Twenty-Two Years Of Job Creation Wiped Out In One Day

I have worked in three venture capital firms over the past twenty-two years. First at Euclid Partners from 1986 to 1996, then Flatiron Partners from 1996 to now, and Union Square Ventures from 2004 until now. Between all three firms, I've been involved in the financing and development of about 200 companies in the past 22 years.

Those 200 companies have, on average, created a couple hundred jobs each over the 5-10 year period of our involvement with them. So that's about 40,000 jobs in total that the three firms I've worked in have helped to create over the past two decades.

Just to be clear, the number of jobs created per company has a wide distribution. Some have created thousands of jobs and others less than ten. My two hundred number is an educated guess and I have not done the work to determine an exact number.

But the news that our economy lost 75,000 jobs yesterday needs some context. That's a lot of jobs for sure but how much? Well, its basically double the number of jobs the companies I've been involved with over the past two decades have created.

There's a lot of talk about creative destruction and renewal and many are looking at the venture backed tech companies to lead the way in renewal and job creation. And I am among those who believe that tech-based entrepreneurship is a big part of the way out of the mess we are in.

But can we in the venture business collectively replace 75,000 jobs per day? No, we can't.

First of all, I sure hope we don't lose 75,000 jobs per day every work day this year. That would be 15mm jobs this year. I think a more realistic estimate of job loss this year is 3mm to 5mm. It could be more but I hope not.

There are about 1000 venture capital firms operating today. If my experience is typical, then each firm could be responsible for making investments each year that create about 2,000 jobs (40,000 jobs divided by 20 years). That's 2mm new jobs. But they don't all get created in the year of investment, it takes 5 to 10 years for the average company to grow to the average of 200 employees. And venture firms work together on deals so there's plenty of duplication in that number.

So the bottom line for me is that the venture capital business is not going to solve this problem we are in. We are going to play a role, possibly an important role, but we'll need more forms of job creation to get everyone back to work.

My friend Charlie O'Donnell may have a better answer, which is that entrepreneurship will have to do the heavy lifiting. As Charlie says:

Well, what if there are no openings come this May–literally none. 
No job postings.  No on campus interviews.  No job fairs.  This isn't a
fantasy.  It's happening right now.  Even the companies that are
showing up to job fairs aren't hiring–they're just there for branding.
Let's not even talk about the number of people getting laid off

You know what that makes all these students, and everyone else out there in the job market…

…besides screwed?


Charlie is talking about people coming right out of college, but I think this is going to be true for a lot of people who need a job going forward. The big companies are not going to be the answer. We are going to need more people going out on their own. Some will raise venture capital, but the vast majority will not. Some will bootstrap a business that hopefully can cover their cost of living. I think more jobs will get created this way than by venture financing.

And our portfolio company Indeed, which is the leading job search service on the web, posted today that there are pockets of strength in the economy that are not being talked about:

this belies myriad opportunities: hundreds of thousands of companies
are continuing to hire. While big layoffs are headline-grabbing,
gradual hiring in sometimes hidden corners of the economy often goes
unnoticed by the media.

Use Indeed’s job search to ferret out the jobs that fit your own background and our job trends
to see which jobs are in demand. If the industry you’re in is
struggling, find where you can deploy your skills in areas of the
economy that are growing.

The Indeed post has some very good suggestions so if you are looking for a job right now, you should go read it.

#VC & Technology

Comments (Archived):

  1. fredwilson

    Small is the right answer but the SBA seems like the wrong approach

  2. Dan Thornton

    I’m definitely hopeful about the potential growth in bootstrapping businesses – the one query I have is whether technology-based businesses would ever need the scale of employment that traditional businesses have had?The number of staff to develop a website or an application, for example, is far less than a traditional media property, let alone a labour intensive skilled blue-collar industry.It’s possible that there’s enough need out there to distribute enough wealth amongst technology solutions to sustain a fair number of people, but I’m not convinced yet!But this change is, I’m convinced, unavoidable due to global supply chains lowering the labour costs. I just wonder if there is a viable solution, or whether economies based on traditional business are going to be in more trouble than we might imagine.

    1. fredwilson

      those are all questions that are weighing on me Dan and keeping me up at night. I’m not losing sleep about my job or my family, but about the economy in general. it’s just hard to see how we replace all these jobs.

      1. deancollins

        Fred,you dont need to, the thing about yesterdays news is that these jobs weren’t lost ‘yesterday’, it’s earning seasons this week so when Catapiller announces it is slashing 20,000 jobs world wide everyone makes a big deal about it.It’s not.The thing is Caterpillar put on 20,000 jobs over the past few years to keep up with demand, did that make the news? nope.Nor will it when they put on these staff again over the next 2-3 years.People are weird creatures, we are terrible at assesing risk (there was a great article about it in the NY times a while back about people who fear sharks but cross the road without thinking a second thought).Caterpillar will be fine, the economy will be fine. Jobs will be created and Fred you should stick to ‘the most efficient use of resources’ you have available (eg your time and money) by supporting and helping New York based tech startups.Cheers,Dean

        1. Alice Barker

          Well Dean I hope you are right about Cat. I live in Peoria,IL area. What I dont understand on how we will be ok if Cat pulls out partly & rebuilds in TX. If Obama wants to do something , try forcing thiese businesses to stay, maybe for a stimulus check for them. I am totally ticked off for the bailout of companys that spend wastefully….like jets.

    2. James Foster

      The VC industry is at the heart of creative destruction. And the job creation that results goes well beyond the jobs created in the VC companies themselves. There is a trickle down effect.It’s hard to believe that someone who has spent 20 plus years in the VC business can demonstrate such a complete lack of understanding of the economics of the VC industry.

