesn’t stop Colvin from speculating on the outcome. “One can’t help imagining,” he writes, “that maybe these trends are contributing to several intractable problems in the U.S. economy: stagnating wages, long-term unemployment, low productivity growth, and overvalued unicorns as VCs compete for ever fewer high-growth startups.”

Were this trend more widely known it could easily become a political football, especially in the hands of the anti-regulation crowd. And they might have a point. It isn’t likely Donald Trump would pay attention to something as nuanced and sophisticated and fact-based as academic economic research. But it’s quite possible this data explains the resentment of the voters who support him.

A healthy economy needs oodles of startup businesses, not just the mega-cap lottery-ticket winners of Silicon Valley. An economy without vibrant startups, no matter how attractive the headline-level data, harbors giant pockets of discontent.

Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com

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BITS AND BYTES

Is Google shopping for cloud apps? Under new leader Diane Greene, Google’s cloud team has assembled a list of cloud business services that would fit well with its existing portfolio, reports Re/code. The list reportedly includes Namely, which specializes in payroll and benefits apps; Canadian e-commerce company Shopify; and Xactly, which focuses on sales and performance management. (Re/code)

Apple encryption engineers might quit over government edict. What happens if federal government prevails in the hotly debated iPhone encryption case? Part of the team who would be responsible for watering down the smartphone’s security is preparing to quit, reports The New York Times. A hearing in the case is scheduled for next Tuesday in Riverside, Calif. (New York Times)

Hewlett Packard Enterprise nears deal to sell stake in Indian outsourcer. It looks like Blackstone Group is buying the tech giant’s 60.5% stake in services firm MphasiS, which is worth about $940 million, reports Reuters. HP Enterprise wants to use the proceeds for investments more core to its business. (Reuters)

Toshiba finds buyer for medical, consumer electronics divisions. Canon will pay about $6.2 billion for the businesses, which the Japanese technology company is selling in the aftermath of an extensive accounting scandal revealed last year. Toshiba’s loss for its latest fiscal year, which ends this month, could reach nearly $6.4 billion. (Wall Street Journal)

Google mulls robotics retreat. Google’s parent company Alphabet was created so it could apply more financial discipline to the organization’s research and development activities. Apparently, the company can no longer stomach the long-term risk associated with its various robotics ventures and wants to sell those interests, reports Bloomberg. Potential buyers include Amazon and Toyota. (Bloomberg, Ars Technica)

Marc Benioff threatens to pull out of Georgia. The state’s new Religious Liberty Bill has the Salesforce founder and CEO up in arms. He believes the legislation makes it “legal to discriminate,” especially against gays and lesbians. Michael Dell and Microsoft President Brad Smith are also calling on Georgia’s governor to veto the bill. (Fortune)

YouTube joins T-Mobile’s video streaming program. Google initially criticized the wireless carrier’s “Binge On” initiative, which allows subscribers to stream video content without it counting toward their data plan limits. It has set those reservations aside. (Fortune)

Spotify settles longtime licensing dispute. The streaming music service will pay between $16 million to $25 million in royalties, along with a $5 million penalty, to avoid a copyright infringement suit by major music publishers, reports The New York Times. The company failed to negotiate mechanical rights for many of the songs it was playing. Spotify still faces individual lawsuits, but they’re likely to be smaller as a result of this settlement. (New York Times)

 


THE DOWNLOAD

Billboards of the future. A Swiss company is tackling one of the key challenges to drone-based advertising by using a new kind of unmanned aerial vehicle that’s part blimp, part quadcopter. Known as Skye, the bulbous, spherical aircraft is soft and slow-moving, making it safe to fly near crowds.

Although drones would be ideal for flying aerial billboards over sporting events, concerts, and other public gatherings, safety regulations generally restrict drones from taking flight near the very crowds that advertisers want to reach. Read Fortune contributor Clay Dillow’s report about Skye, built by Aerotain, a spin-out company from Swiss university ETH Zurich. 



ONE MORE THING

These Nike sneakers lace themselves. Attention Back to the Future buffs: The iconic fitness apparel company has introduced shoes that use sensors to adjust how loosely or tightly they fit. Nike calls the technology “adaptive lacing.” (Ars Technica)


MARK YOUR CALENDAR

Adobe Summit 2016: Digital strategies. (March 20-44; Las Vegas)

Next 2016: Google’s cloud platform strategy. (March 23-24; San Francisco)

Microsoft Build: Microsoft’s premier developer conference. (March 30-April 1; San Francisco)

Microsoft Envision: Where business meets possibility. (April 4-7; New Orleans)

DocuSign Momentum’16: Imagine what you can do. (April 5-7; San Francisco)

Zuora Subscribed: Turn customers into subscribers. (April 12-13; San Francisco)

Apttus Accelerate: Innovation in the sales process. (April 12-14; San Francisco)

Adaptive Live: Journey to insight for financial executives. (April 25-28; San Jose, Calif.)

Qlik Qonnections: Business intelligence trends. (May 1-4; Orlando)

EMC World: What’s next for digital business. (May 2-5; Las Vegas)

The Marketing Nation Summit: Marketo’s annual conference. (May 9-12; Las Vegas)

Salesforce Connections: Cloud marketing trends. (May 10-12; Atlanta)

Coupa Inspire: Rethink the possible. (May 10-12; San Francisco)

Knowledge16: ServiceNow’s service management conference. (May 15-20; Las Vegas)

Fortune Brainstorm E: The intersection of technology, energy, and sustainable business. (May 16-17; Carlsbad, Calif.)

SAPPHIRE Now: SAP’s annual conference. (May 17-19; Orlando)

Gartner Digital Marketing: How to move from vision to execution. (May 17-19; San Diego)

Gartner Supply Chain Executive: Creating a value chain. (May 17-19; Phoenix)

Google I/O (registration link coming soon): For creative software coders. (May 18-20; Mountain View, Calif.)

MuleSoft Connect: Enable your digital transformation. (May 21-25; San Francisco)

MongoDB World: For giant ideas. (June 28-29; New York)

Inforum: Infor’s annual user conference. (July 10-13; New York)

Fortune Brainstorm Tech: The world’s top tech and media thinkers, operators, entrepreneurs, innovators, and influencers. (July 11-13; Aspen, Colo.)

Sage Summit: For fast-growth businesses. (July 25-28; Chicago)

Workday Rising: Talent management in the cloud. (Sept. 26-29; Chicago)

Microsoft Ignite: Product roadmaps and innovation. (Sept. 26-30; Atlanta)

Oracle OpenWorld: The future of the cloud is now. (Sept. 18-22; San Francisco)

Dreamforce: The Salesforce ecosystem gathers. (Oct. 4-7; San Francisco)

Drone World Expo: Commercial apps for unmanned aircraft. (Nov. 15-16; San Jose, Calif.)


This edition of Data Sheet was curated by Heather Clancy.
@greenTechlady
heather@heatherclancy.com

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