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