      1. fredwilson

        that’s why i blog so people like you can explain it to me

        1. Jamie Lin

          Losing your job is not necessarily a bad thing. What’s bad is if you don’t retool yourself. Having an economic crisis also helps us learn from mistakes, if authorities react correctly.I agree in some cases VC-sponsored companies do cause people to lose their jobs. But in the process their disruptive innovations also make the market place more efficient and products of more value to consumers. Moreover, in many other cases, they end up creating an ecosystem of their own — look at MySpace, Facebook or Twitter economies, which in turn creates many more jobs!So Fred’s 200 is an educated guess but I think it’s quite an understatement, if you take into account all the indirect job creation you help made possible!

        2. Seenator

          James,I saw your comment on Hacker News as well-… and thought it made sense and was going to ask Fred to comment on your note. I think your point is valid but not sure the general rudeness about Fred is warranted.Fred- I think if I understand James correctly, his point is that the jobs VCs create are really not net new jobs i.e. jobs from creating entirely new industries or jobs. VC backed startups create jobs but in the process reduce jobs from other companies. E.g. When Google becomes successful, they add headcount to thier payroll but perhaps reduce payroll at NBC since advertisers are not getting as much bang for the buck when compared to Google.I am sure there is a lot of net new job additions created by VCs but the figure will be substantially lower than the total jobs created by VCs.Nik

          1. fredwilson

            I am always suspect of trickle down argumentsSurely there is a trickle down effect, but there are many effects and not all are positive or net additive to jobs

          2. James Foster

            Here is an interesting New York Times article on the subject of innovation and its impact on job creation:

    3. John Reeder

      This seems right to me. If job creation is the most important standard, then venture backed businesses are not likely to lead the way out. The efficiency required to raise money going forward will likely mean that the leanest companies will get the funding. However, I do not think that means that venture backed businesses will not play an important part in any recovery. A simple fact that we have to reconcile ourselves with is that the world does not require as much manpower/worker hours as it used to. Take Obama’s plan for infrastructure improvement. In the 1930’s this made a little bit of sense as road building took the work of many. However, look at any road improvement project now and you will see that it is machine intensive, rather than labor intensive.However, venture backed businesses will be important to the extent that they can foster commerce. This seems a no brainer, but I don’t look at the “hot” companies in today’s world and see a lot of commerce. Sure, they are changing the way that we interact with each other (Twitter), or toppling older brands (Facebook), but to what extent do these companies foster widespread commerce (I don’t count it as fostering widespread commerce if the platform results in a cottage industry of software companies writing programs for games/other on top of the existing platform as has happened with both Facebook and Twitter, these are very small companies and the ripple out effects are contained). Ebay is the example that comes to mind of a company that truly fostered commerce beyond its own walls. It made new businesses possible, and I suppose that you could say that eBay’s very existence was related to commerce, whereas Facebook/Twitter exist for communication and commerce is something that happens as a side effect. Google’s adwords doesn’t count I think in that it merely changed the way that people advertise, rather than making new economic activity possible as eBay did. I can’t recall hearing stories of companies that were created and thrived simply due to google’s adwords, though obviously the adwords have been a huge score for google and have allowed google to become involved in additional commerce.So in my mind the challenge is not to create companies that will provide jobs. The challenge is to create a company that will by its very existence result in significant additional commerce.Also, just to be clear, this is not a criticism/comment related at all to the profitability challenges that Twitter/Facebook have. Fred’s post was about the recession and my comments are only related to the way that VC backed companies might lead us out.

      1. fredwilson

        John, you might be interested to know that Twitter is Etsy’s #3 referrer of transactional visits and Facebook is #4. Flickr is #2. social media can drive a ton of transactions if its configured to do so.

        1. Seenator

          Wow- This is the single most interesting statistic I have heard in the past few years about Social media and monetization and this is buried deep in the comments.If I were a NY Times/WSJ reporter I would blow this up into a separate story by itself.

          1. fredwilson

            Comments are where the action is but they take time and work

        2. ilannewyork

          Fred, does that mean that a startup pitching you can include “Social Media” as an acquisition channel?

        3. David Fishman

          What I believe John meant to say is there should be more work-life applications created to support new commerce opportunities. Agreed Twitter is a nice demand generator. It would be great to see more innovative service-driven applications developed to drive incremental product sales opps. This will inturn produce new workplace opportunities and job creation. I understand that Moskowitz – former Facebook rockstar is working on some hocus pocus application! Interesting to see what other hidden gems there are lurking in cyberspace……I’m certain we will see some diamonds produced from the carnage and wreckage of the past several years;)

  3. awilensky

    I was going to pass by the opportunity to comment, but then I just got religion:We need easier small business granting and loans. The approval process for a small biz loan, SBA or otherwise, is like a rectal exam. Even if the prospect is iffy, and the applicant is not 100% credit clean, any legit storefront services business that agrees to spend on capex and supplies LOCALLY or DOMESTICALLY, should get a break.As for VC’s: I spent an unproductive two years trying to get a small amount of seed cap for a vertical mobile dispatching service for the towing and automotive glass and lock business. I had 1000 independents surveyed and ready to go ( at least they said they were) for 30 a month. I was either thrown out the door, or asked if I had a Facebook App.We need more and smaller investments with fewer strings. There are so many good, local, service based businesses that could leverage all the good work that was Web 2.0, and are ready to pay small subscription fees. The ad supported free model imploded, now we can turn, finally, to specialist, technical, skilled trade, and industrial businesses that need these technologies, and can pay, even in this environment, if the service helps them earn.ThruDispatch! Not dead yet.,where is Fred Grott when you need him?

    1. markslater

      i totally agree with this – i saw one this morning that had me scratching my head saying – surely it cant be that simple! but buyer and seller of this service both benefit (slam dunk for take up) – a transaction occurs and eveyone wins – the trick is in improving the way an existing transaction occurs providing both parties with greater contextual (social) meaning.

