Amid the gloom and doom portrayed by the declining start-up rate—the ratio of new firms to all firms—over the past 30 years, there are some bright spots. A few were just highlighted by my frequent co-author, Ian Hathaway, in a blog entry for Harvard Business Review.
First, total funding of start-ups by venture capital firms, those in the business of trying to pick the fastest-growing firms, is up sharply since the recession: from about $4 billion in 2009 to about $7 billion in 2014.
Second, it is encouraging that venture-capital funding deals are increasingly spreading around the country, but the dollars allocated to start-ups are growing a bit more concentrated: in the top 5% of cities where any venture capital dollars flow (Silicon Valley, Boston, and New York in particular).
A true turnaround in the nation’s entrepreneurial activities still has a long way to go, but venture capital funding patterns are moving in the right direction.