  4. Call Me Ishmael

    We may all soon be entrepreneurs; some of us by choice, others by circumstance. But the reality is that the success rate for entrepreneurship is woefully low. That’s just a fact.If we follow Charlie’s remedy, we will soon have millions of entrepreneurs digging deeper into their savings or taking on additional debt to pursue a business opportunity that is 98% likely to fail. What then for these entrepreneurs? Personal bankruptcy?I don’t mean to pour cold water on entrepreneurship or our culture of risk and innovation. What I am suggesting is that it takes a very particular type of person in a very specific environment to succeed as an entrepreneur. I doubt that there are many lifelong Caterpillar workers that will succeed as entrepreneurs. Let’s not fool ourselves and suggest that entrepreneurship is a panacea or is the solution for every unemployed worker. Like everything else we’ve seen and experienced recently, advocating this course of action will create a glut of inventory that ultimately will end up being liquidated.

  5. rikin

    I graduated two years ago and have been lucky enough to secure a job that focuses on online strategies and bizdevy stuff. In my senior year I couldn’t wait to come into the real world, prove my worth, get my ideas out there, and move up “the ladder”. Today, I realize that this ladder has a broken leg and “the dream” may plateau for a little while before it begins. And though this is kind of frightening I’m one of the lucky one’s who has kept his job so far and has very little to worry about (no wife, kids, mortgage, etc at the age of 24).Part of me sees excitement in this era. If I’m in the right place at the right time and doing the right thing I may come out better after this mess than I was when I went into it. Now it’s up to me alone to decide what “doing the right thing” means. Thanks Fred for the post, it’s good to know that other people are worrying about the same thing and are trying to figure out ways to help out as much as they can.

  6. marshal sandler

    The Job of the future should be everyone’s worry ! Sadly in our world education and a work ethic are a non sum zero affair ! Being born in 1936 and schooled if I busted my ass in school and applied my skills at work I sort of had a good chance of living to retire with a few bucks ! Venture Capitol if invested in Tech and Medical Research by the risk taker maybe the only solution , while the FDA and The Drug Companies are worrying about ED, The Hugh’s foundation on it’s own survives and is alive and well and private! We have also not encouraged kids to learn a trade ! Their Tenured professors who are surrounded by a Picket Fence of Security want to teach them to be a CEO not a hard working stiff ! Now we are bailing out the firms of our society that have created an ok with corrections economy ! Now we have boobs like Arnold in California who learned a new word “Green!” He is as clueless as GM who want to build an Electric Car with out a Power Grid in the US To Support it ! All the Luddites in the car business need is to retro fit their Inventory with fuel delivery system called a carburator that works ! Rick Wagner last year got a a 15 million dollar bonus last year , a reward for destroying GM ! I don’t get angry often but I fear we may follow The UK into a Sea of Guiness ! Lets give Money To VC they may be the only answer

  7. FlavioGomes

    Hi Fred,First post. Have been lurking at your blog for several months and now find it a part of my daily read. Thanks for your efforts and insight.No question the only alternative many would have would be to strike out on their own. That said, there’s a fundemental problem…how many small business’s can our economy sustain? Particularily those that offer no real differentiation to the thousands of others doing the same thing. In regards to web X.X where many will gravitate, there’s just so much noise, rarely anything of real innovative value and I shudder to think that this will be exponentially amplified with all the new entreprenuership.I find that the exodus to entreprenuership has a striking resemblance to the fad of “User Generated Content” of a few years ago. In the beginning it was interesting, but what we’re left with was a dilution of professionally crafted material. Sure there were the rare instances of real talent and quality bubbling to the surface, but, and (I don’t mean to be pessimistic) it in large part decreased the signal to noise ratio.What we need is another bubble of some sort…Thanks

  8. markslater

    well this creative destruction and umairesque notion of atomization has the underlying assumption that from this rubble (the destruction of industrial era business models, the atomization of these distinct nodes of value, and their resulting replacement or evolution) comes a parri passu replacement. I dont see it.take the NY times. Lets assume they are dead – well they are IMO. well their myriad nodes of industrial era value have been replaced (in the instance of a craigs list) or evolved in the instance of user generated journalistic content. But the jobs most certainly have not. in fact the very reason their value points have been replaced is a direct result of massive cost reductions (in the case of print) huge efficiency improvements (network delivered content and services) but certainly not putting people back to work (albeit a retrain, or in an new role etc)i just don’t see this industrial era value destruction resulting in anywhere near corresponding job partner in racketball’s father worked for the boston globe for 36 years – the impending chapter (ok its my opinion but apply this to other industries if you disagree that the times is doomed) will wipe him out with absolutely no easy path to that nest egg replacement.Yes new business will be stand up – fred is at the apex of this – and frankly the value of an employee in a new business is of far greater value than those in industrial era business (thus the venture model) but in all this i just don’t see the job replacement that this economy needs to survive this value destruction.umair has 2 very good posts this morning on the value destruction – i just don’t see how this tectonic shift results in gainful employment for large swaths of this country.

    1. markslater

      maybe this is what i am talking about. first time i have replied to a reply! ok back to work.Jobs Gone for GoodMorici says that housing, real estate, automobiles, finance, and retail sectors are resetting to “permanent lower levels” of employment. Mike Montgomery, an economist with IHS Global Insight, asserts that many jobs in autos, manufacturing, apparel, and textiles aren’t coming back. Those industries “have been in a long-term decline, and the recession is knocking them out.””We are very early in the cycle,” says Morici. “We are going to see the fury of the Old Testament for what we have done to the economy.”

      1. fredwilson

        Old Testament??ugh

  9. Steven Kane

    a quibble with your math – since the jobs you as a vc created were done in collaboration with other vc’s, then you have to de-duplicate your count. i’d divide by 3 — as typical vc backed company has three its 700,000 new jobs/year, not 2MMone other (hopefully somewhat cheerful) note -the reason we are seeing all these layoffs this month is at least partly because most people/companies can’t bear to lay people off during the holiday seasonso we are seeing a backlog of redundancies, arguably the pent up layoffs from Q4 2008, the period that (please god) will mark the nadir of the financial maelstrom

    1. fredwilson

      dividing by 3 is probably too much. 2 seems like a better number.i did mention that issue in my post steve but i appreciate you attempting to add the math behind it.

  10. Dan Cornish

    I do not think the kinds of returns VC are used to getting will be available for years to come. How many people will buy stock after watching the value of their retirement get cut in half. How many IPOs will there be? How many acquisitions, since the access to borrowed capital is diminished?The VC industry was part of the bubble. It will become a much more diminished and smaller source of capital. The 40% per year returns only exist during the inflation phase of a bubble. In reality most business grows at a much lower steady rate. Most investors have yet to learn patience so investing in a business that grows 15% per year is not exciting. The VC industry also needs layoffs. It is probably too big by half. When that happens then the remaining players should then find the returns which make sense.

  11. david foster

    1)You are probably understating the number of jobs that have been created by your work. Jobs are also created at the suppliers of these companies, and the suppliers of *those* companies, down through multiple levels of the product structure. Also, some of the products created by your venture companies have probably improved productivity and have enabled job creation by their *customers*.2)The current VC model does not work well for very capital-intensive projects, such as many energy- and transportation-related projects tend to be. But a bigger inhibitor to such projects in the endless litigation and regulatory hurdles that they face, driven by environmental concerns, NIMBYism, lawyer greed, and sheer cussedness.

  12. Bob Lozano

    Agreed, agreed, and agreed.As a serial entrepreneur who has done all of the above – bootstrapped until something actually worked, funded my own and others, raised venture funds, then built another with funding that was more in keeping (at least in quantity) with a venture deal yet sourced the funds privately – I can say that your thoughts as to many people bootstrapping are probably about right.I know several folks doing that right now – some by necessity, some by choice – including some who never intend to raise much money (from any source) through the first couple of years.Yet for many the paucity of seed funds – no matter how modest – is a real barrier at this point. The very mortgage crisis and it’s more general credit crunch offspring are hitting the precise sources of these earliest of funds.Will the ensuing struggles serve to help the entrepreneur focus, to hone both their targets and their execution, add layers to their perseverance?Undoubtedly, and to that extent it’s ok.Yet the reality is that some progress in loosening sources of seed funds – no matter how modest – will likely go a long way towards enabling some real progress.

  13. jeremystein

    “The big companies are not going to be the answer. We are going to need more people going out on their own. Some will raise venture capital, but the vast majority will not. They’ll bootstrap a business that hopefully can cover their cost of living.”i wish i could find the link but the majority of all startups can be classified as gift shops.i think the real winners in the venture funded category are going to be the enablers– companies like etsy, foodzie, etc. their marketplaces allow people to build real businesses on pre-existing hobbies.i imagine there are going to be a new wave of companies that help people leverage assets and/or skills that they already have.

    1. markslater

      yes – exactly. and in a deeply social context

    2. fredwilson

      Good thoughtEmpowering people to make a living is a good thing

  14. stone

    This is precisely the time when VC should not retreat or retrench, but will…

    1. fredwilson

      Not everyone will

  15. smith

    Out of all the numbers, I’m all but sure that the 2m jobs created would have further added auxiliary jobs, be it the local real estate broker, or the food joint out there in the corner, which if I remember correctly would be another 1 m additional jobs.

  16. kidmercury

    IMO many of these entrepreneurs will benefit from having standardized, turnkey solutions which i think is a great oppty, and is something i am working on. i think an organization that creates such standards for entrepreneurs is well positioned to fix other broken standards, like accounting standards and valuation standards.regarding the big picture though we are so far from getting back on the right track it would be laughable if not so tragic. we’re still not allowed to talk about the problems openly and honestly in america. ain’t gonna solve nothin’ so long as that condition remains.

  17. david foster

    Also: a lot of the job losses (as at Caterpillar) are the result of a cyclical downturn and will be reversed by a cyclical upturn, whereas most of the VC-created jobs hopefully represnt a secular increase.Another category of job losses is those resulting from bad management—I’d put Sprint in this category, for instance–and many of these jobs will sooner or later be replaced by a transition of the customers of these companies to more competent firms.

  18. bill

    While being an entrepreneur is a good solution, I think law school is a better one.Here’s why:People will always do two things: lie and sue.Regardless of the economic climate, you’ll always have a job.

    1. Webomatica

      Uh, no… saw this in the WSJ yesterday :)…

    2. fredwilson

      Why not doctors tooWon’t people always get sick?

      1. jarid

        Nah, the real money is in funeral homes. People always die. Cheerfully yours, Jarid. 🙂

        1. fredwilson

          Hi JaridComplete non-sequitur but I was at LinkedIn last week talking to topmanagement and the term freemium came up and I was asked ³did you reallycoin that phrase? We use it all the time here²I told them the truth and gave you the propsTogether we really created something that has lasted and is part of thebusiness vernacular now.A few pats on the back and now we gotta get back to work

          1. jarid

            Thanks, I appreciate the (repeated) props. I just wish I got a cut of Chris Anderson’s book deal. :)On a somewhat related note, I see Wikipedia has recently taken a contrarian view and does not think freemium is “notable” enough:

  19. davidu

    If you expect a surge of new entrepreneurs to take up the slack then a lot of things need to be fixed. I won’t even go into the lack of exit market. For those building lifestyle companies with 5-50 employees they will still need access to credit and flexible lending terms. That is dead right now.As for VC backed startups, there is zero exit market right now. There is no M&A and there is no IPO activity. That’s not going to change for at least 18 months, if not longer.

    1. fredwilson

      You don’t need exits or M&A to build sustainable businessesYou just need customers

      1. FlavioGomes

        Customers have, and always will remain, the absolute best investor!

      2. davidu

        Companies need access to credit or palatable lending terms in order to grow and scale resources quickly.And VC-backed companies do need exits… not to be sustainable, but to sustain the environment that you and I work in. You would be forced to transition your model dramatically if faced with a situation in 10 years where many of your portfolio companies are growing organically, modestly profitable, and giving you the equivalent of quarterly dividends. That doesn’t work in the VC world. Go ask Sequoia how much fun it was to hold on to for all those years, long long after that fund closed but before they finally IPO’d.Then again, I also believe it’s essentially impossible for a 500mm VC fund to ever make a reasonable return. Even the principal is difficult to pay back. A 50mm VC fund has a much higher chance of delivering substantial returns, ironically.

        1. fredwilson

          DavidGood pointsI¹ve been evangelizing a secondary market for private company stock forexactly this reasonSecond market is building one and I hear that the NASDAQ is tooI guess Sarbox is finally taking its toll on the fully public markets

  20. Hipvisions

    I have to agree, that VC alone is not going to solve this crisis. If anything, it’s going to be solved with the hustle and determination of entrepreneurs across all age groups. However, being 22 years old and luckily graduating in 2007 early, I’ve been able to start my company and watch this all unfold. For my peers that just finished May of 2008, 2 out of 4 of my close friends have chosen to become entrepreneurs. There’s a lot to be said for that change of pace. A few years ago, it wasn’t even a consideration…”start your own company? ha! “Now, it appears more important than ever. Charlie has it right. We (and I say we as a 22 yr old) may be screwed out of a Fortune 500 company path, but there’s surely plenty of ideas out there that may just be acted upon which might have never been started.

  21. AAfter Search

    Some of these companies [ example: Ericsson ]rehire their good [or most connected] employees back. Some of these downsizing will happen in next 2-3 years [like Microsoft ]. Hence, losing 70,000 jobs in a day is not exactly true.VC firms need to fund research to solve real human problems [ lack of social networking is not one of them IMHO), for example why autism is rising, ADD is increasing? what are the solutions beyond normal medications? There are scales, money, and a lots of jobs hidden there – it is just not easy or sexy.

  22. ceonyc

    hmm… Well, actually, I wasn’t saying *actual* entrepreneurship…. I was saying that people need to *act* like entrepreneurs… to go the extra mile to be worthwhile for a business to hire you.I don’t believe that everyone is going to go work for a startup, but having that startup/entrepreneur “hungry” mentality around your job search is what is needed.

  23. SI

    This is a great argument for a small business tax cut followed by carefully considered, targeted infrastructure and R&D spending. Large companies and infrastructure projects are a lot less efficient at quickly utilizing money. Hopefully VCs can support the more disruptive, R&D-intensive initiatives in the areas government is likely to start focusing on (healthcare, energy, etc.).

  24. fredwilson

    Yes, in fact I think this is a path to the ideal business model for social mediaAs deep throat told Woodward, “follow the money”

  25. fredwilson

    I share all of these concerns

  26. Max

    Unless the 3-5mm folks losing their jobs all happen to be Harvard Business School grads, then VC won’t be the answer, and certainly not entrepreneurship that relies on outside investment. Let’s face it, Fred, you and your ilk tend to fund people you know, people in your circle, people that are “safe.” The poor bastards being eliminated are none of these (on the whole). They are the work bees, the middle managers, the VP’s that didn’t have the connections.Being an entrepreneur isn’t even a vocation so much as it is a calling. One cannot just wake up and start a business. It takes guts, personal investment, sucking up to jerkwad VC’s (at times), and just a whole Hell of a lot of work at little or no pay. The masses you talk about — a lot oh families to support, kids to feed, house payments — of these there is a small group — the same percentage or maybe smaller than the population as a whole — who may start a business or join a start-up. Most will fail.Will there be new businesses coming out of this economy? Absolutely. Will some people prosper, you bet. But the majority of the winners won’t come from that group — maybe in time they will work for a growing company, but the majority won’t be in the original start-up team.

    1. fredwilson

      I agree with a lot of this but very few of the teams we fund include Harvard B school grads. Most are geeks and more than a few who blew off college and even some who blew off part of high school. It’s not where you went, it’s what you’ve done and can do that matters.

      1. Max

        Glad to hear that — but you sort of answered the problem I pose — the folks you funded were “different” in some way — risk-takers, geeks, etc. The majority of the folks losing their jobs aren’t “special” in that way (trying to make a point, not be mean!). I think, however, your point is that, at some point, this stress will create in people a need, and sometimes need creates value…

        1. fredwilson

          Your point is totally valid. The auto worked in detroit is not your idealcandidate for a startup. But maybe he or she can set up a business doinglandscaping or home maintenance for others. And that¹s entrepreneurship too.I was just making sure you and others realized that MBAs don¹t mean much tous

  27. Ed

    A 20 year old man who worked for me on college break, called today asking for anything. Except, he’s now a 35 year old man, with 2 masters degrees in engineering, and three children. Laid off, he is willing to do anything (including relocate).I agree with you that people will have to be creative, team up, co-entrepreneur themselves out of this.And the glorious,reaching campaign talk better have ‘some’ real behind it.

  28. Chris Dodge

    I’m so glad you wrote about this as I’ve been thinking quite a bit about a general meta-trend regarding new technologies that create systemic efficiencies. It seems like creating efficiences mean a significant automation of processes that used to be manual and required human intervention (and the jobs to perform those tasks). Those are the jobs that are going away. And going away permanently.Think of Health Care and the tremendous inefficiencies there. While it seems like a terrific opportunity (and it is), it will mean that automating those processes will mean additional job losses. Those that benefits are Systems Designers and Developers – and Entrepeneurs that shepard them. As well as investors that back those initiatives.There is a powerful deflationary force happening now. Look at Digital Media (particular audio). The “value” of music (in economic sense) is very little once the publishing and distribution of music have become an automated process through IP networks. Of course now the economic margin between retail price and production/manufacturing costs in that system is value attributed to Artistic Value, not the cost-basis of music production and distribution. Entertainment will continue to head towards commodity pricing. That’s good, but it is deflationary which seems somewhat dangerous, although I can’t put my finger exactly on why I feel that way.Also, another example: iPhone apps. While I just gush over the iPhone and the App ecosystem, it is part of a deflationary meta-trend. Apps are cheaper and cheaper. I’ll have to find a terrific blog posting from an accomplished iPhone developer who is disturbed by the fact that people are willing to set their pricing to $0.99, which he feels [paraphrasing] undervalues the developer’s effort. While we have not yet seen large Enterprise-scale applications on the iPhone, I assume that those Enterprise mobile apps will also have bargin basement pricing schemes.The same can be said for jobs. In my opinion, there will be intense price pressures on salaries, even in my line of work (architecting/developing SW for seed-stage startups). I look at boards like and it’s amazing (and depressing) how cheap people are bidding to do SW development work these days. Again this is good for Entrepeneurs who require that labor, not sure about the ecosystem as a whole, particularly for developers that live in expensive locales, like Boston, NYC, and SF where cost-of-living makes for salary requirements.Something for me to think about more.

  29. fredwilson

    Jeff Jarvis teaches a course at the CUNY School of Journalism on how to start media companies instead of go work for oneIt’s a great course and I”ve participated in it on multiple occasionsSo I am in total agreement with you

    1. Dorian Benkoil

      Thanks, Fred. I admire what I know of what Jeff does there. If he ever wants, I’ll be happy to participate, too.

  30. Alan W. Silberberg

    As the CEO of a bootstrapped company,, I have a few general observations.A. Take what ever seed capital you have, leverage it through smart decisions and out of the box thinking that consistently puts you ahead of competition, not in same category. B. Make heavy use of social media like Facebook, Twitter, Digg, etc. But for this to work you have to make an investment in time, as well, consider it an investment in kind for your business growth.C. Dig into your own personal treasure trove of skill sets. Become the expert that others seek out. Learn more than anyone in your field, or close to it. D. Even though you have no money and are up against well funded competitors – don’t let that dissuade you from using their heft against them. Be creative. Stand out by doing something others are not. Make your own market. Don’t worry about fractionalizing some market penetration. Become the Intel, or Nike of your industry by innovating while doing.In essence the bootstrapped CEO needs also to be the Chief Marketing Officer, the Chief Sales Manager, The Chief SEO double agent and the #1 customer service representative.Alan W. SilberbergCEO, http://www.you2gov

    1. Gabe da Silveira

      “leverage it through smart decisions and out of the box thinking”? “fractionalizing some market penetration”?You can’t be serious.

      1. sameasiteverwas

        You’re just not operationalizing your core competencies properly. Once you start synergizing things from a 20,000-foot view all will become clear.

  31. milesian

    Interesting perspective. This article suggests that “bootstrap business” entrepreneurship is the way out of our mess, but I just don’t see how that’s possible. First, our economy is predicated on consumption but no one has anymore money to spend right now, therefore small businesses will not have enough customers/clients. Second, our economy barely produces anything anymore, at least nothing that small businesses can get a quick handle on. America is way too far up the production value chain; this isn’t China.. small businesses can’t be the way out of this, not YET, not until consumer confidence returns. This is why the government HAS to deficit spend like crazy, the only question is whether they can be smart about it.

  32. Dorian Benkoil

    CEONYC refers to an entrepreneurial mindset and a couple others above talk about education.One of the things I think needs fixing — and I’m working on it , and hope I can get more to join me — is the mindset and orientation our educational system teaches, which even at the MBA level often teaches us to be workers, to get jobs, not to be entrepreneurial or even to understand the basic “grammar” or vocabulary of business and finance. And, paraphrasing something said by the EVP of the NYSE: that’s a big reason for our current financial meltdown.Imagine if our students, along with algebra and trigonometry were taught how to read an income statement, even the concept of time value of money.

  33. Alvis Brigis

    As market fluidity and quantification increases (something like adsense x 100, spread wherever the web goes) there may emerge a blurry middle ground that allows massive entrepreneurship, unprecedented scaling of open source projects (the FLOSS roadmap projects that 20% of IT jobs will be open source by 2020) and large prosumer federations. Accelerating Change = Blurring StructuresPerhaps one or several of your companies will scale to employ millions of web-based prosumers. It’s quite possible that some venture funded companies will pull this off within the next decade.

    1. FormerVC

      Measuring success by the number of jobs created/lost is a bad idea.1. Firm A is increasingly productive and constantly produces more with the same inputs. As a result, it frequently lays off workers whose labor is displaced by capital investments in machinery or IT (or just-in-time inventory relationships with its suppliers). Firm B has a constant or declining level of productivity, but always seems to be hiring. Which is better for shareholders or for society as a whole? The answer is pretty clearly A, as productivity growth is the core of economic growth and increases in standards of living. Job losses are not always bad, job growth is not always good. We could put everyone to work paving roads or raising wheat by hand, but would we all be better off? Clearly no.2. How many jobs would have been created with that capital had it not been invested in those startups? Perhaps instead of hiring software engineers to build bookmarking apps or me-too enterprise software companies (amidst the otherwise successful investments), the capital would have been invested in private infrastructure projects that employed many more construction workers at lower wages. If 70% of VC investments are unsuccessful, were those “real” jobs or jobs that only existed as long as VCs were willing to spend money to support the companies before they went out of business?3. No startup job could be “created” without another job being lost. For jobs available in one sector to grow faster than the rate of overall population growth, another sector needs to be (net) shedding jobs. Lots of people quit jobs during the tech bubble to become day traders, and lots more people quit jobs during the housing bubble to become mortgage brokers and real estate agents. Now they’ve quit again or been laid off.4) Speaking as a former VC, measuring one’s impact by “jobs created” is just PR fluff from the NVCA to justify exempting the VC industry from potential carried interest taxes. The vast majority of those “jobs created” were created well after the VCs had exited their investments and new growth was being financed by the public markets. It’d be like claiming credit for anyone Google has hired since 1999 as a “job created” by Sequoia/KPCB. Really? Then how many jobs have been destroyed by those same VC firms whose companies killed off older competitors? How many jobs were destroyed by bad acquisitions by Yahoo over the years, culminating in layoffs? $30M for buys a lot of “jobs,” had the money been put to that use. Arguably, if Yahoo still had that money, they could be laying off fewer people today. But would that have been a better outcome for the company or its shareholders? Maybe.The only way jobs are permanently destroyed is when 1) demand for a particular set of goods/services is permanently destroyed due to technological change, population declines or permanent downward shifts in income; or 2) governments permanently lower an employer’s desire to hire workers by increasing the burdens to doing so–the more it costs to hire someone, the fewer people who get hired.VCs undoubtedly finance an important segment of the economy, and are “lighter fluid” for high-potential businesses. But using jobs is a terrible way to measure the value of this activity.

      1. Alvis Brigis

        @ FormerVC – Very good points. They are also extremely relevant now with accelerating change further complicating things by allowing people to more-or-less happily work many jobs, or part-time. As web structures (and people) get smarter more people will be able to fill many micro roles (license their lifelogging, participate in web-based surveys, work freelance for companies that appear one week to perform a massive project then disappear the next, etc). This (and other trends) will finally force us to get more granular with our productivity metrics.A big part of the current economic problem is the lack or non-use of fundamental productivity metrics. Building our economic simulation with blocks like consumer spending, home purchases/ownership, & full-time employment was once adequate, but now results in a structure that fails to resemble reality closely enough.You are right that new metrics will be key to accurately quantifying the state of the economy. We need to get better at measuring productivity, efficiency, happiness/hierarchy of needs status, and other variables. One path might be to build upon Schumpeter’s theories. Another might be to get physical and break things down to Space, Time, Matter, Energy and Information (STEMI) flow and density (holler at your local Evo Devo theorist).What would you suggest Former VC?

      2. fredwilson

        I agree formerVC and I always cringe when I see the NVCA promoting VC as ajobs engine or when I see states and localities investing pension funds inlocal VCs for ³economic development²I wrote this post to put some context into the 75,000 number and to pointout that VC won¹t solve this problemGood commentthanks

      3. Alvis Brigis

        Here’s a nice article that makes the case for technical productivity as the fundamental economic metric:

    2. fredwilson

      The Firm as a organizing principal is losing its valueRonald Coase had it right over 70 years ago

  34. FDL

    Fred – Really like the way you facilitate conversations. My two cents on this: A focus on “job creation” is all wrong. The focus should be on “value creation”. When each business individually focuses on value, job creation takes care of itself. We’re living this right now with our startup which is completely changing one of the oldest industries in the country … textiles. Have we created a lot of jobs? No, but we’re creating a ton of value by saving our customers time and money. That time and money saved can now be re-deployed by our customers in more economically productive ways. Multiply what’s happening at our business by tens of thousands of other smart businesses out there … and there’s your job growth.

    1. marshal sandler

      Dear Fdl, as a person who spent the majority of his life in the Linen Supply Industry and Textile Distribution Industry please tell Fred and his fans what portion of your mix are imports From India Pakistan China India and in countries other than the United States ! If you are doing your own converting please, other than Miliken what other firms are you buying from that produce in the US ! Even the majority of Shop Towels are made in China ! I am retired and 72 years old but was the first Guy to sell Specialty Aprons on the Internet and Coined the term-Specialty Aprons ! Prior to retirement as an independent Rep I sold for Lisadell [Ireland] Hilden Halifax[UK] the Apron Works Bernie Bernard and others ! Even the Majority of Bath Robes are made off shore ! Textiles are bought by the Pound Sold by the Piece ! I created a merger with a US Convertor and a Mexican mill Producing Specialty Aprons I congratulate your efforts and your web site is excellent-but my years in the Textile’s only saw the destruction of the Industry not creation of any jobs in the United States ! Ask the Kids at Clemson University what country they will work in after getting degree in Textile Manufacturing ! Even the Largest Textile Distributor in Las Vegas once owned by my friend Murray Findley is now owned by a firm in South America that produces off shore double loop terry construction towels for Hospitality ! I don’t mean to play Gotcha with you or go off subject which I do often ! Saving you Customer a few cents a pound with a white napkin made in China does not give any one now the US A job especially inn Foodservice and Hospitality ! JOBS ARE THE ISSUE !

      1. FDL

        Marshal – You have some good thoughts (and clearly a ton of experience in the linen business … far more than I). I spent some time yesterday thinking about your post. While I was thinking, a local college student came to my door to ask to remove the snow from my driveway for a fee (I was working from home because of the snow storm). I said yes.There was a time when I was the first kid in the neighborhood with shovel in hand ringing doorbells just like mine asking to do the same work. What’s changed isn’t that I’ve gotten lazier. What’s changed is that my education and work experience have allowed me to hire out snow removal so I can keep working on growing our business.The same thing is happening in the United States and other highly developed economies. It doesn’t make sense to manufacture simple, low tech products like towels in the U.S. in 2009 (What’s more, a constantly increasing minimum wage is making this work impossible to do because customers simply won’t pay the premium for these low tech products to be manufactured by U.S. labor.)What you experienced in the linen business is sad in the short-term for the workers who provide low skill labor, but the economic reality is that this is a natural economic progression. Those jobs are being shed to less sophisticated economies on the rise (like India and China). Someday, India and China will shed those jobs too. As Americans, we should move on by placing our focus on leading the world in entrepreneurship and innovation (exactly the kind of work Fred does) AND equipping our citizens with 21st century job skills (which, I believe, is something we’re doing in a small but growing way). This will create many more jobs than we’re currently losing through economic transitions and recessions. If we try to hold fast to those low skill jobs, we’ll miss some wonderful 21st century opportunities. And the American worker will be the poorer for it in the long-run.- FDL

        1. marshal sandler

          FDl I hope was was not critical of your Venture ! I have a problem in our society my nieces and nephews are Attorney’s,Electrical and Aero Space Engineers and all well educated ! The Problem is that none are prepared to emigrate to a foreign country to survive ! I wish they had become Plumbers and Carpenters these skills will survive I hope in the US ! My good Friend Dr Lev Selector maybe the brightest Teche in Ny Has a Son Alexsey at Cooper Union he did me a favor and evaluated Mr Wilson’s Glue from Adaptive Blue since I wanted a students view, since at 72 what do I know ! It was great – he has a lot of skills and has done some work for me ! When he graduates since he had his Primary Education in Russia has language skills , where will he get an internship ! His sister is a Math Major at Oxford tuition 40 K a year my friend Lev has spent a fortune educating these kids working 18 hour days on developing systems in the Investment Field ! Will his kids benefit ! I don’t Know-

    2. fredwilson

      Excellent point FDL

  35. Jeffrey McManus

    We committed to creating a new business before the crash and we’re going through with it by bootstrapping. Our customers are delighted at the notion of paying us for a product that we’re pricing at a couple of hundred bucks per month instead of an open-ended consulting contract costing thousands or tens of thousands — but some are happy to stay on as consulting clients just the same, ’cause they still need to get stuff done and they can’t afford to hire anybody full time. It’s a win-win for us.

  36. Killu1

    Great article. Not sure, however, that VC investing 20 years ago is similar in job creation impact to investing now – for better and for worse. As a former life science VC, I have noticed the change in recent investing practices (last 5-10 years) that has led to much larger rounds being deployed on one hand, and much less jobs created per dollar invested on the other, in the typical life science (biotech drug) type investments. Larger rounds, as it arguably costs more today than it did even 5-10 years ago or more, since you need to get the companies to a much later stage (clinical now, vs preclinical or R&D stage previously before you can exit), plus development is now more expensive; less jobs, because more companies are being built almost virtually – there is less “company-building” and more “project-investing” going on, with binary outcomes often the norm (if it doesn’t work, the almost virtual company disbands; if there is some clinical success, more clinical development ensues, but not necessarily tied to additional “company-building”, as companies/projects are built to sell more often than perhaps used to be the norm. This of course is not 100% the case, but speaking of job creation, increasingly larger amounts of funding don’t necessarily directly scale to increasingly larger numbers of jobs created, at least in the biotech drug development world of venture investing.The notion of top-tier VC funds being compelled to invest increasingly large rounds (because of very large amounts of capital under management by the funds), compared to what used to be the fund size, is also driving the types of projects that can be funded, leaving a significant gap where previously VC dollars could be deployed and now aren’t – so jobs aren’t being created as a result of this funding gap.Someone in the comments mentioned SBA funding. I wonder whether bringing back the participating equity program of SBA would lead to relatively quick job creation, based on the likely outcome of incease in venture investments in the earlier-stage projects that tend to feature high pay and innovative, entrepreneurial players? Arguably, SBIC funds haven’t performed as well as the blue-chip funds in terms of returns; on the other hand, over the life of the SBIC equity program, job creation numbers have been extremely high, and success rate as measured by returns also arguably high, although very susceptible to fund year issues. The numbers I have seen were compelling – too bad I can’t cite them from memory.SBA participating equity program was rumored to have died dued to political reasons (led by beliefs that government agencies such as SBA should not be in the business of job creation). Perhaps it could be resuscitated for similar political reasons, now that we live in the world that believes government should be in the business of job creation? While imperfect, opening doors to professionally run equity investment firms such as SBIC equity funds, might lead to job creation in companies that are by their nature (due to requirement for significant investment returns) heavy on innovation and high growth. Although new SBICs might not be the best of breed of all VC, they might be better for the economy and types of jobs created than investing in lots of brick-laying projects (also necessary, but low on innovation, in leading the economy to more knowledge-based foundations, and pay scales)? SBA would need to streamline and speed up the licensing process to make a real impact in time, though, given the bureaucratic delays and mountains of paperwork involved at present. But, perhaps a high-level pen stroke could alleviate that.An anecdote to illustrate the point of the awakening of entrepreneurial impulses in the population: a cab driver that took me to SFO airport from a recent JP Morgan Healthcare conference told me that he has been asking himself, what can he do better in this grim environment. His decision was to focus on nurturing and growing his local clientele, to increase their loyalty to him, and to bypass convention traffic, as it would not mean return business. – Now if everyone from cabbies to white collar folks is asking, what can they do better and how, wouldn’t that necessarily lead to a bump in productivity, perhaps an unexpectedly meaningful one? I hope so. Same for previous non-entrepreneurs becoming entrepreneurs – in some sense, it is a numbers game – if enough of them build highly scalable, fast growing businesses, VC-backed or bootstrapped, it might have a strong enough effect to at least dampen the fall we are in. I choose to remain a long-term optimist, if wounded at present.

    1. fredwilson

      I love that last paragraph and I think that¹s what charlie was getting attoo

  37. fredwilson

    At least chris didn¹t call the book ³freemium²And wikipedia is always pulling that not notable crap on me

  38. fredwilson

    I tend to agree with this thinking FDL but it does take a leap of faith onour part

  39. FDL

    Marshal – Not at all. This was my first time commenting on any blog … I’ve enjoyed the discussion.

  40. Mike

    I am ready to begin hiring people to manufacture a new line of diesel engines but I can’t find the capital to do it. If we as Americans don’t start putting money back into making US goods, I fear we will look like Mexico shortly. I know that Manufacturing is what made us great and I also know that service jobs won’t pay for houses and cars.

    1. Greg

      Mike,I have a similar situation and do not understand it either other than investment firms seem to only invest in things that have hit like a lottery payoff in the past and industry is like the tortoise in the race. The tortoise wins but its just not sexy enough. Greg

  41. Jeff Hilimire

    Couldn’t agree more. It’s why I decided to join the Shotput Ventures ( group in Atlanta. It’s a technology accelerator for back-of-the-napkin startups. My feeling is, there will be a LOT of very smart young folks getting out of college and there won’t be as many jobs for them to pick from, so creating an opportunity to help them get their feet under them in the entrepreneurship arena should make for some great new companies.

  42. Greg

    Fred forgive me but i just emailed you my pro-forma and business plan in hope that you can help me find a source. It is not “tech” but the technology implemented is the cutting edge for its industry. It is also a type of business that is not going away and is relatively recession proof. The problem I am having is finding any investment groups that do this “type” of project. If I were inventing the blackberry or believe it or not putting in more housing I would be rolling already. This is solid and so is my track record, I appreciate anything you can help me with.